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80–549PDF 2013

NATURAL GAS EXPORTS: ECONOMIC AND

GEOPOLITICAL OPPORTUNITIES

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS

FIRST SESSION

APRIL 25, 2013

Serial No. 113–17

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

ADAM KINZINGER, Illinois 

MO BROOKS, Alabama 

TOM COTTON, Arkansas 

PAUL COOK, California 

GEORGE HOLDING, North Carolina 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

STEVE STOCKMAN, Texas 

RON DESANTIS, Florida 

TREY RADEL, Florida 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

LUKE MESSER, Indiana 

ELIOT L. ENGEL, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

JUAN VARGAS, California 

BRADLEY S. SCHNEIDER, Illinois 

JOSEPH P. KENNEDY III, Massachusetts 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

ADAM KINZINGER, Illinois 

MO BROOKS, Alabama 

TOM COTTON, Arkansas 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

TED S. YOHO, Florida 

BRAD SHERMAN, California 

ALAN S. LOWENTHAL, California 

JOAQUIN CASTRO, Texas 

JUAN VARGAS, California 

BRADLEY S. SCHNEIDER, Illinois 

JOSEPH P. KENNEDY III, Massachusetts 

(III)

C O N T E N T S 

Page

WITNESSES 

Mr. Rob Bryngelson, chief executive officer, Excelerate Energy ......................... 5

W. David Montgomery, Ph.D., senior vice president, National Economic Research Associates .................................................................................................. 28

Michael A. Levi, Ph.D., director, Program on Energy Security and Climate 

Change, Council on Foreign Relations ............................................................... 49

Mr. David Mallino Jr., legislative director, Laborers International Union of 

North America ...................................................................................................... 56

Mr. Michael Ratner, specialist in energy policy, Congressional Research Service .......................................................................................................................... 64

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Mr. Rob Bryngelson: Prepared statement ............................................................. 8

W. David Montgomery, Ph.D.: Prepared statement .............................................. 30

Michael A. Levi, Ph.D.: Prepared statement ......................................................... 51

Mr. David Mallino Jr.: Prepared statement .......................................................... 58

Mr. Michael Ratner: Prepared statement .............................................................. 66

APPENDIX 

Hearing notice .......................................................................................................... 94

Hearing minutes ...................................................................................................... 95

(1)

NATURAL GAS EXPORTS: ECONOMIC AND 

GEOPOLITICAL OPPORTUNITIES 

THURSDAY, APRIL 25, 2013

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:13 p.m. in room 

2200, Rayburn House Office Building, Hon. Ted Poe (chairman of 

the subcommittee) presiding. 

Mr. POE. The subcommittee will come to order. Without objection, all members may have 5 days to submit statements, questions, extraneous materials, for the record, subject to the length 

limitation in the rules. 

Five years ago, companies were building terminals to import natural gas at the cost of billions of dollars because analysts agreed 

that the United States’ economy was going to need natural gas 

from overseas. Today, that scenario has changed 180 percent. Import terminals lie dormant. The Department of Energy has 19 applications waiting to get permission to export natural gas. Thanks 

to breakthroughs, the United States’ natural gas reserves have 

climbed 72 percent since 2000 and 49 percent since 2005. The 

amount of natural gas that is technically recoverable in the United 

States is 97 times greater than all of the natural gas we consumed 

in 2011. In plain terms, this means we have an abundance of natural gas that we are not using. It is just sitting there, and this is 

really not smart policy, or smart business. 

A big reason why is the Department of Energy. The Department 

of Energy has not approved an application to export to a country 

we don’t have a Free Trade Agreement with in 2 years. When the 

DOE says you can’t export, that floods the domestic market with 

natural gas because producers have no place to sell it. Prices domestically have now dropped so low that it just isn’t worth it for 

producers to even pull any more natural gas out of the ground. 

So we have recoverable natural gas that is unused because the 

government refuses to let it be produced. Let me give you an example. There is one company that has a permit pending with the DOE 

for 2 years. If the DOE would give the green light, the company 

would immediately create 3,000 new construction jobs, 20,000 to 

30,000 more jobs would also be created for exploration, drilling, 

and pipe laying. In all, the economy would see an infusion of $10 

billion from the project alone. Jobs are important and it is imporVerDate 0ct 09 2002 15:18 May 31, 2013 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\042513\80549 HFA PsN: SHIRL
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tant that the government understand that we should move forward 

with jobs in this industry. 

It is not just one project; there are others like this one project 

that can’t get started. No matter what economic study someone 

looks at, even those commissioned by the DOE, the result of opening up our natural gas exports is an economic gain for the United 

States. Real income and the GDP will all rise. More exports would 

be a big gain for our business sector; 91 percent of firms in the oil 

and gas extraction industry have fewer than 20 employees. Many 

family-owned small businesses really can’t wait for 2 years for the 

Department of Energy to approve a permit. They really don’t have 

that kind of flexibility or money. So the longer the process takes, 

the harder it is on mom-and-pop companies to survive. 

In Europe, countries who rely on natural gas have been held hostage by the Russian energy company, Gazprom. Our friends in Poland, Hungary, and the Czech Republic know this better than anyone. Cheap U.S. natural gas exports would reduce the Russian 

stranglehold on the European market and give the U.S. more political clout at the expense of Russia. In the Pacific, allies like Japan 

and Korea pay very high prices for natural gas. They would be immediate importers of cheaper U.S. natural gas if we were allowed 

to sell it to them. 

Perhaps more than anyone, our friends in India have been the 

most vocal. The current Indian Ambassador to the United States 

recently wrote in a Wall Street Journal op ed that U.S. natural gas 

exports to India, ‘‘would provide a steady, reliable supply of clean 

energy that would help reduce [India’s] crude oil imports from the 

Middle East and provide reliable energy to [India].’’

Without U.S. natural gas, the Indians might have to participate 

in the Iran, Pakistan gas pipeline. We have given the Indians a 

reasonable alternative. We should use it. Liberalizing our natural 

gas export policy will provide certainty to allies and economic partners around the world that the United States is an advocate of free 

trade. 

On a side note, we have the problem with the World Trade Organization. The WTO punishes countries that limit exports to keep 

their own domestic prices down. The U.S. has a World Trade Organization case against China for doing exactly that with its rareearth minerals. But here the DOE is limiting our own natural gas 

exports. If this policy continues, there is a possibility we could be 

sanctioned by the WTO and our entire trade regime could be hurt. 

So the DOE should let the free market work and approve pending applications. The U.S. has the best technology and the safest 

technology in the world, but our competitors with their own natural 

resources, like China, are catching up. 

The purpose of this hearing is to explore natural gas exports 

from the United States to other nations. 

And now, I will yield to the ranking member, Mr. Sherman from 

California, for his opening statement. 

Mr. SHERMAN. Thank you, Mr. Chairman. I commend you for 

holding these hearings. Ordinarily, people don’t think natural gas 

is a focus of the Foreign Affairs Committee, let alone this subcommittee. But the fact is that while the Ways and Means Committee is the primary committee to deal with imports and taxation 

3

thereof, it is our committee that has primary jurisdiction over exports, export promotion, and export control. It is interesting that 

the private sector invested billions in building terminals to import 

liquefied natural gas and now wants to retool them to export. And 

it is clear that the price as structured now justifies that. My fear 

if I was an investor, and I am not, is that by the time we are ready 

to export, we will have already exported our fracking technology, 

which we are exporting now, and there will be discoveries of natural gas on the Eurasian landmass that will allow the piping of 

natural gas to the very people that anticipate buying our liquefied 

natural gas. 

Whether to develop in full our natural gas resources, and whether to export natural gas brings up environmental, national security, 

and economic concerns. From a national security standpoint, I am 

particularly interested in vehicle propulsion. Vehicle propulsion is 

the domain of petroleum worldwide, and it is our dependence on 

petroleum imports and the world’s dependence on petroleum imports that determines much of foreign policy around the world. 

Right now you can get twice as many miles per dollar with a natural gas vehicle as with a petroleum-based vehicle. If we start exporting natural gas that may change. We may need to have a huge 

differential between the price of natural gas and the price of gasoline in order to encourage use of natural gas to propel trucks and 

perhaps even cars. 

On the other hand, it is in our national security interest as the 

chairman points out, to provide secure natural gas supplies for our 

allies and to prevent India from turning to Iran for a natural gas 

pipeline. 

As to economics, there are jobs involved in developing the infrastructure to export our natural gas. There are also jobs involved in 

our manufacturers and our petrochemical companies having cheaper natural gas than anyone else. Many countries with a valuable 

export deliberately prevent the export of the raw material in order 

to give the processing jobs and the use of that raw material jobs 

to their domestic market. In addition, we are currently exporting 

coal. So if we start exporting natural gas, we will be burning more 

of our own coal, and if we choose not to, will we simply be exporting more of our own coal? 

As to the environmental side, natural gas is the best fossil fuel, 

which may—environmental-wise, not be a particular compliment. 

But to the extent that we don’t develop our natural gas resources, 

or that we export them, will we be burning more coal? How will 

that count against us in the international calculations of carbon 

emissions, and eliminate our efforts or deter our efforts to be able 

to get other countries to stop exporting. I believe my time is expired, but if I can go on for a little bit longer, I hope. 

Mr. POE. The gentleman is recognized for a little bit longer. 

Mr. SHERMAN. Okay, thank you. So, and finally on the economic 

side, we have consumers. The only thing my constituents will understand about these hearings after they get point and counterpoint is that their natural gas bills are lower now than they used 

to be and they would like to keep it that way. 

We want to find out what is the expense of shipping natural gas 

compared to shipping coal because they are usable by the customer 

4

for the same purpose. We will want to focus on what advantages 

our manufacturers and petrochemical companies will have if they 

can pay half for natural gas what other people are paying or less 

than half. So it cannot be said that we are here to make sure that 

there are jobs in one industry without hearing what jobs might be 

available through another process. 

With that, I think my little bit longer has been exhausted and 

I yield back. 

Mr. POE. I now recognize the vice chair of this subcommittee, the 

gentleman from Illinois, Mr. Kinzinger. 

