    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

    THE DEPARTMENT OF ENERGY'S STRATEGY FOR EXPORTING LIQUEFIED NATURAL GAS

    =======================================================================

                                    HEARING

                                   before the

                         SUBCOMMITTEE ON ENERGY POLICY,
                          HEALTH CARE AND ENTITLEMENTS

                                     of the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 19, 2013

                                   __________

                               Serial No. 113-11

                                   __________

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

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

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     DARRELL E. ISSA, California, Chairman
    JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland,
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of
    JIM JORDAN, Ohio                         Columbia
    JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
    TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
    JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
    PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
    SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT,
    TREY GOWDY, South Carolina               Pennsylvania
    BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
    DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
    CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
    ROB WOODALL, Georgia                 PETER WELCH, Vermont
    THOMAS MASSIE, Kentucky              TONY CARDENAS, California
    DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
    MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
    KERRY L. BENTIVOLIO, Michigan        VACANCY
    RON DeSANTIS, Florida

                       Lawrence J. Brady, Staff Director
                    John D. Cuaderes, Deputy Staff Director
                         Robert Borden, General Counsel
                           Linda A. Good, Chief Clerk
                     David Rapallo, Minority Staff Director

          Subcommittee on Energy Policy, Health Care and Entitlements

                       JAMES LANKFORD, Oklahoma, Chairman
    PATRICK T. McHENRY, North Carolina   JACKIE SPEIER, California, Ranking
    PAUL GOSAR, Arizona                      Minority Member
    JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of
    JASON CHAFFETZ, Utah                     Columbia
    TIM WALBERG, Michigan                JIM COOPER, Tennessee
    PATRICK MEEHAN, Pennsylvania         MATTHEW CARTWRIGHT, Pennsylvania
    SCOTT DesJARLAIS, Tennessee          TAMMY DUCKWORTH, Illinois
    BLAKE FARENTHOLD, Texas              DANNY K. DAVIS, Illinois
    DOC HASTINGS, Washington             TONY CARDENAS, California
    ROB WOODALL, Georgia                 STEVEN A. HORSFORD, Nevada
    THOMAS MASSIE, Kentucky              MICHELLE LUJAN GRISHAM, New Mexico

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on March 19, 2013...................................     1

                                   WITNESSES

    Mr. Tom Choi, National Practice Leader, Gas, Deloitte Marketpoint
      LLC
        Oral Statement...............................................     8
        Written Statement............................................    11
    Mr. Paul Cicio, President, Industrial Energy Consumers of America
        Written Statement............................................    16
        Oral Statement...............................................    18
    Dr. Charles Ebinger, Director Foreign Policy, Energy Security
      Initiative, Brookings Institute
        Oral Statement...............................................    30
        Written Statement............................................    32
    Mr. Chris Smith, Actng Assistant Secretary Fossil Energy, U.S.
      Department of Energy
        Oral Statement...............................................    42
        Written Statement............................................    44

                                    APPENDIX

    The Honorable Jim Jordan, a Member of Congress from the State of
      Ohio, Opening Statement........................................    98
    The Honorable James Lankford, a Member of Congress from the State
      of Oklahoma, Opening Statement.................................    99
    The Honorable Jackie Speier, a Member of Congress from the State
      of California. Opening Statement...............................   101
    DEI, Opening Statement...........................................   104
    The Honorable Elijah E. Cummings, a Member of Congress from the
      State of Maryland, Opening Statement...........................   106

    THE DEPARTMENT OF ENERGY'S STRATEGY FOR EXPORTING LIQUEFIED NATURAL GAS

                                  ----------

                            Tuesday, March 19, 2013,

                      House of Representatives,
        Subcommittee on Energy Policy, Health Care and
                                          Entitlements,
                  Committee on Oversight and Government Reform,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 3:10 p.m. in
    room 2247, Rayburn House Office Building, Hon. James Lankford
    [chairman of the subcommittee], presiding.
        Present: Representatives Lankford, Gosar, McHenry,
    DesJarlais, Farenthold, Massie, Issa, Speier, Horsford, Lujan
    Grisham, and Cummings.
        Also present: Representatives Turner, Meadows, and Fleming.
        Staff Present: Ali Ahmad, Majority Communications Advisor;
    Molly Boyl, Majority Parliamentarian; Joseph A. Brazauskas,
    Majority Counsel; Sharon Casey, Majority Senior Assistant
    Clerk; Drew Colliatie, Majority Legislative Assistant; Brian
    Daner, Majority Counsel; Linda Good, Majority Chief Clerk;
    Tyler Grimm, Majority Professional Staff Member; Ryan M.
    Hambleton, Majority Professional Staff Member; Frederick Hill,
    Majority Director of Communications and Senior Policy Advisor,
    Christopher Hixon, Majority Deputy Chief Counsel, Oversight;
    Mark D. Marin, Majority Director of Oversight; Scott Schmidt,
    Majority Deputy Director of Digital Strategy; Jaron Bourke,
    Minority Director of Administration; Jimmy Fremgen, Minority
    Legislative Assistant; Nicholas Kamau, Minority Counsel; Chris
    Knauer, Minority Senior Investigator; Adam Koshkin, Minority
    Research Assistant; Safiya Simmons, Minority Press Secretary
    and Mark Stephenson, Minority Director of Legislation.
        Mr. Lankford. Let us begin this hearing by saying the
    Oversight's mission statement.
        We exist to secure two fundamental principles. First,
    Americans have the right to know that the money Washington
    takes from them is well spent. Second, Americans deserve an
    efficient and effective government that works for them.
        Our duty on the Government Oversight and Reform Committee
    is to protect these rights. Our solemn responsibility is to
    hold the government accountable to taxpayers because taxpayers
    have a right to know what they get from their government. We
    will work tirelessly in partnership with citizen watchdogs to
    deliver the facts to the American people and bring genuine
    reform to the federal bureaucracy.
        This is the mission of the Government Oversight and Reform
    Committee.
        Today we are here to discuss the Department of Energy's
    strategy and process in reviewing applications to export
    liquefied natural gas, LNG, specifically to non-free trade
    agreement countries.
        For countries with which we have a free trade agreement
    covering the Natural Gas Act of 1938, and obviously amended
    multiple times since then, the Department of Energy is required
    to grant applications to export LNG. Such export is deemed to
    be consistent with the public interest and the authorization
    must be granted without modification or delay.
        For countries with which we do not have a free trade
    agreement covering natural gas, the Natural Gas Act presumes
    the Department of Energy will grant the application to export
    LNG unless the Department finds the proposed exportation will
    not be consistent with the public interest.
        The issue we are here to discuss today is not if we should
    export natural gas. The U.S. has exported natural gas via
    pipeline to Canada and Mexico since the 1930s. We are also not
    here to discuss if we should export liquefied natural gas. The
    U.S. has exported LNG from the Kenai Peninsula in Alaska since
    1969.
        Again, by statute, the Department of Energy must approve
    LNG exports to FTA countries and the default position is it
    exports to non-FTA countries unless DOE finds that it is not
    consistent with the public interest.
        Finally, we are not here to discuss if we should export
    liquefied natural gas to non-FTA countries. Again, the U.S. has
    exported to Japan, which is not an FTA country, from Alaska
    since 1969. In the lower 48 in May 2011, the Department of
    Energy granted the first permit to export LNG to a non-FTA
    country. That facility is currently under construction in
    southwest Louisiana and will begin exporting LNG within two
    years.
        We are not even here to discover for the first time the
    economic impacts of LNG export. DOE has already commissioned
    and released the results of a two-part study. The first part
    was conducted by the U.S. Energy Information Administration and
    the second part was conducted by NERA, Economic Consulting.
    Dave Montgomery of NERA was invited to testify today as well,
    but due to a last minute scheduling conflict, has submitted
    written testimony for the record for which I will ask unanimous
    consent to put into the record.
        Mr. Lankford. The DOE studies concluded that for every one
    of the market scenarios examined, net economic benefits
    increased as the level of LNG exports increased and that
    exports of natural gas will improve the U.S. balance of trade
    and result in a wealth transfer to the U.S.
        Two additional studies on LNG have also been commissioned
    by Brookings and Deloitte, which will testify here today on the
    risks and potential gains for our economy and global
    relationships.
        As a Nation, we have already decided exporting is
    consistent with our public interest and we will continue to
    export natural gas by pipeline and LNG to FTA and non-FTA
    countries. The only issue here is how and when the Department
    will process the approximately remaining 20 LNG export
    applications. Every other applicant is now significantly behind
    the first permit holder which was permitted almost two years
    ago. It is essential that the process moves fairly and
    expeditiously.
        Today's question is really a narrow and simple set of
    process questions, although each answer has enormous
    implications for our international economic relationships and
    capital investments at home. When will DOE make its
    determination of public interest and what are the specific
    criteria in that decision, especially since the law encourages
    a default yes answer to exports.
        The two DOE-requested studies are complete. They both show
    a favorable gain for our nation when we export LNG. Now the
    comment period and replies are also complete. Will the DOE seek
    to limit the number of billion cubic feet that can be exported
    per day? Has DOE already set a certain amount of LNG to export
    and if so, how was that limit chosen? Will DOE seek to limit
    the number of export facilities permitted and thus allowed to
    compete and explore for contracts worldwide? What role will the
    market or geopolitical goals play in this decision? When can
    potential exporting companies begin competing for those
    contracts?
        There are not an infinite number of contracts that can be
    acquired worldwide. If we delay making a decision on
    permitting, other countries with a more efficient bureaucracy
    will beat us. The U.S. has a great head start in terms of
    technology, experience, pipeline infrastructure and processing.
    We have developed financial and legal systems to support gas
    development. These advantages will not last forever.
        There are massive shale gas fields around the world. China
    and India have invested in the Marcellus Shale in order to
    learn more about our technologies and currently Australia has
    eight LNG export facilities under construction. We have one.
    The demand window is open. We can step through it or we can
    delay until the window closes.
        If DOE intends to delay the decision to export to reduce
    the opportunity for global contracts, that is also something we
    should know. I don't believe that is the Administration's
    intent. In December 2012, President Obama said to Time
    Magazine, ``The United States is going to be a net exporter of
    energy because of new technologies and what we are doing with
    natural gas and oil.''
        The President also recognizes these energy developments
    could have huge geopolitical consequences. For decades, energy
    has been used as a diplomatic tool against the U.S. Now with
    LNG, the U.S. has the potential to flip that and be in the
    position to use energy as a tool to benefit our Nation's
    strategic interest.
        Now that DOE has completed the first permit and developed a
    system, what will be the timing and systems to permit the
    remaining applicants? With billions of private capital at
    stake, how can we make the process neutral, fair and expedited?
    How quickly can that process be released and how can we
    complete the process so that our nation can move forward with
    energy exploration, jobs, construction, midstream jobs and the
    narrowing of our trade deficit?
        Uncertainty destabilizes a free market economy. It is time
    to provide timelines and decision-making criteria ensuring
    fairness of the process for everyone involved. I look forward
    to those answers on all these key issues today.
        Mr. Lankford. With that, I would like to recognize the
    distinguished Ranking Member, the gentlelady from California,
    Ms. Speier, for her opening statement.
        Ms. Speier. Thank you, Mr. Chairman. Thank you for holding
    today's hearing. I look forward to an informative discussion on
    the Obama Administration's process for reviewing the export of
    liquefied natural gas.
        New technologies in horizontal drilling and hydraulic
    fracturing have led to significant increases in U.S. natural
    gas production and a huge growth in our domestic gas supplies.
    For the first time in modern history, America has the
    opportunity to become dramatically more energy independent.
        As USAID Today reported last year, energy independence is
    no pipe dream. The U.S. is already the world's fastest growing
    oil and natural gas producer. Counting the output from Canada
    and Mexico, North America is the new Middle East. Furthermore,
    at our current pace of production, the Energy Information
    Administration predicts that the United States will slash its
    dependence on foreign oil to as low as 36 percent by the year
    2035, down from some 49 percent in 2010.
        Many have called natural gas a bridge fuel to a clean
    energy future due to its lower emissions compared to other
    fossil fuels. Right now the natural gas producing and
    transporting industry wants to cross that bridge in part by
    exporting U.S. natural gas to foreign countries. Those foreign
    countries will pay a higher price for natural gas than is
    currently sold domestically. That means higher profits, more
    investment and more jobs for the oil and gas industry.
        Many gas consuming industries, including many businesses
    who ``are making it in America,'' want to cross that bridge in
    a different way. These are companies that use gas as a fuel and
    as input to make a variety of products ranging from chemicals
    to cars. They want U.S. natural gas to be sold into the
    domestic market at current prices which will enable them to
    make higher profits and invest in more job creation.
        The domestic manufacturing industry warns that if we permit
    the export of large volumes of our domestic natural gas supply,
    prices for natural gas in the U.S. will increase. It is unclear
    what the consequences of a rush to export would be for American
    manufacturing jobs, as well as for many middle class and lower
    income Americans.
        I look forward to hearing from today's witnesses about the
    importance of natural gas to our manufacturing sector and
    whether those benefits have been overlooked or under assessed
    in the debate over liquefied natural gas.
        We are balancing two very important interests, those that
    want to export and those that want to retain the natural gas in
    the United States for consumers and companies that make it in
    America. The Federal Government should proceed deliberately and