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

holding this important hearing on gas exports. Since the 1930s, we 

have exported natural gas via a pipeline to Canada and Mexico, 

and more recently, starting in 1969, the U.S. began exporting natural gas to Japan, at that time a non-free trade agreement country 

from the Kenai Peninsula in Alaska. 

However, given this history of exporting natural gas, the Department of Energy has only granted a single permit to export liquefied 

natural gas to another non-FTA while approximately 20 remaining 

LNG export applications remain in limbo. What would approval of 

these 20 remaining LNG export applications mean for the American economy? I believe that the answer is somewhat simple. It 

means American jobs. The majority of the economic studies analyzing a wide range of scenarios found increased LNG exports 

would produce a net economic gain to the U.S. economy, resulting 

in an increase in U.S. households’ real income. At a time when the 

economy continues to struggle, we need to support policies that encourage domestic job growth. 

I do want to, however, say a note of caution. I represent an area 

of heavy manufacturing, and especially in the Rockford area in Illinois. We have a lot of manufacturing, and cheap energy has actually been very effective in bringing manufacturing back to the 

United States and making us competitive with the rest of the 

world. A question that I do legitimately want answered is, what 

will exporting natural gas do to natural gas prices here at home 

because I fear that a skyrocket in domestic natural gas prices 

would, in fact, lead to a hurt in the manufacturing sector as energy 

prices skyrocket again. 

But that said, the Department of Energy concludes that for every 

one of these market scenarios examined, net economic benefits increase as the level of LNG exports increase. And I am interested 

in hearing from our panel about the impact increased LNG exports 

will have on our national security interest around the world. LNG 

exports ought to support our allies, and I believe they could provide 

an important alternative to Middle Eastern or Russian competition 

that currently dominates the market. 

And thank you, chairman, I yield back. 

Mr. POE. Anyone else wish to make an opening statement? Without objection, all of the witnesses’ prepared statements will be 

made part of the record. I ask each witness to keep your presentation to 5 minutes, so that we can move along in this process and 

have questions and answers. 

I will introduce each of the witnesses at this time, and then we 

will have the witnesses’ opening statements. 

5

Mr. Rob Bryngelson is the president and chief executive officer 

of Excelerate Energy in The Woodlands, Texas. Before helping 

found Excelerate Energy he worked as managing director in El 

Paso Corporation’s Global LNG Group where he was responsible 

for LNG infrastructure development, supply, procurement, and 

downstream marketing for North America. Dr. David Montgomery 

is a senior vice president at NERA Economic Consulting, and 

helped lead the study that the DOE commissioned on the economic 

impact of LNG exports. Prior to NERA, Dr. Montgomery held a 

number of senior positions in the United States Government, including Assistance Director of the United States Congressional 

Budget Office, and Deputy Assistant Secretary for Policy in the 

U.S. Department of Energy during the Carter administration. Dr. 

Michael Levi is the David Rubenstein senior fellow for Energy and 

the Environment at the Council on Foreign Relations, and director 

of the CFR program on Energy Security and Climate Change. Before joining CFR, Dr. Levi was a fellow at the Brookings Institution 

and director of the Federation of American Scientists Strategic Security Project. Mr. David Mallino is the legislative director at the 

Laborers International Union of North America. He previously 

worked for the American Federation of Labor, Congress of Industrial Organizations, and National Environmental Education and 

Training Center. And Mr. Michael Ratner is a specialist in energy 

policy at the Congressional Research Service focusing on natural 

gas and all markets. His recent CRS work has addressed U.S. LNG 

exports and U.S. natural gas demand and prior to joining CRS, Mr. 

Ratner was a senior energy analyst at the Central Intelligence 

Agency. 

Mr. Bryngelson, we will start with you. You have 5 minutes. 

STATEMENT OF MR. ROB BRYNGELSON, CHIEF EXECUTIVE 

OFFICER, EXCELERATE ENERGY 

Mr. BRYNGELSON. Thank you, Chairman Poe, Ranking Member 

Sherman, members of the subcommittee. My name is Rob 

Bryngelson. I am the president and CEO of Excelerate Energy. I 

appreciate the opportunity to appear before the subcommittee 

today to share Excelerate’s views on the current status of the natural gas industry relating specifically to liquefied natural gas exports, the positive impacts both to Texas and the Nation associated 

with LNG exports, and finally, Excelerate’s views on the Department of Energy approval processing to export LNG. 

I have submitted more extensive written testimony for the 

record, therefore, I will use this time to summarize a few key 

points. Excelerate Energy was established in 2003 and is based in 

the Woodlands, Texas. We are the world’s largest provider of floating storage and regasification vessels, and are engaged in the development, construction, and operation of liquefied natural gas, 

transportation and regasification infrastructure worldwide. 

In 2009, Excelerate initiated front-end engineering design efforts 

to construct the world’s first floating liquefaction, storage, and offloading unit capable of taking U.S. domestically-produced natural 

gas and processing it into LNG for export. The project is referred 

to as the Lavaca Bay LNG project, and will be located in Calhoun 

County along the Texas Gulf Coast. 

6

U.S. residential, commercial, and industrial consumption is not 

expected to increase quickly enough to offset the growth of natural 

gas production which has led to projections of sustained low prices 

in the U.S. rapid growth in U.S. natural gas production has driven 

gas prices to historically low levels, resulting in decreased investment by the natural gas industry, and a reduction in associated 

economic activity. It is our belief that exporting domestically produced LNG will meaningfully contribute to the public interest in a 

variety of ways including creating more jobs, greater tax revenues, 

and increased economic activity; introducing new competitive supplies into world gas markets leading to improved economies among 

America’s trading partners and providing better opportunities for 

U.S. products and services abroad; promoting greater national security through a larger role in international energy markets; increasing production capacity that will better adjust to varying domestic demand scenarios; reducing the volatility of domestic natural gas prices; and improving the U.S. balance of payments by between $2.4 billion and $4.4 billion annually per project through the 

export of natural gas and the displacement of imports of other petroleum liquids. 

On October 28, 2012, Excelerate filed its application with the Department of Energy for the export of LNG to non-free trade agreement countries. Excelerate remains in the queue with 18 other 

companies awaiting DOE approval. In its non-FTA application to 

DOE, Excelerate included two independent economic studies focused on the specific project area and the U.S. as a whole. The 

independent studies concluded that the project would have a positive impact on the region surrounding the project site comprising 

Calhoun and Jackson Counties as well as on Texas as a whole and 

the Nation. 

After receiving approval from the FERC to proceed, Excelerate 

will begin the nearly 4-year construction process to complete Phase 

I of the Lavaca Bay LNG project. The construction and operation 

of the project will stimulate local, regional, and national economies 

through job creation, increased economic activity, and tax revenues. 

Much of the technology, equipment, and material needed to construct the project will be obtained domestically. I have included in 

my written testimony specific data concerning jobs, tax revenue, 

and other key benefits of the project. 

DOE is required to authorize exports to a foreign country unless 

there is a finding that such exports will not be consistent with the 

public interest. We concur with the DOE policy guidelines which 

emphasize free market principles and promote limited government 

involvement in Federal natural gas regulation. Previously, other 

issues considered in making the public interest determination have 

included local interests, international effects, and the environment. 

Excelerate’s primary concern is the timing of such non-free trade 

approvals. As you are aware, there are a multitude of projects 

around the world offering LNG supplies that are competing with 

the U.S.; specifically, Australia, East Africa, and the Eastern Mediterranean. 

Further delays are likely to result in buyers concluding that 

other potential LNG sources provide greater certainty and the 

focus on U.S. exports will diminish. This would be a considerable 

7

economic loss for our Nation. In addition, with only authorization 

to sell to free trade nations, we are limiting the potential pool of 

potential customers. As one would expect, with a limited customer 

base, those volumes of natural gas liquefied and exported will see 

lower prices than if a more expanded pool of purchasers were available. 

In conclusion, the overall outlook for domestic natural gas production is promising. Without a significant increase in U.S. residential, commercial, and industrial demand, the current rate of 

consumption is not enough to offset growth and production, and 

may contribute to artificially low prices for natural gas in the U.S. 

This rapid growth without increased demand is already resulting 

in decreased investment by the natural gas industry and a reduction in associated economic activity. 

It is crucial that DOE move expeditiously to act on the pending 

export applications before other countries lock up customers with 

their own exports and the U.S. loses this opportunity. 

Thank you again for allowing me the opportunity to appear before the subcommittee today, and I look forward to answering any 

questions that you may have. 

Mr. POE. Thank you. 

[The prepared statement of Mr. Bryngelson follows:]

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Mr. POE. Dr. Montgomery, you have 5 minutes, please. 

STATEMENT OF W. DAVID MONTGOMERY, PH.D., SENIOR VICE 

PRESIDENT, NATIONAL ECONOMIC RESEARCH ASSOCIATES 

Mr. MONTGOMERY. Thank you, Mr. Chairman. I am honored by 

your invitation to appear before the committee today. My name is 

David Montgomery, and I am the senior vice president of NERA 

Economic Consulting, and I would like to start by stating that I am 

speaking on my own behalf today. 

Mr. POE. Is your microphone on, Dr. Montgomery? 

Mr. MONTGOMERY. It is not, thank you. I am sorry. I am senior 

vice president of NERA Economic Consulting, and I would like to 

start by stating that I am speaking on my own behalf as an expert 

on the issues being discussed by the committee today, and not representing positions taken by my employer NERA, and I am certainly not speaking for the Department of Energy. 

I would like to begin with a quick summary of the key findings 

of our study that we did for the Department of Energy, and I will 

talk about economic principles and not numbers at this point. Then 

I will address some of the controversies that have arisen since the 

study was issued, and then I would like to conclude with a few observations on geopolitical effects of LNG exports. 

In the study we did for the Department of Energy, we examined 

a wide range of scenarios for export levels. We had different assumptions in these scenarios about the costs and availability of 

natural gas in the United States, and also on levels of global demand, and the supply from competing sources in the world market. 

We found that in some cases the U.S. might not export gas at all, 

as Mr. Sherman suspected. But in those cases, allowing exports 

had no effect; they did no harm and did no good. 

In all of the scenarios in which the U.S. did export, we found 

that there were net benefits to the U.S. economy from those exports. The larger the exports were, the greater the benefits were. 

Limiting exports never produced greater benefits in any of the scenarios we looked at than unlimited exports. This shouldn’t be surprising or controversial. It is exactly what the basic principle of 

comparative advantage that underlies all of international trade 

theory says will happen. All countries are better off when they specialize in exporting what they are good at, rather, what they are 

better at, and importing what others are better at producing. 

We wanted to be sure of our ground. We asked one of the leading 

trade economists in the country, Professor James Markusen at the 

University of Colorado, to advise us on this work and to review the 

study. He concurred in these conclusions as did studies that were 

released by the Brookings Institution, and by Rice University. They 

all apply essentially the same principles of international trade theory and reached the same conclusion about net benefits. 

Another way of putting this is that the advent of shale gas creates a new opportunity, and it changes the nature of the United 

States’ comparative advantage in trade. That produces some 

changes in patterns of imports and exports and industry outlook. 

But we have never found that shutting off opportunities or preventing change increases national wealth. It works the other way 

around. 

29

So let me talk a little bit about prices. Since the world won’t buy 

gas from the United States if it costs more than the natural gas 

that they can get from other sources, there are limits on how large 

the price increase caused by LNG exports could be. In most of the 

scenarios that we looked at, U.S. prices increased by about $0.50 

and that is looking out to, say, 2025 and it is on a base forecast 

of $6 of what natural gas prices would go back up to even if we 

had no LNG exports. In some cases, at most, we had $1 as the increase in cost that 

would be attributable to gas exports. In other words, with abundant gas, we can supply ourselves and export gas, and with limited 

supplies of gas, we can’t do either. But even with the largest price 

increases, U.S. energy-intensive industries will still be getting natural gas for half the cost of their competitors in natural gas-importing industries. That is because the cost of moving gas from where 

it is produced in the United States to where it is burned in countries like Japan, Korea, China, or even Europe, just about doubles 

the U.S. wellhead price. So I mentioned some of the importing 

countries. 

I can’t believe that the U.S. chemicals industries, for example, is 

so inefficient that it can’t survive if these competitors are still paying twice as much for natural gas as it is even after we are exporting natural gas. U.S. energy-intensive industries no matter what 

we export of LNG will still be getting natural gas at perhaps half 

the cost of the competitors that we worry about, like China, Europe, and Japan. 

Overall, the benefits of LNG exports that we found in our study 

were clear, but they weren’t large. And this is instructive. The U.S. 

is not going to become a one-crop economy. Natural gas is not a 

large part of the U.S. economy. Natural gas exports won’t be a 

large part of U.S. exports. And I think this is helpful in understanding that the U.S. is not going to become a country like a small 

African country that is exporting copper and is swung back and 

forth by commodity markets. This is one part of a large portfolio. 

Let me see, I am running very short on time, so let me make several other points I would like to cover. 

Mr. POE. Dr. Montgomery, if you would, summarize and then end 

your statement and then we will file your statement with the 

record. We have some questions for you, too. 

Mr. MONTGOMERY. I will, yeah. I agree with the chairman, LNG 

exports will help our friends and limit Russia’s ability to extract 

higher prices. I think they will distribute to nonproliferation goals 

as well as energy security because of the countries like India that 

need the exports. I don’t believe the LNG exports will increase local 

CO2 emissions. If the gas is burned elsewhere, it will substitute for 

coal and it is pretty much awash. But mainly my points is, limits 

will be self-defeating. Free trade areas will receive gas. Canada is 

a free trade area. If we have abundant gas and don’t export it ourselves as LNG, it will move to Canada, and that gas will displace 

Canadian gas which then can be exported. We will suffer all of the 

costs of exporting natural gas and get none of the benefits of selling 

it at the high price as a nation. Thank you, Mr. Chairman, I appreciate your indulgence. 

Mr. POE. Thank you, Dr. Montgomery. 

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[The prepared statement of Mr. Montgomery follows:]


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Mr. POE. Dr. Levi. 

STATEMENT OF MICHAEL A. LEVI, PH.D., DIRECTOR, PROGRAM ON ENERGY SECURITY AND CLIMATE CHANGE, COUNCIL ON FOREIGN RELATIONS 

Mr. LEVI. Chairman Poe, Ranking Member Sherman, members of 

the subcommittee, thank you for inviting me to speak with you 

about the geopolitical implications of U.S. LNG exports. As you 

know, in order to export LNG to countries with which the United 

States does not have a special Free Trade Agreement, companies 

must be granted permits by the Department of Energy. Approving 

some or all of those permits would benefit U.S. economic and security relationships. The United States has long been a promoter of 

open international energy markets as a way of separating commerce from diplomatic intrigue. In particular, in recent years it has 

challenged Chinese restrictions on exports of various raw materials 

at the World Trade Organization. A U.S. decision to disallow LNG 

exports would undermine Washington’s strength when challenging 

Beijing and when promoting open markets more generally. 

Some have gone further and argued that the United States 

should abolish even the current permitting process for LNG exports. Doing this, however, would remove valuable U.S. leverage in 

international trade negotiations. Maintaining some limited uncertainty about U.S. openness to exports, does create useful incentives 

for other countries to enter Free Trade Agreements with the 

United States. 

Now, what would actually happen if the Department of Energy 

approved a substantial number of export permits? It is entirely possible that few or no export facilities would ultimately be built and 

used. Export facilities cost several billion dollars each and take 

years to build, and their economics only work if gas prices stay well 

below overseas ones. Many analysts, nonetheless, project that small 

but nontrivial volumes of U.S. natural gas will be exported. Those 

exports would give large LNG buyers, including Korea, Japan, and 

India, an alternative to Middle Eastern and other producers for 

part of their supplies. That would provide those countries some leverage in negotiations with the traditional suppliers, who have 

long insisted on rigid contracts that link the price of natural gas 

to the price of oil and that entangled gas trade with international 

relations as a result. 

It would also provide them with some protection from economic 

damage that can result from volatile prices. It is unlikely, however, 

that U.S. LNG exports alone will fundamentally transform the 

highly politicized world of natural gas trade. 

The prospect of U.S. LNG exports would also help Europe maintain leverage against Russia, even if, as it appears likely, little U.S. 

natural gas is actually shipped to Europe. Europeans are increasingly forcing Russia to sell its natural gas on transparent marketbased terms rather than through opaque politically-charged contracts. And even the possibility of U.S. exports will help sustain 

pressure on Russia to sell natural gas on European terms. 

Now, analysts have raised two major geopolitical risks that 

might result from natural gas exports. Some argue that the United 

States will be better off using its natural gas to replace oil in its 

50

transportation system. But the best way to make that happen is 

not to block exports. It is to create incentives that directly encourage the use of natural gas in our cars and trucks. Similarly, efforts 

to promote natural gas as a lower carbon substitute for coal in 

power plants, while important, would be far better pursued 

through direct incentives to electric utilities rather than through 

export restrictions. 

Others warn that allowing exports would link the price of U.S. 

natural gas to volatile world markets. Such an outcome is unlikely, 

though not impossible. U.S. natural gas prices will remain well 

below overseas ones due to the high cost of liquefying and transporting the fuel, and in addition, as long as U.S. export facilities 

are fully utilized, fluctuations in overseas prices will not influence 

the price of natural gas within the United States. 

Despite the geopolitical and macroeconomic benefits of allowing 

exports, there remains substantial domestic opposition on other 

grounds. Congress would be wise to address opponents’ legitimate 

concerns in order to maximize the odds that the country will capture the benefits of allowing exports. 

Two areas are critical here: First, while the impact of exports on 

U.S. natural gas prices would likely be small, it could still be significant for low-income consumers. Congress can help address this 

by ensuring that the Low Income Home Energy Assistance Program, or LIHEAP, is fully funded. 

Second, natural gas exports would boost U.S. gas production. 

That would be good news for the economy, but it would increase 

environmental risks. The prospect of exports makes it all the more 

important that Congress makes sure that strong rules are in place 

to ensure that shale gas development is done safely. 

Members of the subcommittee, I thank you for the chance to 

speak with you today and look forward to answering any questions 

you have. 

Mr. POE. Thank you, Dr. Levi. 

[The prepared statement of Mr. Levi follows:]

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Mr. POE. Mr. Mallino, you have 5 minutes. 

STATEMENT OF MR. DAVID MALLINO JR., LEGISLATIVE DIRECTOR, LABORERS INTERNATIONAL UNION OF NORTH 

AMERICA. 

Mr. MALLINO. Thank you, Mr. Chairman. I am going to beg your 

indulgences for my loss of a voice. Washington, DC, pollen, and a 

loud, raucous rally yesterday in support of the Keystone XL Pipeline has left me a little bit wounded so I apologize, but I am going 

to croak through this as best I can. 

Mr. Chairman, on behalf of the 500,000 members of the Labors 

International Union of North America, I would like to thank you 

and Ranking Member Sherman and the members of the subcommittee for allowing us to testify today. As you know, too many 

Americans are out of work. Within the construction industry, the 

unemployment rate reached over 27 percent in 2010, and joblessness in the sector still remains far higher than any other industry 

with over 1 million construction workers currently unemployed in 

the United States. 

However, one bright spot for LIUNA members has been the 

growth in work hours associated with natural gas pipeline construction. As you know, the production of North America’s natural 

gas supply has increased dramatically in recent years through the 

development of shale gas reserves, which is largely the result of the 

development of hydraulic fracturing for the extraction of natural 

gas. The development of these domestic reserves of natural gas has 

dramatically increased work opportunities for our members, and 

the continued development of these resources will not only lead to 

job creation and expanded economic opportunities for America’s 

workers, but will also help put the United States on a path toward 

energy independence. 

Affordable domestic natural gas supplies have the potential to be 

an economic game changer across many sectors of the economy. 

However, in order to realize the full economic benefits of the expanded U.S. gas resources, the industry must be able to find a 

price for its product that makes continued development profitable. 

In 2012, LIUNA members worked over 11 million hours on pipeline projects under the National Pipeline Agreement, and we are 

just one of four crafts that are signatories to that agreement. 