    carefully on LNG export. In fact, the Federal Government is
    legally bound to determine what degree of LNG exports is in the
    ``public interest'' before moving ahead on permitting new
    export facilities.
        Currently, the Department of Energy is fulfilling its duty
    under the Natural Gas Act of 1938 to evaluate the cumulative
    impacts of allowing the natural gas industry to export U.S.
    natural gas. The Department of Energy commissioned two reports
    from the Energy Information Administration and NERA Economic
    Consulting and is now reviewing more than 200,000 public
    comments on those reports, including many that are highly
    critical of the reports' methodologies and conclusions.
        I would like to hear from our witnesses today whether they
    feel that the EIA and NERA's report conclusions are
    comprehensive or leave important questions unanswered or
    inadequately addressed.
        I do not believe it is the job of DOE or the Federal
    Government to choose sides in the natural gas marketplace. This
    is not what the Natural Gas Act requires. However, it is the
    job of the Department to hear all sides and determine, on
    balance, how much liquefied natural gas export is permissible
    within the ``public interest'' and to make sure that its
    decision is informed by the best data and analysis.
        Today's hearing should not be read as an opportunity to
    influence the DOE's process or to push on the scales of what is
    in the public interest. The Department is considering all views
    as it is charged to do by statute.
        Thank you again, Mr. Chairman, for holding this hearing. I
    look forward to hearing from our witnesses.
        Mr. Lankford. Thank you.
        I now recognize the Chairman of the full committee, Mr.
    Issa, for an opening statement.
        Mr. Issa. Thank you, Mr. Chairman.
        On the screen, I have a slide that I think sets of
    something of interest for us to bear in mind throughout the
    hearing. The two circles drawn around areas are areas of major
    production, one of oil and natural gas at Eagle Ford, the other
    one of almost all oil but with enough natural gas being flared
    today that it practically looks like New York City. That is the
    effect, in no small part, of artificially low natural gas.
        I think one of the points we have to make here today is
    that when natural gas falls too low, you end up with it
    becoming essentially waste fuel. That is not our goal. This is
    a valuable and clean energy. This is an energy that produces
    not just the methane we think of as burnable natural gas, but
    the ethylene that we so often think of for plastics and other
    uses; the propane, a highly portable fuel that on which America
    counts. All of this and more in the way of byproducts are part
    of what we are hoping to get to.
        The other thing is, for those who talk in terms of clean
    energy and exports, I just want to point out that in 2012, the
    United States exported 126 million short tons of coal, a great
    deal of it to China, our largest partner in that. If you could
    visualize that, it is 1.4 million railcars of coal.
        To a great extent, what we are trying to do is export a
    cleaner fuel, both in its raw form and of course if we burn it
    in the U.S. and use it in the U.S., in the form of exported
    product. I believe there is enough fuel, and the studies show
    there is, to do both.
        Additionally, today, with a roughly $3.90 cost of a million
    BTUs, that is about $21 equivalent to a barrel of oil. It is so
    cheap that Burlington Northern has announced a $2 billion
    investment to convert diesel locomotives to work on natural
    gas. For many who find that interesting, let us make something
    more interesting. We are going to burn natural gas to haul coal
    to China. That is the reality of what we are doing and that's
    how plentiful it is.
        I support all of the use of both liquefied and compressed
    natural gas because, in fact, it is a clean fuel, a plentiful
    fuel and an inexpensive fuel. It is going to be part of
    reducing our trade deficit.
        Mr. Chairman, in 2012, in spite of increased exports, we
    had our largest trade deficit since 2008, a whopping $475
    billion. Converting to using more natural gas, producing more
    oil as we are in North Dakota, all of this comes together to
    reduce our imports, increase our exports and make America more
    competitive.
        For those who view, as they should, the lower a fuel stock
    gets, the lower a raw material gets, the better for domestic
    business, I concur. However, there comes a point at which a
    decision has been made by many companies that at $5.77, which
    is our 10-year average price for natural gas, they are going to
    bring those jobs to America because that is so much lower than
    the global price, that, in fact, American businesses remain
    very competitive with this low cost fuel, still half the cost
    of using comparable oil.
        If you look to Japan where they compete with us often, they
    are looking at nearly $20 equivalent to our $3.95. They pay a
    lot. They are an important ally.
        Mr. Chairman, one of the most important things you are
    bringing about today is a discussion on our NATO allies who
    find themselves being held hostage both by the Middle East and
    by Russia and our Asian allies who find themselves simply
    paying a very high price and feeling fuel is part of their
    diplomatic decisions.
        The ability to export at least, in part, a portion from the
    United States, along with Australia and other countries who are
    also going to be increasing exports, makes us better neighbors
    diplomatically and better allies. Last but not least, you
    pointed out very clearly if we deliberately delay the ability
    to compete 20 year-plus contracts will go to other nations and
    will not go to the United States. We are not dealing with
    whether we do it today or tomorrow, we are dealing with whether
    delay is working to the detriment of our long term ability to
    compete in this important fuel.
        Last but not least, for those who say natural prices will
    rise, when I have looked at the nature of export contracts, if
    we get back to the $12.69 peak in 2008 or above, the liquefied
    natural gas exporters will simply shut that down because it
    won't be worthwhile. There is a natural stop point on all of
    this.
        For all of us who have viewed energy as an important tool
    of our national defense, as an important tool of our economy,
    we have a windfall. We need to make sure we have enough of the
    windfall that we do not flare gas for lack of the price to
    support infrastructure development.
        I thank the Chairman for this important hearing.
        Mr. Lankford. I would like to recognize the Ranking Member
    of the Full Committee, Mr. Cummings for an opening statement.
        Mr. Cummings. Thank you very much, Mr. Chairman. Thank you
    for holding this hearing.
        I have not reached conclusions; I am coming here today to
    hear the witnesses so that I can be better informed. Today's
    hearing focuses on a very important energy policy question. Is
    it in the public interest to export increasing amounts of
    natural gas to foreign markets overseas? That is the question.
        Because of new drilling techniques and other technology
    advancements, the United States is now able to produce natural
    gas in geological formations that were once impossible to tap.
    This new technology has given rise to an emerging industry that
    is transforming parts of our nation. This recent boom has
    reduced the price of natural gas and has saved consumers money
    on their electricity bills and is fueling a resurgence in the
    domestic manufacturing. Our natural gas has become a
    competitive advantage in a global market.
        Because so much natural gas is being produced,
    paradoxically, it may be placing the natural gas production
    industry and the jobs in that sector at some risk. As prices
    fall, some producers may be faced with the prospect of
    suspending operations or even going out of business. To address
    that concern, some companies are now seeking to export gas to
    foreign markets.
        While that could be a very good thing for United States
    producers, it raises questions that must be addressed. First,
    will exports drive up prices for domestic U.S. manufacturers
    and consumers? Multiple studies have shown that they will. That
    will mean higher gas prices for consumers, higher prices for
    manufacturers who want to support and potentially higher prices
    for goods and services for everyone.
        The producers contend that increasing exports will increase
    jobs. That too must be a consideration. By converting import
    terminals to export terminals, there is likely to be an
    increase in the number of jobs in certain sectors. God knows,
    we need more jobs.
        We also need to understand whether we will be supporting
    this set of jobs, those in the energy sector, at the expense of
    another set of jobs in United States manufacturing that rely
    heavily on natural gas in their operations.
        Another question we must answer is whether exporting
    natural gas will more quickly deplete U.S. supplies just as the
    Country is moving toward greater energy independence. For
    years, we have heard that the United States must reduce its
    dependence on foreign energy sources. By increasing gas
    exports, are we trading part of that independence for short
    term profits?
        Third, complex environmental questions regarding some of
    the techniques used in gas production have not been resolved. I
    believe it is critical that we give ample attention to how
    increased production may exacerbate those concerns.
        Mr. Chairman, as we hear today it is the Department of
    Energy's job to determine whether exporting more natural gas is
    in our Nation's best interest, but we will also hear today that
    studies commissioned by the Department are subject to debate.
    Some believe that recent studies demonstrate a clear benefit
    from gas exports while others believe the studies point to the
    opposite conclusion.
        Although we may begin to answer some of these important
    questions at today's hearing, I believe we will also learn that
    there are a number of key questions that need to be studied
    more carefully.
        I want to thank you for holding this hearing and with that,
    Mr. Chairman, I yield back.
        Mr. Lankford. Thank you.
        All members will have seven days to submit opening
    statements for the record.
        I will now recognize our panel. Mr. Tom Choi is the
    National Practice Leader, Gas, Deloitte MarketPoint LLC; Mr.
    Paul Cicio is President, Industrial Energy Consumers of
    America; Dr. Charles Ebinger is Director, Foreign Policy,
    Energy Security Initiative, Brookings Institute; and Mr. Chris
    Smith is Acting Assistant Secretary for Fossil Energy, U.S.
    Department of Energy.
        Thank you all for being here.
        Pursuant to committee rules, all witnesses are sworn before
    they testify. Please rise and raise your right hand.
        Do you solemnly swear or affirm that the testimony you are
    about to give will be the truth, the whole truth, and nothing
    but the truth?
        [Witnesses respond in the affirmative.]
        Mr. Lankford. Thank you.
        Let the record reflect that the witnesses answered in the
    affirmative.
        In order to allow time for discussion, I would ask you to
    limit your testimony to five minutes. Watching our clock, we
    expect votes somewhere around the next 15 minutes, so that
    would be perfect. We will try to get through all of our
    testimony and will start with questioning time. If votes call
    us, then we will put temporarily pause, come back and continue
    questioning from there.
        Depending on time and the questioning, as soon as two of us
    get back, I would like to start questioning again and try to
    finish as quickly as we can to honor your time as well.
        Mr. Choi, you are at bat first. We are pleased to receive
    your testimony.