America workers need the access to the good paying jobs, familysustaining wages, and the kind of jobs that the oil and natural gas 

sector provide. In addition to the drilling operations to recover the 

gas, there is extensive pipeline and compressor station infrastructure required to move the gas to facilities for processing or export. 

Often, in an attempt to kill new domestic energy sources, the enemies of job creation call these jobs dangerous and dirty. The fact 

of the matter is, construction is, in fact, a dangerous occupation, 

but when performed by trained workers it can be less dangerous. 

It is also less environmentally damaging when done by properly 

trained construction workers. 

Opponents of the industry also try to disparage these jobs by 

passing a value judgment that holds these jobs to be of lesser value 

because by its very nature, the construction project has a completion date and therefore, that individual job will come to an end at 

57

some point. They call these jobs temporary in order to diminish the 

importance, and they recruit others to join with them in a course 

of negativity in the mistaken belief that these jobs have no real 

value to society. 

The report issued by the Energy Information Administration, the 

statistical arm of the U.S. Department of Energy, predicts that 

shale gas production will continue to increase, while expected natural gas consumption and the industry power generational sector 

is to increase significantly. 

In order to find a price point that makes extraction of these tight 

gas reserves economically feasible, gas producers must be able to 

move natural gas to international markets. A number of LNG facilities’ liquefied natural gas terminals have been proposed for construction, which will themselves be economic engines that will create good jobs and other benefits. These are large-scale projects that 

cost billions of dollars to build and employ thousands of workers for 

several years during the principal construction. 

One of these proposed LNG export terminals, the Jordan Cove 

Energy Project in Coos Bay, Oregon, is expected to be built under 

a project labor agreement which will maximize the quality of the 

jobs for the construction trades on that project. This PLA will ensure that the workers on this massive project will possess the highest skills and best training while ensuring that the workers receive 

fair wages and working conditions. 

This project is expected to provide millions of work hours for the buildings trade crafts and will invest approximately $5.7 billion 

into the local economy. Natural gas development also produces 

needed government revenues at the Federal, State, and local levels. 

The Coos Bay Project is expected to generate $20 million in revenue for local and State governments in the first 3 years of operation, and $30 million to $40 million a year thereafter. These resources can help our State and local governments protect their 

communities from harmful budget cuts that have led to layoffs and 

the elimination of much-needed services. 

I will try to wrap up. I am sorry, guys. Responsible development 

of our natural gas resources is essential to the United States and 

is going to fully maximize the economic benefits of our oil and natural gas reserves. Best industry practices based on innovation and 

technology, combined with a highly-trained, skilled workforce represents an important step in addressing public concern. Through 

our affiliation with the Building Construction Trades Department 

of AFL–CIO, LIUNA is a partner of the Oil and Natural Gas Labor 

Management Committee. This joint business and labor committee 

has developed a set of principles that we believe companies engaged in the extraction and transportation of natural gas and oil 

should adhere to. They are in my formal submitted record. I will 

not read them to you. 

To be clear, LIUNA is also committed to helping advance policies 

that reduce our greenhouse gas emissions. We believe that an aggressive, science-based approach to emissions reduction is not only 

necessary from the perspective of achieving a sustainable environment, but that it will, in itself, be good for our economy and for 

working families. However, we reject the notion that natural gas 

resources should be abandoned or constrained as a path toward 

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greater sustainability. We believe that responsible development of 

natural gas is essential for the future economic prosperity of the 

United States, and we will continue to advocate for policies that 

foster growth in this sector. 

We look forward to working with the members of the committee 

and other policymakers who want to see our economy recover and 

produce American jobs that can foster middle-class families. Once 

again, the laborers thank you for this opportunity to testify before 

you today. 

Mr. POE. Thank you, Mr. Mallino. 

[The prepared statement of Mr. Mallino follows:]


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Mr. POE. Mr. Ratner. 

STATEMENT OF MR. MICHAEL RATNER, SPECIALIST IN 

ENERGY POLICY, CONGRESSIONAL RESEARCH SERVICE 

Mr. RATNER. Thank you, Chairman Poe, Ranking Member Sherman, and members of the subcommittee. My name is Michael 

Ratner, and I am a specialist in energy policy at the Congressional 

Research Service. CRS appreciates the opportunity to testify on the 

important issue of liquefied natural gas exports. Additionally, in 

accordance with our enabling statutes, CRS takes no position on 

any related legislation. 

Prior to the advent of shale gas in 2007, the United States was 

viewed as a growing natural gas importer. Terminals were built in 

the 2000s to import LNG from overseas and prices were rising. The 

success of shale gas production has reversed these trends. Prices 

have come down since peaking in 2008, and the U.S. price for gas 

is lower than other regional markets. Natural gas imports are 

down and LNG imports terminals sit idle with many having applied for export permits. This brings us to where we are today, 

weighing the benefits and costs of LNG exports. I will touch upon 

four components of the debate: Economic impacts, trade issues, environmental concerns, and the Department of Energy’s approval 

process. 

First, all else being equal, LNG exports should raise domestics 

prices because they increase total demand. However, whether LNG 

exports are good or bad for the economy in part depends on one’s 

perspective. Most gas producers who have faced low domestic prices 

would like to export to expand their market and access higher 

international prices. Some large industrial consumers of natural 

gas argue that allowing exports will raise domestic prices and stifle 

the economic benefits of having a low-cost input. 

For the Federal Government, LNG exports may or may not lead 

to a net increase in Federal revenue. Taxes paid by LNG exporters 

because of higher gas company profits could be offset by a decline 

in taxes paid by large consumers of natural gas because of higher 

domestic prices. Federal royalties would only increase if new natural gas production comes from Federal lands. Meanwhile, directly 

taxing exports raises constitutional issues. Natural gas is used for 

three primary purposes: Electricity generation, residential and 

commercial heating, and industrial processes. The specifics of each 

of these market segments will determine the effect of LNG exports. 

For example, the price of natural gas is just one component of the 

total cost of residential heating. 

While LNG exports may raise gas prices, new supplies may reduce transit costs. In addition to current uses, there has been discussion of using natural gas as a transportation fuel. Although 

some progress is being made, it is more a long-term prospect because of the infrastructure and technological changes that would 

have to occur. Price is just one factor that companies and consumers would consider before investing in natural gas-fueled vehicles. 

Second, the decision to permit or restrict LNG exports also raises 

trade considerations. As a member of the World Trade Organization, the United States could be subject to cases under the general 

65

agreement on tariffs’ and trades’ general prohibition against quantitative restraints if exports were limited. While certain exemptions 

from this prohibition may apply, export restrictions may put the 

United States in a contradictory position vis-a`-vis cases that it has 

brought to the WTO. 

Third, as shale gas came to market, it was hailed as a way to 

reduce emissions from dirtier fossil fuels, but environmental concerns were also raised, primarily because of the industry process 

known as hydraulic fracturing or fracking. Environmental groups 

against exports assert that additional production from shale for export implies more fracking. 

Finally, to deny an LNG permit to non-Free Trade Agreement 

countries, DOE must determine that exports would not be in the 

public interest. To make its determination, DOE evaluates many 

factors: Domestic need, previously approved capacity, adequacy of 

supply, the environment, geopolitics, and energy security, among 

other things. 

DOE commissioned two studies as part of its evaluation. One by 

the Energy Information Administration on price effects, and one by 

NERA Economic Consulting on macroeconomic impacts of LNG exports. Both studies have received praise and criticism by various 

stakeholders. For example, EIA scenarios were viewed as unrealistic because of the high volumes considered, but those are now 

well below the level of export applications. NERA’s use of data 

from EIA’s 2011 Annual Energy Outlook was considered dated. The 

data did not include potential domestic industrial demand, nor did 

it include recent improvements in shale gas extraction. However, 

EIA bases its projections on existing policy, technology, and data, 

not possible changes in any of these. 

Despite recent testimony, DOE has not laid out a clear timetable 

for approving pending permits, nor how it weighs each input in its 

decision. Some stakeholders have faulted DOE for a lack of transparency. 

Thank you for the opportunity to appear before the committee. 

I would be happy to address any questions you may have. 

Mr. POE. Thank you, Mr. Ratner. 

[The prepared statement of Mr. Ratner follows:]

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Mr. POE. I want to start the 5-minute questioning by each member. I will start with Mr. Bryngelson. How many jobs will the 

Lavaca Project create? 

Mr. BRYNGELSON. During construction, it is approximately 2,500, 

and in long-term operation, Phase I would be about 200. Phase II 

would double that to about 400. 

Mr. POE. How long have you been waiting for the Department of 

Energy approval? 

Mr. BRYNGELSON. We filed in October of last year. 

Mr. POE. When do you expect a decision? Do you know? 

Mr. BRYNGELSON. We don’t know. We are hopeful soon, but a lot 

of the project is depending on that at this point. We have no clear 

idea. 

Mr. POE. How much does it cost you a day or a month while you 

wait for that permit? 

Mr. BRYNGELSON. Well, right now, we are moving through the 

permitting process, so it is not impacting our costs specifically. 

What is impacting us is our ability to secure customers, and that 

could jeopardize the whole project. 

Mr. POE. What does that mean? 

Mr. BRYNGELSON. That means if we can’t sign up non-free trade 

customers, we don’t have customers. We don’t have a project. And 

every day that goes by it is harder and harder to keep just the 

baseline spend to get permitting, which over the next year is approximately $10 million. 

Mr. POE. Let me ask you this, and all of the members of the 

panel will weigh in, why does the permitting process take so long 

to get approved by the Department of Energy? How come it takes 

so long? 

Mr. BRYNGELSON. I wish I had an answer to that question, sir. 

Mr. POE. You don’t know. Dr. Montgomery? You are the expert. 

Do you know? 

Mr. MONTGOMERY. No, I don’t know what DOE is doing. 

Mr. POE. Dr. Levi? 

Mr. LEVI. I trust that because this is such a new area, this country has changed from being very much a consumer into also a 

major energy producer, that it is taking time to analyze the cost 

and benefits and ins and outs, just like this committee is. But I 

agree that time does matter, and that there is a limited market, 

and different companies around the world are trying to do contracts, particularly with key buyers in Korea and Japan, and so the 

timing of our approvals will have consequences. 

Mr. POE. How long does it take normally to get a DOE approval 

for a permit? 