                           WITNESS STATEMENTS

                         STATEMENT OF TOM CHOI

        Mr. Choi. Good afternoon, Chairman Lankford, Ranking Member
    Speier and members of the subcommittee. Thank you for inviting
    me to testify this afternoon.
        My name is Tom Choi. I am the National Gas Practice Leader
    for Deloitte Marketpoint.
        Deloitte Marketpoint has worked for a number of clients
    across different industries to help them better understand
    energy markets. In particular, we have utilized a World Gas
    Model to help LNG companies seeking objective and in-depth
    economic analysis of global gas and LNG markets. The key
    results of our model and our analysis form the basis for my
    comments this afternoon.
        The World Gas Model computes prices and quantities based on
    established microeconomic theories. It has been used by leading
    energy companies and institutions for over 20 years. Vital to
    this analysis, the World Gas Model represents natural gas
    producers' decisions regarding when and how much gas to develop
    given a producer's resource endowment and anticipated forward
    prices.
        The supply-demand dynamic is particularly important in
    analyzing the impact of demand changes, including LNG exports.
    Without a proper representation, the results would likely under
    estimate producer response and over estimate the price impact.
    It would be tantamount to assuming that the markets would be
    surprised or unprepared for the volume of exports and in
    effect, would have to ration fixed supplies to meet export, as
    well as domestic demand.
        Our findings show that the price impact to the U.S. is
    likely to be modest. The impact of 6 Bcfd of U.S. LNG exports
    on average U.S. prices is projected to be only $.15/MMBtu from
    2016 to 2030. Abundant North American gas resources, coupled
    with the market's demonstrated ability to respond to market
    changes, mitigate the price impact of exports.
        Since there is some uncertainty about the magnitude of the
    potential impact of LNG exports on domestic prices, an
    examination of the fundamental economic factors might be
    helpful. I think it is important to separate the timing issue,
    that is how quickly new supplies can be brought online from the
    resource depletion issue, how increased demand affects future
    production costs and prices.
        Can the U.S. natural gas production keep pace with
    projected gas demand, including potential LNG exports? If
    history provides any indication, the answer appears to be yes.
    In just four years, from 2008-2012, the U.S. dry gas production
    has increased by over 10 Bcfd a day, demonstrating just how
    dynamic the U.S. natural gas industry is.
        Hence, if export volume can be properly anticipated and
    productive capacity made available when needed, then the price
    impact will likely be determined by how increased demand
    affects resource depletion and future production costs.
    Moreover, it is not just the gas fields feeding directly into
    LNG export terminals that respond, but rather, the entire
    highly interconnected North American gas system.
        Since there is a large quantity of domestic gas available
    at similar production cost levels, U.S. exports are projected
    to increase the price of domestic gas not by very much, because
    it is not likely to change the future production cost by very
    much.
        Our model also projects that natural gas prices will likely
    be greater in importing countries than in the U.S. As prices in
    the U.S. firm and prices in export markets soften, their price
    spread will narrow. Hence, markets will check the volume of
    U.S. LNG imports, even in the absence of policy restrictions.
        Furthermore, U.S. LNG exports are unlikely to cause prices
    to rise to levels of importing regions. The cost of
    liquefaction, shipping and regasification form a large price
    wedge between prices in the U.S. and those in import markets.
    Exports will only occur if large price spreads prevail,
    implying that sectors of the U.S. economy that compete in
    global markets will not likely see their price advantage
    significantly diminished as a result of LNG exports.
        In summary, given the dynamic nature of the North American
    gas market and the abundance of U.S. gas supplies available at
    similar cost levels, our model projects modest price impacts at
    our assumed export volumes.
        Thank you for this opportunity. I look forward to
    addressing your questions.
        [Prepared statement of Mr. Choi follows:]

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        Mr. Lankford. Thank you, Mr. Choi.
        Mr. Cicio.

                        STATEMENT OF PAUL CICIO

        Mr. Cicio. Thank you for the opportunity to testify before
    you.
        I am Paul Cicio, President of Industrial Energy Consumers
    of America.
        IECA is a nonpartisan association of leading manufacturing
    companies with $1.1 trillion in annual sales, over 1,000
    facilities nationwide, and with more than 1.4 million employees
    worldwide.
        IECA membership represents a diverse set of energy
    intensive industries including: chemical, plastics, steels,
    aluminum, paper, food processing, fertilizer, insulation,
    glass, industrial gases, pharmaceutical, brewing and cement.
        IECA member companies are energy-intensive and trade-
    exposed, EITE. For these industries, the cost of energy can be
    from 10 to 85 percent of the cost of making their products. Our
    competitiveness is dependent upon the price of energy relative
    to our offshore competitors.
        The U.S. manufacturing sector is the largest consumer of
    natural gas, as a fuel and as a feedstock, and natural gas-
    fired electricity, consuming approximately 40 percent of all
    U.S. natural gas. We also consume approximately 30 percent of
    the electricity.
        It is important to note that IECA is not opposing LNG
    exports, although we are very concerned that exports could
    negatively impact manufacturing competitiveness and jobs. It is
    for this reason that we urge the DOE to do a better job than
    what we have seen so far. Even though both DOE-sponsored
    studies used domestic demand assumptions, I should understated
    assumptions, the outcome of the study should give public
    policymakers pause because they confirm one thing, that any
    level of exports will increase domestic prices for all
    consumers.
        Natural gas prices have both direct and indirect impacts on
    peoples' lives and their safety for homes, for heating, cooling
    and electricity, for the Nation's economic growth, exports of
    manufactured products and jobs. Energy intensive manufacturing
    industries are especially impacted.
        Specifically page 7 of the flawed NERA study confirmed that
    ``Expansion of LNG exports has two major effects on income. It
    raises energy costs and in the prices, depresses both real
    wages and the return on capital in all other industries'' and
    from our perspective, with only trivial net benefit to the
    economy.
        My comments today will focus on two issues. First, we urge
    the DOE to implement a rulemaking process to determine public
    interest determination criteria that will be used on an
    application by application basis. Secondly, we also urge the
    DOE to complete the necessary studies to clarify the
    implications of LNG exports to consumers, the economy and the
    manufacturing sector using up to date, domestic demand
    assumptions.
        DOE must include scenarios that consider pending
    legislative and regulatory actions that could impact natural
    gas production and spur domestic demand. Special attention is
    needed to address the impacts to energy intensive trade exposed
    industries.
        The U.S. is at an important crossroads on the subject of
    LNG exports. If we do this right, the U.S. can export LNG and
    provide an adequate supply of natural gas at affordable prices
    to domestic consumers. If we get it wrong, the LNG exports
    could slow, if not stop, the manufacturing renaissance and
    every U.S. consumers' price of natural gas and electricity will
    rise, so much is at stake.
        Today, the DOE is considering 24 applications to export
    LNG. In the modern era, the U.S. Government has not faced the
    need to determine the public interest in connection with
    requests to authorize exports as large as this. The DOE has
    extensive experience in evaluating import applications but has
    limited experience with export applications. Perhaps not
    surprisingly, there are no clear established criteria for DOE
    to apply in determining the public interest with regard to
    natural gas exports.
        IECA supports an approach to such determinations by DOE
    that are based on objective criteria and metrics, established
    through a rulemaking process and applied on an incremental case
    by case basis consistent and balanced in manner. We urge the
    Congress to embrace this process.
        Thank you.
        [Prepared statement of Mr. Cicio follows:]

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        Mr. Lankford. Thank you.
        Dr. Ebinger.