Mr. LEVI. We don’t know because we have had only one experience. 

Mr. POE. And that took how long? 

Mr. LEVI. Anyone else know? 

Mr. POE. No one knows. Mr. Ratner, do you know? 

Mr. RATNER. I would say probably about a year or so. I can’t remember exactly when Cheniere applied for it. But one thing I 

would also add that I find interesting, I mean, everybody, for good 

reason, is focusing on the DOE process, but the FERC process, 

which also takes over a year to 2 years, people aren’t complaining 

72

about in part because they know the FERC process. You know, 

Excelerate knows what it needs to do to apply to FERC in order 

to move that application along. 

Mr. POE. Can do both processes move together, or does DOE 

have to finish theirs before FERC starts? 

Mr. RATNER. They can move together. 

Mr. POE. All right. Let me ask you this, Dr. Levi. When I was 

in India, I talked to the foreign minister. The only thing they wanted to talk about was getting natural gas from the United States to 

India. They made it really simple for me; the cost of their production and transportation in India is higher than for us to produce 

it in the United States, transport it, make a profit, and they still 

get a good deal in India. 

And the question was, why aren’t we exporting natural gas to 

India? Can you help me out with that a little bit? 

Mr. LEVI. Well, it will take time to build terminals and export 

to India, but the way you describe the economics is correct. Natural 

gas production in India is expensive. There are barriers to production, and so there will be incentives to export natural gas to India. 

It would help them reduce emissions relative to building more coalfired capacity. That said, it is not clear to me that it will be an alternative to other sources of natural gas. India has rapidly-growing 

demand for energy, and it will probably try to bring in resources 

from wherever it can. 

But there is no doubt that the more we are engaged in a positive 

way with them on natural gas, the more influence we will have on 

the other decisions they make. 

Mr. POE. Politically, for the United States, wouldn’t it help the 

relationship to have India look to the United States instead of look 

to China, or Pakistan, or somewhere else, even Russia for natural 

gas? Would this help us politically with this nation? 

Mr. LEVI. There is no doubt that being open to natural gas exports to India would help the United States politically. There is a 

long history in the U.S.-India relationship, as least as the Indians 

see it, of the United States interfering with free trade to India’s 

detriment, and this goes back a long way in the Indian political 

memory. 

So when we talk about trade restrictions on a commodity that 

India cares about, this isn’t just an isolated issue, it speaks to a 

broader set of concerns and a broader set of trust issues with the 

United States. So certainly allowing those exports would help. Of 

course, whether natural gas went from the United States to India 

would be the decision of private companies based on where they 

thought the contracts were most attractive. 

Mr. POE. I understand there was a contract signed today with 

India and a Houston-based company for a 20-year contract and 

there is also a contract with a Maryland corporation for the same 

thing. 

Last question. Mr. Ratner, if you could answer really quick. The 

WTO, we have got them sitting over here. Is the United States 

going to be in court if we don’t fix this problem with the WTO? 

Mr. RATNER. Very possibly. It will depend upon, you know, some 

of the countries that we discussed. I mean, the odds of Japan suing 

73

us in international court is possible, but how likely it would be, you 

know, remains to be seen. 

Mr. POE. I hope the Department of Energy knows that that is a 

possibility as well. I now will yield 5 minutes to the ranking member, Mr. Sherman from California, who is also the timekeeper. 

Mr. SHERMAN. Of three major fossil fuels, the one that is most 

versatile is petroleum because you can move it from one continent 

to another rather cheaply. We export coal, India and China don’t 

really care very much about whether they create twice as much 

carbon for every kilowatt they generate. 

Mr. Ratner, why are you even talking about exporting natural 

gas to China and India when instead, they could purchase our coal? 

That has to relate to the cost of shipping. Can you provide some 

estimates as to what it costs to export an MCF of natural gas, that 

means liquefy it and move it across oceans, versus what it costs to 

move coal that would have the same number of BTUs? And if you 

don’t know, just answer for the record. 

Mr. RATNER. I am not sure of the cost of shipping coal. I know 

relative to gas, it is a lot cheaper and a lot easier than liquefying 

gas and putting it on a cryogenic tanker which, I mean, some of 

the numbers I have seen to liquefy is about $3 per thousand cubic 

feet, and to ship it to Asia would be about $2, or $2.50. 

Mr. SHERMAN. So maybe $6 per MCF. I have no idea. You know, 

coal is heavy. It is not as dense in its energy so I have no idea 

what it would cost, but I know CRS is great at research and I know 

you will get an answer for the record. 

[Material submitted to the subcommittee by Mr. Ratner after the 

hearing follows:]

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Mr. SHERMAN. We have heard from both Dr. Levi and Dr. Montgomery about economic theories. I will just point out first that 

while the economic theory is that free trade works perfectly, and 

will enhance everybody, no one has been able to explain why we 

have a $600 billion trade deficit. It is theoretically impossible, and 

economists are in the same position as those aerospace engineers 

who said we have got a great theory, but we can’t explain how a 

bumblebee can fly. There is nothing the matter with the bumblebee. And the fact is that we do have a huge trade deficit. 

The other thing I will point out to Dr. Levi is, you said okay, if 

we want to adjust for this, we could provide more funding for lowincome consumers, and we could provide incentives, which would 

mean subsidies for natural gas vehicles. We don’t have any money. 

So if we want both vehicles and low-income consumers to get cheap 

natural gas, we are going to have to keep natural gas cheap. The 

other way to do it from an economic perspective would be to provide an incentive for natural gas vehicles by taxing gasoline. And 

I see you nodding because you are an economist. If you were a political consultant, you would not be nodding. 

Mr. Mallino, you talk about jobs, but what we really need are 

good jobs at good wages. You are looking at certain applications 

that have been filed. They are just the tip of the iceberg if we open 

this. With the ones that you are focused on, you have got project 

labor agreements or expect them, so those will be good jobs. 

Mr. MALLINO. Correct. 

Mr. SHERMAN. But the vast majority of the focus on where to 

build these facilities, they are all in Right to Work States with the 

exception of Oregon. Can you give us an idea of what, you know, 

what right to work, or what I call right to work for less will mean 

in terms of the wages and working conditions of those who work 

on these projects? 

Mr. MALLINO. As you know, Congressman, sometimes we also 

refer to it as a so-called right to work because it is everything except for an actual right to work. Right to Work States generally 

have, and I will have to look up the specific number, but generally 

have a wage and benefits scale about 30 percent less than those 

States that are not Right to Work States. And I will get the specific 

numbers for you. But there have been a number of very good studies that show that in Right to Work States workers have a much 

lower standard of living, and wage and benefit package. We like to 

believe that there should be a right to prosperity, not just a right 

to work. 

Mr. SHERMAN. Or at least a right to organize according to the 

U.N. Declaration of Human Rights. 

Mr. MALLINO. Right. 

Mr. SHERMAN. Finally, I will point out, because my time is nearly 

expired, that I don’t think congressional action just opening this 

will pass by itself through the Senate, but if we marry any legislative fix to this to nationwide standards for fracking, designed to assure environmental safety, it is much more likely to pass. 

I would have said also, perhaps, some revenue from an export 

tax, but unfortunately, the Constitution was written at a time 

when we were worried about the export of cotton and corn and 

seems to have prohibited that. I will go back to my office and try 

77

to find a loophole in what Mr. Ratner points out to be in the U.S. 

Constitution—not loophole, provision applicable to these modern 

circumstances, and I yield back. 

Mr. POE. Well said. 

Mr. LEVI. Can I briefly address the question of cars and trucks 

because I think it is important. 

Mr. POE. Okay. 

Mr. LEVI. Prohibiting exports and creating new incentives to get 

natural gas for our cars and trucks aren’t alternative options for 

achieving the same goal. Prohibiting exports would not get a lot of 

natural gas into our cars and trucks. And we do have ways of encouraging natural gas use that don’t require new spending on the 

part of government. We are already encouraging it through new 

corporate average fuel economy standards. We could further encourage it by modifying the advanced biofuel part of the Renewable 

Fuel Standard which is not being met and is repeatedly waived 

each year in a way that encourages the use of gas to liquid fuels. 

So there are creative ways to do this without incurring additional 

debt or having everyone lose their congressional seats by trying to 

pass a gasoline tax. 

Mr. MONTGOMERY. Could I also respond, I think, to a question 

that was addressed to me? I think there is a general consensus 

among economists that we understand exactly where the trade deficit comes from. It is the observation of the twin deficits, which I, 

unfortunately, remember going all the way back to the 1980s and 

colleagues at Brookings explaining it to me, simply meant that the 

trade deficit comes from our huge budget deficits, that when the 

government borrows, the borrowing leads to a differential between 

what we are importing and what we are exporting. 

Mr. SHERMAN. Let me just note for the record, when we had a 

budget surplus in the latter years of the Clinton administration we 

had a huge trade deficit, and Japan runs a much larger national 

deficit than we do and they have a huge trade surplus. Once again 

the bumblebee is flying, but the theory doesn’t work. 

I yield back. 

Mr. POE. I thank the ranking member. Just to follow up on the 

question to Mr. Mallino, in Texas until recently, until Mr. Weber 

took over some of my congressional area, I represented all the energy industry down in southeast Texas. My understanding is in the 

energy industry and Right to Work States you have a lot of union 

workers and you also have nonunion workers. 

Mr. MALLINO. We do. 

Mr. POE. I would ask Mr. Ratner, can you find out the percentage of union and nonunion workers in the energy industry and get 

back with this committee. 

Mr. RATNER. Sure. 

[Material submitted to the subcommittee by Mr. Ratner after the 

hearing follows:]

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Mr. POE. All right, thank you. 

Mr. MALLINO. Just one. The energy sector is a good sector for the 

employment of union workers, there is no doubt about it. One of 

the reasons why we are here today is because the jobs that those 

energy jobs provide do give our members a number of very good, 

well-paying jobs. 

Mr. POE. All right. Thank you. 

I am going to yield 5 minutes to the vice chairman, Mr. 

Kinzinger from Illinois. 

Mr. KINZINGER. Thank you, Mr. Chairman. 

And thank you, gentlemen, for being here. 

Illinois is fighting its own issue with the area of fracking. We 

have, I would say, terrible leadership in the State of Illinois that 

is very slow to react to changing circumstances, and I think we 

have a real opportunity to put a lot of good folks to work in Illinois 

and we have a lot of laborers in my district, a lot of union members 

in my district that would love the opportunity to be part of this energy renaissance. If anybody in Springfield is watching, hopefully 

they will be motivated by this hearing. 

I want to be all in on this. I lean toward favoring this. But I do 

have a couple of questions. And these aren’t like a lot of times in 

this when people lead you to answers to make a point. These are 

actual questions I have. 

When we come to a world-priced commodity on this situation, 

right now there is a huge disparity between obviously what we are 

paying for natural gas here and what it is paid for overseas. If we 

increase our ability to export, and over time, over the next 10 or 

20 years the infrastructure is built up in a big way and we can 

pretty much easily get this, what is to prevent our cost of natural 

gas from being married up and priced on the world market and 

married up with what they are paying in Europe and everywhere 

else? 

I will start with you, Dr. Montgomery. 

Mr. MONTGOMERY. What is going to prevent it is basically the 

cost of transportation. And we see this even in the United States 

where there is a difference of $1 or so between the price of gas in 

Texas and the price of gas in the Northeast, and that is actually 

changing as we have additional supplies being produced in the 

Northeast so that the transportation cost is narrowing. 

But unless there is some huge innovation in the liquifaction technology, we have a cost of moving the gas by pipeline from the wellhead to the liquifaction facility. To recover the cost of capital, 

liquifaction costs several dollars a million BTU. It is expensive 

moving natural gas long distances by ship because of the fact that 

you have to use the natural gas for fuel because it is going to boil 

off from the ship. 

But the point is, yes, there will be something like an irreducible 

$6 difference between the United States and the countries that it 

actually exports to because it takes that much to cover the cost of 

getting the gas from one to the other. 

Now, if we had no capacity constraints, if we had enough capacity to serve all of the needs, we would find there would be some 

convergence, but that convergence would be so that the price in the 

receiving countries and the price in the exporting countries differed 

81

by no more than that amount. That is, the rents that are being 

sought now by developers who think, hey, I can pay all that cost 

plus make a couple dollars, that would be competed away. 

Mr. KINZINGER. So we are limited by our capacity. And so again 

the concern was, though, is what if we get in 10, 20, 30 years 

where our capacity is——

Mr. MONTGOMERY. Even if our capacity is unlimited it will still 

be necessary to pay that cost of shipping the gas. 

Mr. KINZINGER. Gotcha. 

Mr. MONTGOMERY. And the prices can’t get any closer than that. 

Mr. KINZINGER. Did you want to? 

Mr. LEVI. I generally agree with what Dr. Montgomery has said. 

Some of those costs, if there is massive overinvestment, can ultimately be written off. Companies can go bankrupt and these facilities can still be operated. So in a situation where there was massive overinvestment you could have prices come closer together 

than the $6 differential. It is not zero. But that is possible. The 

thing that mitigates against it is that these are extremely expensive facilities, they take a very long time to build. And that gives 

a lot of time for them to fail. 

Mr. KINZINGER. Briefly another subject is just simply on the national defense side of it. What would this do in Eastern Europe if 

we begin exporting natural gas. Theoretically, some of it goes to 

Eastern Europe. What does this do with Eastern Europe, for instance, for their relationship with us versus Russia. Does it shift 

that balance of power at all? I guess I will look at you, sir. 

Mr. LEVI. I don’t think it makes an enormous direct difference. 

I think the bigger question in Europe is whether Europeans on 

their own will be able to negotiate more flexible contracts with 

Russia. And the prospect of U.S. exports will be there as a threat 

if Russia wants to try and push for more favorable terms for itself, 

and I think that does help us and it will be appreciated. 

Mr. KINZINGER. And very briefly, Mr. Mallano—did I say it right? 

Mallino. 

Mr. MALLINO. It doesn’t matter. 

Mr. KINZINGER. Mallino. There you go. 

Mr. MALLINO. I butcher your name all the time. 

Mr. KINZINGER. I know. Everybody does. 

Hey, just quickly, you had mentioned jobs in other sectors as 

well. Can you just expand on that a little bit, what it means to 

your folks? 

Mr. MALLINO. And part of that is about finding kind of a sweet 

spot. I mean, we recognize that cheap gas can lead to a resurgence 

of manufacturing like we haven’t seen, and while that will help our 

brothers and sisters in the manufacturing sectors and in those 

unions, constructing those facilities will also help us. And we know 

that there are a number of projects on the books, or at least in the 

planning phases, hopefully they get on the books, to build some 

new chemical facilities and others that we look forward to participating in. 

So literally finding the right price, whether that is through market or through whatever, is important because we should be able 

to export gas, but we also need to keep enough of it here that we 

can bring those jobs back. You know from your district and your 

82

State how important manufacturing jobs are. We are construction 

workers, but we want to see all sectors of the economy revitalized 

by this energy boon. We are an all-of-the-above union when it 

comes to energy. We don’t think any type of energy should be advantaged over the others. We just want to see these jobs come back 

to the United States. 

Mr. KINZINGER. Thank you. This was helpful. 

And I yield back, Mr. Chairman. 

Mr. POE. Thank you very much. 

We will now hear from Mr. Vargas from California. 

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

My question is really about keeping natural gas cheap. I liked it 

when you talked about keeping it cheap. I liked that part of it. And 

that is my concern. If we get the idea to send it all overseas and 

we see it go up two, three, four times here, no one will think we 

were geniuses. No one will be thanking us for how quickly we went 

through this process, they will say what the hell did you guys do? 

Why did you double, triple, quadruple the cost of natural gas when 

it was so cheap? And that is my concern. So I want to ask you a 

little bit about that, if I could. 

Now, I know gas a little bit better than natural gas. What is the price of gas, a gallon of gas in the United States, $3.60, $3.70 

cents? Depends on where it is. In California it is four bucks because we have more of that EPA stuff. That is the truth. But you 

go to Europe, and how much is it in Belgium for a gallon of gas? 

Dr. Levi or somebody who knows that? 

Mr. LEVI. I haven’t traveled to Belgium recently. It is much more 

expensive because of high taxes on gasoline. 

Mr. VARGAS. Right. And in other places also because of transportation and other issues you have got gas that is two, three, four 

times as expensive, it seems, as gas here in the United States. 

Mr. LEVI. We are talking about natural gas now? 

Mr. VARGAS. No. No. No. I am talking about gasoline. 

Mr. LEVI. Gasoline price differences in different parts of the 

world are primarily due to different levels of taxation on gasoline 

and to some degree due to the environmental requirements, just 

like the difference between California and other States. 

Mr. VARGAS. But also production. So, for example, in Venezuela 

they are very cheap because that is what keeps that government 

afloat, right, because they have a whole bunch of it. And my concern is that right now it seems to be that we are producing a whole 

bunch of natural gas, and I think that that is fantastic, and I absolutely believe that we can do this safely. I mean, I think if you 

have unionized labor doing it, you know, with the PLA, they always do a good job. I mean, that is just the way it is. We develop 

standards. 

My issue is with the cost, so if you could address that a little bit 

more, because I think it would be a terrible mistake if we rush this 

thing through and all of a sudden we double it. I mean, for some 

States it would be fantastic, I am sure, but for my constituents, 

they wouldn’t be so excited about that. 

Mr. MONTGOMERY. If I could just start. I think the primary determinant of the cost of natural gas is not going to be whether or 

not we are exporting it. It is the balance between supply and deVerDate 0ct 09 2002 15:18 May 31, 2013 Jkt 000000 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\042513\80549 HFA PsN: SHIRL
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mand in the United States. And I agreed with Mr. Bryngelson, 

right now we have a glut of natural gas. We have more production 

capacity and less demand than it takes to balance the market. 

And most forecasts that I look at, including the most recent ones 

by EIA, have the price of natural gas going up in the United 

States, say, roughly doubling from its lowest point over the next 10 

years or so simply because of domestic supply and demand, even 

if we don’t allow any LNG exports at all. So that is the first point. 

We are in a time that consumers might as well enjoy, but that it 

is not the way the market is going to be over the next 10 years. 

If we allow LNG exports, the exports are only going to occur if 

we have a willing buyer overseas. And I agree with Dr. Levi that 

if we have built lots of excess capacity we might find that there is 

a big demand for our gas. But over the next 10 years we are not 

going to have a great deal of capacity. We are not going to come 

close to the 20 TCF or two-thirds of U.S. gas production for which 

applications are in at DOE. The most that anyone I have talked to 

in the industry thinks it is feasible to do would be to build maybe 

a quarter of that, which means we might at most be able to export 

5 trillion cubic feet out of production of 25. That leads to——

Mr. VARGAS. Before I think I may run out of time, let me—I like 

the explanation—but let me make sure everybody agrees with you. 

Does anyone disagree that exporting some of this gas is not going 

to cause the price to go up here? Anyone disagree with that, or does 

everyone agree with that? Do you agree? 

Mr. BRYNGELSON. I agree. I think it is a small enough portion 

of the market you won’t see the effect, and you have got enough 

production out there that will ramp up and keep up with this. 

Right now prices are lower than the marginal cost to produce on 

a lot of the wells. You are seeing rig counts drop, production drop, 

and I think the market has got to equilibrate. But there is enough 

supply in the stack out there to meet the demand for the exports 

and the domestic market. 

Mr. MALLINO. I was just going to say, Congressman, the one concern we have based upon other fights that we have been engaged 

in over job creation is that we know that some of the opponents of 

the export of natural gas don’t really care about keeping prices 

cheap. They want to keep prices cheap to strand the resource, so 

that the resource isn’t developed. And that is our concern from our 

perspective. 

Mr. VARGAS. Okay. 

Mr. MALLINO. We believe that natural gas can revitalize the industry, but we don’t want it so cheap that it doesn’t get developed. 

Mr. LEVI. I think there is no question that prices would be slightly higher as a result of exports. If more people want to buy the 

same thing, it gets more expensive. But I don’t think it is plausible 

that it would be three or four times more expensive because that 

would raise U.S. natural gas prices so much that no one would 

want to buy it anymore. So for exports to continue and drive prices 

up, U.S. prices can’t get too high. 