                      STATEMENT OF CHARLES EBINGER

        Dr. Ebinger. Chairman Lankford, Ranking Member Speier and
    other distinguished subcommittee members, thank you very much
    for inviting me here today to share my views on U.S. LNG export
    policy.
        My name is Charles Ebinger, Director, Energy Security
    Initiative, Brookings Institution and not the Director of the
    Foreign Policy Program, for the record.
        The Energy Security Initiative at Brookings has been
    studying this issue of LNG for the past two years and last
    March, issued a comprehensive report. In the interest of time,
    let me say the report had two primary conclusions. First, the
    negative implications of LNG exports in the lower 48 States are
    at best marginal and vastly are outweighed by the benefits.
    Second, as the lynchpin of a globalized economy, the United
    States must continue to espouse free trade and avoid
    intervening in a global market.
        As we state in our report, ``The United States should
    neither act to prohibit nor to promote export of LNG, but
    rather let the existing process, with modifications, work its
    way through.''
        I will not spend much time talking about the economic
    implications because I think Tom Choi has done an excellent job
    of that, but merely say we echo Deloitte's findings and that of
    other major public reports by ICF, EIA and others that we
    believe that the impact on domestic natural gas prices arising
    from exports would only be between 2 and 11 percent than they
    are today by the year 2035, hardly a massive distress to the
    American public.
        We also believe that LNG exports are likely to have only a
    modest impact no electricity prices. Again, studies done by a
    host of leading economic consulting firms have produced a range
    of estimates but the conclusion is profound. That is that the
    average increase in electricity prices per megawatt hour might
    be somewhere between $1.40 to just under $5.00.
        To put this in context for those that do not follow
    megawatt hour pricing, the EIA's annual energy outlook in 2013
    estimates that by 2035, the average megawatt price will be $101
    a megawatt hour, nearly 95 times bigger than the increase in
    prices, again hardly devastating to the American consumer.
        I firmly disagree with the views of people who say we
    cannot export because it will hurt the prospects of an
    industrial renaissance in the United States. Today, the ratio
    of the price of oil to the price of natural gas in the world
    market is over 30 to 1, well over the 7 to 1 oil to gas price
    ratio at which the American Chemistry Council considers the
    U.S. petrochemical and plastic producers to be globally
    competitive.
        Let me turn quickly to the issue of geopolitics. Already,
    we have seen the fact that cargoes planned to be destined to
    the United States, when we were forecast to import up to 40
    percent of our natural gas in the near future have had a major
    transformation in the European market and have proven to be of
    benefit to our European allies in both western and central
    Europe.
        The advent of LNG coming into that market has reduced the
    influence of Gazprom, the Russian monopoly on the European gas
    market and today, rather than dominating the European market,
    we see a situation where last month nearly 54 percent of the
    gas that flowed in Europe was under spot contracts, not under
    long term oil index contracts, saving many of the nations huge
    quantities of money, particularly some of the more ailing
    economies in eastern Europe.
        Already we have seen the impact that LNG exports can have
    on alleviating the terrible situations in Asia with index
    pricing already beginning to come down away from oil and
    towards natural gas which will be of vital assistance to our
    major Allies.
        Finally, let me turn quickly to say we believe it is a
    prudent policy to continue to allow exports. We disagree with
    the two extreme proposals of the volumetric gap or a policy
    where the U.S. automatically approves all applications.
        We do, as we say in our testimony in greater detail,
    believe there are reforms that may occur in the process and we
    hope they will be seriously considered, both by our
    Administration and by members of Congress with oversight on
    these issues.
        Thank you very much.
        [Prepared statement of Dr. Ebinger follows:]

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        Mr. Lankford. Thank you.
        After 30 minutes of talking about DOE, it will be great to
    hear from DOE. We are honored that you are here and glad you
    are a part of this conversation.
        Mr. Smith, we are pleased to receive your testimony.

                        STATEMENT OF CHRIS SMITH

        Mr. Smith. Thank you very much, Mr. Chairman.
        Thank you, Chairman Lankford, Ranking Member Speier and
    members of the subcommittee. I appreciate the opportunity to
    discuss the Department of Energy's program regulating the
    export of natural gas, including liquefied natural gas.
        The boom in domestic shale gas provides unprecedented
    opportunities for the United States. Over the last several
    years, domestic natural gas production has increased
    significantly, outpacing consumption growth, resulting in
    declining natural gas and LNG imports. Production growth is
    primarily due to the development of improved drilling
    technologies, including the ability to produce natural gas
    trapped in shale gas geologic formations.
        Historically, the Department of Energy has played a
    critical role in development of technologies that have enabled
    the United States to expand development of our energy
    resources. Between 1978 and 1992, public resource investments
    managed by the Department contributed to the development of
    hydraulic fracturing and extended horizontal lateral
    technologies that spurred private sector investments and
    industry innovation, unlocking billions of dollars in economic
    activity associated with shale gas.
        Today, domestic natural gas prices are lower than
    international prices of delivered LNG to overseas markets. As
    in the United States, demand for natural gas is growing rapidly
    in foreign markets. Due primarily to these developments, the
    Department of Energy has begun to receive a growing number of
    applications to export domestically produced natural gas to
    overseas markets in the form of liquefied natural gas.
        The Department's authority to regulate the export of
    natural gas arises from the Natural Gas Act which provides two
    statutory standards for processing applications to export LNG
    from the United States. By law, applications to export natural
    gas to Free Trade Agreement nations are deemed to be consistent
    with the public interest and the Secretary of Energy must grant
    authorization without modification or delay.
        For applications to export natural gas to non-FTA nations,
    the Secretary must grant the authorization unless after
    opportunity for hearing, the proposed export is found to be not
    consistent with the public interest.
        The Department's review of applications to export LNG to
    non-Free Trade Agreement countries is conducted through a
    publicly-transparent process which includes full public
    interest review. To date, the Department of Energy has granted
    one long term application to export domestically-produced,
    lower 48 LNG to non-Free Trade Agreement countries.
        In the Sabine Pass Order, the Department of Energy stated
    that it would evaluate the cumulative impact of the Sabine Pass
    authorization and any future authorizations for export
    authority when considering subsequent authorizations. Following
    issuance of that order, the Department undertook a two-part
    study of the cumulative economic impacts of LNG exports.
        The first part of the study was conducted by the Energy
    Information Administration and looked at the potential impact
    of additional natural gas exports on domestic energy
    consumption, production and prices under several prescribed
    export scenarios. The second part of the study, performed by
    NERA Economic Consulting under contract to the Department of
    Energy, evaluated the macroeconomic impact of LNG exports on
    the U.S. economy with an emphasis on the energy sector and
    natural gas, in particular.
        To date, the Department has received 188,000 initial
    comments and about 2,700 reply comments on these two studies.
    Now that all comments are received regarding the LNG export
    studies, the Department will take into consideration the
    studies, the comments and the record of the proceedings of the
    19 non-FTA LNG export applications. The Department will then
    make a public interest determination and act on each of these
    applications on a case by case basis.
        Due to the adjudicatory nature of this process, I will be
    unable to comment today on issues that are presently being
    addressed in our opinion proceedings. Those issues include but
    are not limited to the merit of pending applications, the
    validity of the two-part macroeconomic study, the study's
    adequacy as the basis for decisions and the appropriate scope
    of environmental review.
        I can, however, speak to DOE's statutory authority, our
    process to review applications to export LNG to non-FTA
    countries, our two-part LNG export studies, the comments we
    have received on those studies and other recent developments in
    LNG export. With respect to those topics, the Department and I
    are committed to being as responsive as possible to any
    questions the committee may have today.
        In conclusion, Mr. Chairman, I would like to emphasize that
    the Department of Energy is committed to moving this process
    forward as expeditiously as possible. The Department
    understands the significance of this issue as well as the
    importance of getting it right.
        With that, I would be happy to answer any questions the
    committee may have.
        [Prepared statement of Mr. Smith follows:]

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        Mr. Lankford. Thank you.
        I ask unanimous consent to place in the record the
    statement of Dr. David Montgomery, the Senior Vice President of
    NERA Consulting. Without objection, so ordered.
        [The information follows:]
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        Mr. Lankford. We have a vote that has been called at this
    point. It is a single vote, so that makes it rapid to go over
    and come back. We will take a momentary recess.
        I would like to reiterate something Mr. Smith asked, a
    personal privilege for the members of the committee when they
    go through the asking of the questions. I would like for us not
    to get into a specific application from a specific company,
    where they are in the process, how they can move in the
    process. I think that is unfair to be able to ask Mr. Smith.
        Obviously, each of us can choose what we ask on our own
    time and on questions, but I would ask that out of respect for
    DOE for being here to be able to honor them in that, process
    questions rather than a specific company and whether they are
    moving a specific permit.
        With that, we will stand in recess for a single vote. We
    will return. As soon as two of us get back here, we will
    continue with our questions.
        [Recess.]
        Mr. Lankford. Thank you for being able to recess for a
    short period, have the votes and jump back into it.
        I would like to recognize the Ranking Member, Ms. Speier,
    for a quick motion.
        Ms. Speier. Thank you, Mr. Chairman.
        I would like to ask unanimous consent that the written
    testimony by the American Public Gas Association be submitted
    for the record.
        Mr. Lankford. Without objection.
        [The information follows:]