Mr. POE. The gentleman’s time has expired. 

Mr. VARGAS. I didn’t hear the little buzzer. Sorry about that. 

Mr. POE. We don’t have a buzzer. It is on silent when your side 

is talking. 

84

Mr. Weber, 5 minutes. 

Mr. WEBER. Great. All right, I have Freeport LNG and Cheniere 

LNG on the edge of my district, the Gulf Coast of Texas. Judge Poe 

used to have it. Gentleman, which other product do we tell we don’t 

want them shipping overseas because it might drive our prices up? 

Is it Apple? Is it Nike? Is it Ford? Who do we tell that to? 

Mr. MALLINO. We actually bring Apple in from overseas. 

Mr. WEBER. Well, they do have some products that they might 

distribute from overseas. The point is whatever the company is, I 

don’t think we restrict any of them from sending overseas, do we, 

because it might drive prices up? 

Mr. BRYNGELSON. Well, here is an interesting thing to look at. 

You can export the natural gas liquids you take out of the gas 

stream without a DOE export. The methane that is left you can’t 

export. So to me that is a very odd situation for the same gas 

stream. 

Mr. WEBER. Right. And I happen to have a little startup company in my district called Dow Chemical, and they have come out 

being opposed to exporting liquefied natural gas. But we did sign 

on a letter that we did support it. 

Mr. Ratner, you made the comments that there were a lot of 

plants sitting around that had been set up to import natural gas 

that were sitting idle now and were regearing or retooling, if you 

will, for exporting natural gas, and they have got hundreds of millions, sometimes billions of dollars invested. We need to get this 

process done and over with so that those entrepreneurs, those private industries can export that gas. 

And I would submit to you, and you all can argue with me if you 

want, we will go down the line here, that unleashing the energy 

industry would be a way to get more money into our economy, to 

get our economy refueled, no pun intended, and to get business 

going again. Those jobs created, they will have a multiplier effect. 

Talk to your chambers of commerce. They will plow money back 

into the economy. They will be paying taxes. In some instances 

many of those people will be off of the assistance rolls, so to speak. 

Would any of you all argue with that? Mister, is it——

Mr. BRYNGELSON. Bryngelson. 

Mr. WEBER. Bryngelson. 

Mr. BRYNGELSON. No, I wouldn’t argue with that a bit. There is 

quite a bit, all the local industries, local regions will benefit from 

the project. 

Mr. WEBER. Okay. Dr. Montgomery? 

Mr. MONTGOMERY. No, I agree completely. 

Mr. WEBER. We will go on. I have 2 minutes left. Dr. Levi? 

Mr. LEVI. Nationally there is a net benefit. Different regions will 

gain or lose, depending on what they do. 

Mr. WEBER. Is it Mallino? 

Mr. MALLINO. Yes, sir, we agree. 

Mr. WEBER. Great. 

Mr. RATNER. I agree as well. 

Mr. WEBER. Glad to hear it. Let the record show it is unanimous. 

Now, let me just say that, for Mr. Sherman’s benefit, for coal, 

1.07 pounds yields 1 kilowatt of energy, electricity. For natural gas, 

0.00798 million cubic feet or 1,000 cubic feet yields 1 kilowatt. ReVerDate 0ct 09 2002 15:18 May 31, 2013 Jkt 000000 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\042513\80549 HFA PsN: SHIRL
85

sidual fuel oil is 0.00184 barrels, it yields 0.8—it is 0.8 of a gallon 

of fuel oil. So there is your energy difference when you want to talk 

about where you get the most. I own an air conditioning company 

so we deal a lot with BTUs. When you deal with energy output and 

you are talking about heat content, British thermal units is the 

heat to raise 1 gallon of water, 1 pound per hour—1 pound of 

water, rather, 1 degree, 1 hour. Natural gas is a great, great fuel 

source, and I think you said that, Mr. Vargas, and we appreciate 

that. 

So all in all, I think we should be moving toward exporting this, 

freeing them up so that our economy gets moving again. Can you 

give me any overriding economic reasons why we shouldn’t? And I 

have got about 11⁄2 minutes left. 

Mr. BRYNGELSON. No, sir. 

Mr. WEBER. He is easy. 

Mr. MONTGOMERY. It is a very interesting intellectual challenge, 

but no, I can’t. 

Mr. WEBER. Good. 

Mr. LEVI. I can’t either. 

Mr. WEBER. Great. 

Mr. MALLINO. Again, we just want to make sure that there is a 

price point for which we have encouraged domestic manufacturing. 

But we believe that the export and that can be done simultaneously with each other. 

Mr. WEBER. Great. 

Mr. RATNER. As I said in my statement, I mean, there will be 

winners and losers in this. And so depending upon your perspective 

of where you are sitting will depend upon whether or not you support it. 

Mr. WEBER. Okay. Thank you. I yield back 47 seconds. 

Mr. POE. I thank the gentleman. 

If the witnesses would bear with us, I think we are going to have 

another 3 minutes a round for the remaining members if they want 

to stay. Mr. Vargas, if you can stay. So I have a few questions as 

well. 

Mr. Bryngelson, you work in the energy industry. I have heard 

anecdotal stories that the price of gas has gotten so low that people 

who produce, drill for natural gas, have quit drilling for gas and 

they have gone back to drilling for crude oil. What is your impression of that concept? Is that happening or not? 

Mr. BRYNGELSON. Well, exactly what I hear in the industry is 

that they won’t drill for dry gas. Now, some of the wet gas where 

they can pull the liquids, your ethanes, your propanes, your 

butanes and pentanes where there is more value, they will drill 

those, but the natural gas price now is not enough to encourage dry 

gas drilling. 

Mr. POE. All right. My next question is, started out talking about 

the Department of Energy. What shall we do to move this process 

along? Suggestions? 

Mr. BRYNGELSON. Well, I am a firm believer, and we saw this 

with the regasification projects looking to import, that the market 

is going to decide on these. We have seen this in other regions. 

Australia is an excellent one where you have multiple projects proVerDate 0ct 09 2002 15:18 May 31, 2013 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\042513\80549 HFA PsN: SHIRL
86

posed. Each one gets incrementally more expensive than the last 

until you get to an economic indifference point. 

That is what is going to happen here. You won’t have an infinite 

number of these plants built at the same level. Liquefaction may 

cost $3.00 on the first plant, it is at $3.10, $3.50 on the next, until 

you get to a point where the cost of liquefaction doesn’t make sense 

and the market will say enough. 

The problem is you can’t predict which of these projects will go 

forward so you can’t really pick the winners or losers. The market 

will ultimately decide. We saw that happen on the regasification 

side. Companies ended up with stranded assets that aren’t being 

used. But those were on entrepreneurs, private industries. They 

didn’t hit the ratepayers. Now they are trying to be reused. 

So that is clearly my view on how this is going to work out and 

what the DOE needs to say is it is a market test. 

Mr. POE. And a political question, Mr. Levi. Back in 2009, I 

think it was, the Russians shut off the gas to the Ukraine. I noticed it when I was there for the 13 days. I quickly left. It got cold 

in January. The concept, political economics if I can use that 

phrase, of expanding our natural gas resources to other countries, 

including Europe, does that help us politically, like the Ukrainians 

and our relationship with the former Soviet republics? 

Mr. LEVI. It certainly does help us. Anything that gives consumers that we are friends or allies with more options in dealing 

with their traditional suppliers that use natural gas to exert political leverage helps them, and if they see us helping them, they 

tend to appreciate that. So I think it is a pretty straightforward 

equation on that front. 

Again, I don’t think it decisively changes things. The biggest 

change we have seen is that the United States is not an importer. 

As a result, big producers, Qatar in particular, have had surplus 

gas, they have dumped it on to the European market, and given 

our European friends and allies more options with Russia. Our entering the LNG export market would help continue that trend, but 

the big stimulus has already happened in a significant way. 

Mr. POE. Very briefly, Mr. Ratner. 

Mr. RATNER. Sir, there are just two points I would make. One is 

Europe has a lot of LNG import capacity. They use it to meet their 

peak demand in the winter, but they don’t have a lot of storage, 

so they can’t take in the gas during the rest of the season. So it 

is hard for them to necessarily use LNG to counter the Russians 

completely. 

Mr. POE. Thank you. 

Mr. BRYNGELSON. Mr. Chairman, would you indulge me for a second because I have a good bit of information on this. Our company 

was set up to find new markets for liquefied natural gas and we 

focused on Europe and Gazprom here. And that is one small bit of 

the equation. Right now we are developing projects to bring LNG 

into Pakistan, Egypt, Indonesia, Bahrain. We are working on building one in the Emirates. We have a project in Kuwait where we 

are actually bringing LNG into these countries from other sources, 

from Nigeria, from Trinidad. It could be the U.S. 

And these aren’t theoretical. These are projects that exist today. 

Twenty-five percent of the gas on a cold winter day that goes into 

87

Argentina flows across our ships, about the same on our largest 

vessel we have in Brazil. We have a project in Israel. As I said, Kuwait. We have one in the U.K., we had two in the U.S.—one we 

have shut down. But our list goes on from here. There are markets 

out there we are developing and it is other peoples’ LNG. 

And one of the things we try to do is to see ways we can get the 

U.S. behind us supporting our push for a U.S. company going in 

and keeping things happening. Pakistan. We would love to bring 

LNG there and not have the Iranian pipeline built. That could easily be U.S. LNG going in there. 

So these aren’t theoretical markets. These are real markets we 

are developing today. 

Mr. POE. Thank you. 

I yield to the ranking member. 

Mr. SHERMAN. Mr. Bryngelson, you may have misspoken if you 

said you were going to import natural gas to Kuwait. 

Mr. BRYNGELSON. We have actually been importing. This is our 

fifth year of LNG imports. 

Mr. SHERMAN. Of taking natural gas, and instead of piping it 

from Qatar you are liquefying it and then taking it over to Kuwait? 

Mr. BRYNGELSON. In our case, for that process, we are not liquefying, but our vessels deliver regasified LNG into Kuwait. 

Mr. SHERMAN. The idea of carting coals to Newcastle is illustrated here. It surprises me that Kuwait simply wouldn’t use petroleum to meet its energy needs. They seem to have a lot of it. That 

is an idiosyncrasy that I just want to——

Mr. BRYNGELSON. Certainly. Certainly I can tell you exactly why 

they do it, though. 

Mr. SHERMAN. Now, the other thing I will kind of disagree with 

you on is, this is conjecture, and that is you put forward the idea 

that the cost of liquification would go up with each new plant. It 

is the experience of most of us that as new technologies are developed costs go down, that the tenth plant built in the United States 

will be better designed and have better technology. I can’t see a 

reason why a plant built 10 miles away from another plant is going 

to have higher costs when it has all the experience of the older 

plant. 

I want to get to just nail down some numbers here. Mr. Ratner, 

what is the cost per MCF in Texas or the hub of natural gas. What 

is the price now? 

Mr. RATNER. The Henry Hub right now I think is about 4-something. 

Mr. SHERMAN. 4-something. Now, we have heard testimony here 

that the effect of exporting would be to increase that by between 

50 cents and $1. Dr. Montgomery, Dr. Levi, I think that is consistent with your testimony. You can just nod or let me know. 

Mr. LEVI. At the high end. 

Mr. SHERMAN. Okay. 

Mr. LEVI. I think we don’t know how much capacity will be built. 

Mr. SHERMAN. So if we are going to go back to our constituents, 

it is 50 cents or $1, although it is really not a quarter of the cost 

they are paying, because most of what they are paying is for the 

shipping, the billing process, the utility, et cetera. 

88

Mr. Levi, if it was $1 per MCF, on a basis of $4, what am I going 

to pay extra for cooking, 10 percent more or 20 percent more? 

Mr. LEVI. I will be pleased to do the math and get back to you. 

[The information referred to follows:]

WRITTEN RESPONSE RECEIVED FROM MICHAEL A. LEVI, PH.D., TO QUESTION ASKED

DURING THE HEARING BY THE HONORABLE BRAD SHERMAN

You are correct: the ultimate impact on delivered natural gas prices would likely 

be 10 percent or less.

Mr. SHERMAN. That really is a question about what percentage 

of what I pay my gas company is for the gas at the Texas price and 

what percentage—I don’t know if Mr. Ratner——

Mr. LEVI. I can give you one estimate from a study that I published last year looking at what would happen to household bills 

if prices went up by $1, and what I found was that for the lowest 

10 percent of household income earners, it would increase annual 

bills by about $50 a year if you combined electricity and home heating costs, and for sort of the median user it would be about $100 

a year at that upper range. 

Mr. SHERMAN. And those median users tend to live in the colder 

parts of America where an awful lot more natural gas is used. And 

I don’t think it would be that high in our area. And then I think 

the testimony has been that the cost to liquify and ship combined 

is roughly $6 an MCF, is that correct? I am seeing one panelist 

nod. 

Mr. BRYNGELSON. Yes. 

Mr. SHERMAN. I see another. Okay. So basically our manufacturers would have a $6 cost advantage on a product that costs $4, so 

they would be paying less than half of what the rival manufacturer 

would pay. 

Finally, and I know nobody has commented on this, when 

fracking technology hits the Eurasian landmass, is there going to 

be a lot more natural gas there so they won’t need ours? Dr. Montgomery? 

Mr. MONTGOMERY. I spent the beginning part of last week at a 

conference that was dealing exactly with this issue, and I am not 

sure I would call it a consensus, but the strong opinion of geologists 

and production companies and oil field services companies was not 

likely; that China has a very different kind—I mean, you can call 

it shale, but shale covers a multitude of sins—that it is a very different kind of resource than the U.S. There has only been, like, 20 

wells punched there into shale to test it. And so the opinions 

ranged from we simply don’t have any evidence that it is there to 

what we do know——

Mr. SHERMAN. That is China. Russia already creates a whole lot 

of natural gas. When they get our fracking technology, can they 

double or triple their production? 

Mr. MONTGOMERY. Russia, less clear. They apparently do have 

resources that are susceptible to fracking. 

Mr. SHERMAN. Okay. I yield back my negative time. 

Mr. POE. Mr. Weber, do you have some more questions? 

Mr. WEBER. I do. And I am sorry, I never turned my mike off. 

89

China, you mentioned 20 holes, Dr. Montgomery. I have heard 

that China is beginning to discover shale plays out in the western 

part of China but that they don’t have infrastructure out there and 

it is not near their population centers. So their challenge is to be 

able to get that infrastructure in place and to get that natural gas 

to where the people can use it as quickly and as affordably as possible. 

What kind of window do we have for our exporters to really get 

out there and seize on this market opportunity? Would you say 1 

year, 2 years, 3 years, 8 years? Any guesses, Mr. Bryngelson? 

Mr. BRYNGELSON. Well, my view on timing is not so much driven 

by the shale gas plays because a lot of the customers we deal with, 

potential customers, are looking for diversity of supply just as 

much as they are anything else in sourcing from the U.S. I think 

it is more of an issue of how quickly the other projects move along, 

and our biggest competitive threats are places like Mozambique 

and Tanzania with large finds there and the Eastern Mediterranean. So in my view this is something in the next year to 18 

months this gets decided, if not before that. So we don’t have a lot 

of time. 

Mr. MONTGOMERY. In our analysis we did not include a lot of increased demand for gas from China, so I guess in that sense we 

were assuming that China would in one way or another either satisfy its needs or be able to get gas more economically from elsewhere. So I am not sure that that is the market that is going to 

be driving the growth of U.S. exports. 

Mr. WEBER. You don’t think it plays. 

Mr. LEVI. I tend to agree Japan and Korea are more likely large 

markets. No one is going to build a multibillion-dollar facility on 

an expectation that they will make money for a year or 2. If they 

are doing it, it is because they hope to make money over a decade 

or more. 

Mr. WEBER. Well, and supply their people with gas, obviously. 

Mr. LEVI. Yes. And so the focus will be on this long-term payoff. 

The near-term question is, can you get those Japanese and Korean 

contracts, because for a lot of producers that is what their bankers 

want to see. 

Mr. WEBER. That is the window. 

Mr. Ratner? 

Mr. RATNER. The only thing I would add regarding China, I 

mean, they are the only country that I have heard could rival the 

U.S. as far as quantity, but getting the gas out is going to be a lot 

more difficult. 

Mr. WEBER. That is their challenge. 

Mr. RATNER. Yeah. And besides the infrastructure, there is no 

water out in western China to frack. 

Mr. WEBER. All right. Thank you. I yield back. 

Mr. POE. Thank the gentleman. 

Mr. Vargas from California. 

Mr. VARGAS. Mr. Chairman, thank you very much. Now that I 

get to go after my good friend from Texas, I can brag about a California company in San Diego, and that is Sempra, Sempra Energy, 

a very responsible company, very responsible both environmentally 

and I think with its workers it has done a pretty good job. And I 

90

know that they are looking at this opportunity, and I got a chance 

to speak to them about it. 

The issue, though, that now does concern me is the math, the 

math part. And the reason the math concerns me is because it 

doesn’t get really cold in California but it gets really hot, and as 

my friend Sherman told me, of course, we use that to fire up our 

electrical plants and produce energy. 

So I think that is one of the things that I think we have to nail 

down the math to figure out how much is it going to cost us if we 

do export it. I mean, there seemed to be some agreement there are 

going to be winners and losers. I just hate to be on the losing side 

of things. When I was in California the Democrats were on the 

winning side. Here we are on the losing side. So that is why it 

makes a difference. 

And I would like to know the math a little bit, and I hope you 

guys do work on that. Thank you. 

Mr. MONTGOMERY. Could I just comment on that, because we did 

have a lot of math in our report. And I think you are absolutely 

right that natural gas prices are very important for electricity 

prices in California. Pretty much natural gas prices California electricity. But we did take that in account, at least in the work that 

we were doing because we have a comprehensive model. 

But I think I did a disservice in the way I wrote the report we 

did for DOE in talking about winners and losers in terms of consumers and producers, because it is always going to look like there 

is a loss if you only look at one slice of the economy whenever you 

are talking about a trade issue, because the benefits that we get 

from trade are those that come from our export earnings, but they 

are also because those mean that we can import more things that 

we can——

Mr. VARGAS. You know, I am familiar with that. I went to school 

in Boston, I went to law school, and I got a chance to go to Worcester, and they would probably argue that some of the exports there 

hurt them because they had all those facilities. If you go there now 

there are old brick buildings with nothing in them. 

Mr. MONTGOMERY. Well, that is another case. But the point 

being that we need to look at a comprehensive picture. My opinion 

now is that the winners and losers are shareholders in companies 

that are going to be producing natural gas, building the infrastructure in natural gas, and the workers in those industries. The losers 

are largely going to be shareholders in some chemical industries 

and some other energy-intensive industries. Somebody who has a 

Standard & Poor’s 500 portfolio is going to come out ahead because 

quantitatively the gains on the gas side are going to be——

Mr. VARGAS. Right. I know my time is probably over. But it is 

the $100 more per resident in California that I am concerned 

about. 

Mr. MONTGOMERY. Yes, but a lot of those California residents are 

going to be participating in their other sources of income in the 

gains that come from trade. That is the picture that needs to go 

together. 

Mr. RATNER. If I could add just one quick comment to that, one 

thing to keep in mind, whether exports are allowed or not—well, 

if exports aren’t allowed and the manufacturing renaissance hapVerDate 0ct 09 2002 15:18 May 31, 2013 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6601 F:\WORK\_TNT\042513\80549 HFA PsN: SHIRL
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pens, that will be an additional source of demand which will also 

drive domestic prices up. So there is no reason necessarily to believe that if we don’t allow exports that prices are going to stay 

low. There have been a lot of projects that have been announced 

and if those get built the increase in demand will also raise prices 

domestically. 

Mr. VARGAS. Thank you, Mr. Chairman. I know I went over. 

Thank you, sir. 

Mr. POE. I thank the panelists for being here—your information 

was very valuable—and also to our committee members. So the 

committee is adjourned. Thank you very much. 

[Whereupon, at 3:45 p.m., the subcommittee was adjourned.] 

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