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        Mr. Lankford. I would like to recognize myself for five
    minutes of questioning. Then we will move back and forth and
    allow members to ask questions. If we have an opportunity,
    schedule allowing, we would like to be able to do a second
    round if time permits for both the witnesses and us as well.
        We are at a 14 year low of actually gas well producing rigs
    and 1999 was the last time we had this small a number of rigs
    out there producing natural gas. It is an interesting dynamic
    to see very little production coming into the stream but
    because we have so much currently being produced in the wells
    that are out there and makes this conversation about the
    cumulative impact and the decision is very difficult for DOE.
        The first export facility has been permitted. They are in
    the process of construction and will be done some time in two
    years from now. When you begin to evaluate, from the DOE
    perspective, cumulative impact, how will that work process-
    wise? Because obviously we have one facility and will not
    really know the impact of that truly for maybe four or five
    years as we go through the process. You have the two studies in
    hand, now what on determining cumulative impact?
        Mr. Smith. Thank you, Mr. Chairman, for that question.
        Essentially the way the Department has handled this, when
    we issued the permit for Sabine Pass, in that permit we noted
    for future applications, since we were looking at queue of
    applications that were building up, we would have to consider
    the cumulative impact of each of those applications and going
    through our public interest determination.
        The first step we did was to commission a study. The first
    part was conducted by EIA and the second part was conducted by
    NERA Economic Consulting. The idea of doing the studies and
    offering the studies for public comment was to provide some
    sort of analytic rigor to looking at what the production
    capability of the natural gas industry in the United States and
    the capability of the global gas market to absorb gas in the
    United States.
        That was the process we undertook. The NERA study is now
    back and has been put out for public record. We have entered a
    public comment and reply comment period and have received
    responses. It is our job now to evaluate not only the study we
    received, which was done for the Department, but also the
    cumulative comments that we received from stakeholders and
    individuals interested in the process.
        Mr. Lankford. How does that work from here? Is the
    cumulative impact an economic impact, a forecasting, is it a
    matter of they have to function for a while before that is
    determined or can you do that off the study and the responses?
        Mr. Smith. That is the process we are going through right
    now. We have something around 200,000 comments and reply
    comments that we are evaluating. Our job is to take the studies
    that have been provided, that have been put out for public
    comment, evaluate the rigor of the studies and also the
    opinions we received from the stakeholders.
        Mr. Lankford. I understand. Once it comes back, is the
    issue really just the evaluation from the studies or will you
    have to wait to permit numbers two, three or whatever may be,
    if you permit two and three, until after the existing facility
    that is under construction is done and is actually exporting?
    When will that decision be made? Will it be before the export
    begins two years from now or after?
        Mr. Smith. The answer to that question is going to be
    determined by the analysis we are currently undergoing. The
    reply comment period just ended three weeks ago. We are now
    looking at a tremendous amount of information we just received.
        Mr. Lankford. That is the reply on the initial. You had the
    initial that went out, all those comments went out and then
    there was reply. That is really the second phase of it,
    correct?
        Mr. Smith. There were two periods. The reply was 45 days
    and the reply comment was 30 days.
        Mr. Lankford. The question in making the decision is do you
    forecast the decision, what to do with applications to and on
    after the facility under construction is already exporting or
    before?
        Mr. Smith. That is going to be determined by our analysis
    of the comments.
        Mr. Lankford. It could be four years from now before the
    second decision is made? Is there a time period you are looking
    at of when to make the next decision or is it that wide open,
    could be ten years or two years?
        Mr. Smith. I am not in a position to opine on something
    that is going to be based on a determination or analysis we are
    currently conducting.
        Mr. Lankford. Does DOE feel at all an economic pressure of
    what happens globally on these contracts? By the way, I do not
    intend to pressure DOE. I am just trying to figure out what is
    going on with this one way or the other.
        Globally, the contracts are going out. As I mentioned,
    there are eight export facilities being constructed currently
    in Australia and other countries are ramping up for this. There
    is a limited amount of time that we have to be able to compete
    in the global market and be able to fulfill contracts that are
    out there.
        If this is going to be ten years before the next facility
    is constructed, that is a significant lag to try to get those
    contracts. The guess is where do we go as a nation? How big is
    that window you anticipate before a decision is made?
        Mr. Smith. Again, Mr. Chairman, I am not in a position to
    put out a timeline for making decisions because that timeline
    is going to be based on the very analysis that we are in the
    middle of right now.
        Mr. Lankford. When do you think you will have concluded
    your analysis? As you go through all the comments, you are in
    the second phase of that, do you think that is another 45 days,
    another six months, another year? Give us a best guess on how
    that moves.
        Mr. Smith. Mr. Chairman, it would be inappropriate and
    irresponsible for me to make a guess.
        Mr. Lankford. I would have to disagree, it is inappropriate
    to have an indefinite period of time to decide when you are
    going to decide. At some point, there has to be something in
    your forecasting to think we are going to decide by this point
    and then the decision will be out from there.
        Mr. Smith. The comment period ended three weeks ago. We are
    currently going through an immense volume of input. Many of the
    commenters have made comments very consistent with the points
    you are making, so I understand the sense of urgency and the
    importance of this decision.
        Mr. Lankford. It has to be right.
        Mr. Smith. But we have to make the decision in a way that
    is consistent with public interest and that withstands the
    scrutiny it is certainly going to receive.
        Mr. Lankford. Thank you.
        I will recognize Ms. Speier for five minutes.
        Ms. Speier. Thank you, Mr. Chairman.
        Mr. Smith, let us get to what your challenge is, which is
    to determine whether or not approving or authorizing the
    process to move forward for liquid natural gas to be exported
    is consistent with the public interest. Can you be more
    specific about the criteria you have to include in that
    evaluation?
        Mr. Smith. The statute essentially creates a rebuttable
    presumption that exports are in the public interest. It is our
    job to look at each application to make that determination. The
    law gives the Department of Energy considerable latitude in
    determining what that means. In fact you opined that when the
    law was written, one was not envisioning the export of natural
    gas from shale gas resources. That was just not something that
    was on the horizon.
        Our job has been to come up with a standard which we are
    going to have to defend when we write the order. We are looking
    at a wide range of factors that Americans care about,
    everything from balance of trade, creation of jobs, GDP, impact
    of prices on consumers and American families, impact of prices
    on American industry, energy security and environmental issues.
    We have a wide range of factors we have to consider.
        For me, it is illustrative to be sitting next to Mr.
    Ebinger, Mr. Cicio and Mr. Choi, all professionals whose work I
    am familiar with outside of this hearing, but all who have
    somewhat divergent views on what this means.
        Ms. Speier. Let me ask, Mr. Cicio, in your statement you
    said any level of exports will increase cost of natural gas for
    consumers. That was pretty blanketed in that statement. Can you
    express that more specifically?
        Mr. Cicio. I am referring to the two studies, the EIA study
    done in January of last year and the NERA study. Both of them
    used a broad number of volume of exports. Under every scenario,
    prices of natural gas rose. That is where our comment came
    from.
        Ms. Speier. Mr. Choi, you make evaluations based on whether
    or not they are good investments for the oil and gas industry,
    is that correct?
        Mr. Choi. We have a model that looks at producer decisions
    based on a profit maximization objective for the producer.
        Ms. Speier. When you speak up, you are speaking from a
    perspective of it being advantageous for the producers as
    opposed to whether it is advantageous for domestic
    manufacturers or the domestic consumers, correct?
        Mr. Choi. Yes. We have a model of the NASR gas industry in
    which we represent producer decisions and also consumer
    decisions. Our model is different from most other models in
    that we represent the individual incentives by each of the
    parties. It is not purely looking at the incentives for one
    particular sector but rather, representing the industry by
    looking at how each individual agent would make decisions.
        Ms. Speier. Dr. Ebinger, I actually read your report. One
    of the things you stated in the report is that there would be
    harm or impact, I should say, to low income consumers with the
    exportation of LNG and that there should be some set aside of
    whatever sales tax or revenue the Federal Government gets to
    make sure low income people would have some form of subsidy
    because of the increased cost to consumers, is that correct?
        Dr. Ebinger. Yes. We did not go into great detail in
    looking at what that real impact would be but it was certainly
    our conclusion that low income consumers would have some price
    impacts. Again, I would like to emphasize that taken in the
    wide sweep of the benefits of exports, however those needs are
    met for the low income consumers, we believe overall, the
    nation would be much better off with exports.
        Ms. Speier. I will yield back, Mr. Chairman, until the
    second round.
        Thank you.
        Mr. Lankford. Dr. Gosar.
        Mr. Gosar. Thank you, Mr. Chairman.
        Mr. Cicio, the rates are artificially low right now, are
    they not?
        Mr. Cicio. Natural gas prices are low, yes.
        Mr. Gosar. So we are not really being truthful to the
    American public, as the Ranking Member mentioned. We are going
    to see a natural increase because if we do not, we are not
    going to see production, true?
        Mr. Cicio. That is true. In fact, the NIMEX price between
    now and 2020 increases 44 percent.
        Mr. Gosar. Mr. Ebinger, you just heard Mr. Smith's comments
    about timelines. How do you view that timeline from your
    perspective?
        Dr. Ebinger. I view that timeline as very deleterious to
    the U.S. natural gas industry because, according to our
    analysis by 2020, if you are not in the marketplace by one of
    our first few LNG plants, you are going to have very serious
    competition. The Chairman has mentioned the projects coming out
    of Australia. By the early 2020s, we will see major new gas
    projects arising in east Africa, Algeria, Angola and many other
    places.
        We also remind people in our report that in the Asian power
    market, coal remains extremely competitive with LNG and despite
    our efforts to curtail global warming, we see massive new coal
    deposits coming into the international market. Coal is going to
    be competing directly against gas.
        As we move into the 2020 period, particularly the ten year
    time frame that was potentially mentioned, I think we can
    assume there will be at least a handful of additional countries
    that come up with their own shale gas development, be that in
    China, South Africa or Argentina. We are going to have more
    shale gas, more LNG with the prospect of big pipelines coming
    from eastern Siberia and Russia to the Asian market which will
    also compete against LNG.
        It is not going to be easy to finance a big LNG project
    when the competition is so great and you have to get your buyer
    to take a huge proportion of the sales in order to get the
    project financed.
        Mr. Gosar. From what you have seen of our previous history
    in this country about getting projects like this online, give
    me an estimate of getting it online by 2020. My dad is a
    geologist, so 30 days, 60 days, 90 days, 120 days, three
    months, six months. They all come at cost and within the
    bureaucracy of government. What is your best estimate of
    getting it done?
        Dr. Ebinger. I think it is an impossible question to answer
    because DOE and FERC do have statutory responsibilities.
        Mr. Gosar. Isn't there a way to streamline the process?
        Dr. Ebinger. I would certainly think we could have some
    additional plants in the market by 2020, 2022, if we were able
    to get the process moving beyond the first Cheniere project
    that we could probably see two or three projects in the
    marketplace by 2025, say. I think anybody who thinks we are
    going to have more or the fearmongers that list all the
    projects before DOE and FERC argue that all these were built,
    we would collapse the international LNG market. We see no
    scenario where that is going to happen.
        Mr. Gosar. I agree.
        Do you see, Mr. Smith, in regards to the protocol? Looking
    at timelines, it is very, very frustrating to America, by not
    having a timeline that is equivocally pretty close to an
    outline. Does that make sense?
        Mr. Smith. I appreciate that Congressman. One think I would
    like to emphasize is it is our job to get to a defendable,
    transparent a decision as expeditiously as possible. We have a
    tremendous sense of urgency for this process. Many of the
    points that have been made by members of the committee and by
    my friends on the panel have certainly been made multiple times
    on both sides of the fence in the numerous comments we have
    received in our public comment period.
        Our job is to move forward as expeditiously as possible,
    but in a way that is open, transparent and which yields a
    decision which will withstand the scrutiny that it is certain
    to receive. A point we emphasize as we go through our own
    internal adjudication is that a decision that does not
    withstand scrutiny is not going to be useful for the concerns
    you have and it will be a wrong decision for the country.
        This is something that is important. We are talking about a
    period of analysis that we discussed here but this is
    infrastructure that will be in place, if built, for decades.
    These are long term decisions and are going to lead to long
    term investments that will be important for our economy. We
    have to get this right.
        Mr. Gosar. That is only if you do them within the time
    frame that makes it economically feasible. If you don't, you
    are done.
        Mr. Smith. On that, I would state I spent 11 years in
    industry before I came to the Department of Energy. I actually
    worked at Chevron when Chevron was working on the LNG import
    terminal at Sabine Pass and I worked on that terminal. I did a
    lot of that commercial work.
        Industry will move forward to build what it decides to
    build. Certainly falling into a window where you think the
    market is open sometimes is good for the shareholders of that
    company, sometimes it is not. It is not our job to opine on
    what the company should be doing.
        We have to make sure that our process is managed in the
    public interest to make sure we are looking out for the public
    interest of American businesses and families, that it is
    consistent, open, transparent and will withstand scrutiny.
        Mr. Gosar. Thank you.
        Mr. Lankford. Mrs. Lujan Grisham.
        Mrs. Lujan Grisham. Thank you, Mr. Chairman.
        I am actually going to reverse my order of questions
    because this is what happens when you are nearly last on a
    panel.
        Mr. Smith, given your now testimony and description of a
    pretty in-depth process to make sure we get it right in terms
    of the public interest and considering that we have trade
    agreements with our Allies and we are mindful and watchful
    about those compliance issues, are you reaching out to those
    other federal agencies and stakeholders when you are talking
    about those folks you are working with in the public interest
    to get this right?
        Mr. Smith. We are trying to be as open and transparent as
    possible, so we like input from a diverse field of
    stakeholders.
        Mrs. Lujan Grisham. I appreciate that, but are you also
    reaching out? Are you in a position to maintain objectivity
    where you are waiting for people to come to you?
        Mr. Smith. The process works such that we have an open
    comment period, 45 days for entities to make comments and there
    is a reply comment period. Anything we are going to consider as
    part of the adjudicatory process has to be entered in the
    public record, so that is our primary vehicle for making sure
    we have an open and diverse group of stakeholders who are
    opining on the process.
        Mrs. Lujan Grisham. I would just encourage you on that note
    that without interfering with the due process required here and
    to get it right, and I am mindful and appreciative of the fact
    that the public interest issues are paramount and get this
    right so that we make the right decisions going forward, that
    you are also reaching out and coordinating with our other
    administrative partners who are going to have similar issues
    and interests. I appreciate that and encourage you within the
    context of that process to do that.
        Mr. Choi, I am from New Mexico and very excited about the
    positive potential here for natural gas and exporting liquid
    natural gas. In my home State, it accounts for one-tenth of the
    U.S. total and the San Juan and Permian Basins, neither of
    which by the way are in my district, but create really the
    economic foundation for our State.
        Unfortunately, as you all have indicated, the low price of
    natural gas has led to a drop off in natural gas production and
    it has negatively impacted many parts of New Mexico's economy,
    especially our State tax revenues that depend heavily on
    severance taxes and other revenue raisers from gas production.
        In the context of difficult economic times, the prospect
    that we can increase natural gas exports and increase economic
    activity and create jobs in my State is particularly
    encouraging. As you discussed, we need to examine the issue
    carefully and ensure that we are protecting consumers, domestic
    manufacturing jobs and the environment as we consider exporting
    our surplus natural gas.
        Without reading the rest of that statement, the issue I am
    getting to, you talked about in the short term, I am really
    interested, given the low price of natural gas today and the
    supply and demand influences, I want you to talk to me a bit
    about whether the processes we are undertaking today can bring
    stability in the long term for natural gas in terms of the
    price indexes?
        Mr. Choi. Are you talking about the regulator process or
    the market process?
        Mrs. Lujan Grisham. Both.
        Mr. Choi. I am more familiar with the market process,
    having worked with a number of companies. I can tell you that
    they are undergoing a very deliberate and careful process
    because a lot of the companies seeking to export LNG are the
    same companies that have been burned by building import
    terminals in this country. They are not going to rush towards
    anything that puts their investments at risk.
        Part of the interest in exporting LNG is the abundance of
    natural gas that we have in this country. U.S. gas production
    has continued to increase. You might have seen a bit of decline
    in your home State because some of the production has shifted
    from dry gas areas to more liquid rich areas. The total U.S.
    production continues to grow.
        At the present time, I believe the market is more demand
    constrained than it is supply constrained. There are wells that
    have been completed but not yet connected just because there is
    a lack of demand or possibly because of lack of infrastructure
    to take the gas away to markets. I believe the market is well
    equipped to determine how much LNG export would be economic.
        There could be some increase in price, but according to
    economic theory, any increase in demand will have some increase
    in price. Just because there is a price increase is really a
    pretty innocuous statement; the question is how much of a price
    increase will there be? According to our study, that price
    increase will be fairly modest because of how dynamic the
    market is and because of how much domestic resources we have in
    this country.
        Mrs. Lujan Grisham. Given the huge fluctuations in the
    market, it would be nice if there was a sense given that the
    potential here for broadening our exports, that we might be
    able to have a little more long term stability in the market by
    the appropriate effort between the two, market supply and
    demand, a response and an appropriate regulatory environment so
    that you do not have these huge fluctuations. You could then
    get to a place where we can do consumer protection by some
    other model if necessary in that case.
        Mr. Choi. I agree with that. Just because we have exports,
    I don't believe necessarily means that price volatility would
    increase in this country. In addition to exporters securing
    long term markets through long term supply contracts, they
    would also have supply contracts or supplies that are ready to
    support their export terminals. The supply will respond to the
    increase in demand.
        Mrs. Lujan Grisham. Thank you. I yield back.
        Mr. Farenthold. [Presiding]. Thank you very much.
        At this point, I think I am next on the list right at the
    time I take the center chair, so perfect timing for me. I will
    now recognize myself for five minutes.
        Mr. Choi, you talk about an abundance of natural gas and
    not a whole lot of price volatility with the addition of
    exports. Can you give us an idea just how much natural gas we
    think there is in some of these new shale finds?
        Mr. Choi. It is not just shale finds, it is the total
    domestic resource base which includes conventional supplies,
    shale gas, coal bed methane and other types.
        Mr. Farenthold. Assuming projected growth in world demand,
    how many years supply are we looking at?
        Mr. Choi. By most accounts, we have over 2,000 bcf of
    natural gas in the United States. At our current production
    levels, that is equivalent to about 100 years.
        Mr. Farenthold. In shale gas, we only recover with our
    fracking technology about a third of what is there with today's
    technology?
        Mr. Choi. The technology is constantly improving and we are
    able to recover more. The shale gas comprises a growing share
    of our total U.S. production.
        Mr. Farenthold. Mr. Smith, are you familiar with the
    concept of being in the right place at the right time? That is
    where you want to be, right?
        Mr. Smith. You would have to clarify that question.
        Mr. Farenthold. I guess what I am getting at is I don't
    know whether it is coincidence or divine providence or
    whatever, but to me it looks like our technology in the energy
    industry is pulling this country out of a recession kicking and
    screaming. I am going to mix my metaphors here, strike while
    the iron is hot. If the blacksmith industry had to go through a
    burdensome regulatory process while the tire industry was
    developing, we would miss the ability sell a lot of horseshoes
    because cars come into existence.
        I guess what I am getting at is the Federal Government is
    spending a lot of money on alternative energies. I think a
    breakthrough in battery technology makes a whole lot of
    alternative energies work a whole lot better. Are we not
    possibly at a unique time in history where we have a lot of
    natural gas, there is a market for it and we could make some
    money off it if we did something now?
        Mr. Smith. Congressman, what I can say is that there are
    certainly a large number of commenters of the 200,000 comments
    we are going through now that have made exactly the point you
    are making. We certainly have a sense of urgency to as
    expeditiously as possible get to a open and transparent.
        Mr. Farenthold. I know that Chairman Issa showed this slide
    where you can actually see in the dark the Balkan field and the
    Eagle Ford Shale in Texas which I am blessed to have touch the
    district I represent.
        I am also going to show you a map, a Baker Hughes map, that
    shows all the rigs currently in production. The red ones are
    gas, the blue ones are oil. There is no gas being produced in
    the Balkans because there is no market for it and at the
    current prices, they cannot afford to build a pipeline. They
    basically are just burning it. It is a huge waste of what
    potentially is a very valuable resource.
        We are seeing gas prices that are just above $3.00, $3.25
    or so, in Texas. It is great for us. We have steel plants
    coming in, we have plastic plants coming in, we have LNG
    companies looking to come in and export. We have some red ones
    because we have the pipeline infrastructure to do it and
    market.
        What we hear from producers is in addition to having to get
    pipelines, which are expensive to build and another regulatory
    burden, I only need say the word Keystone, that is a problem.
        Then you zoom in down here and see there are also gas wells
    offshore in Louisiana. These are traditional, horizontal wells.
    You are not seeing the development of the gas wells because you
    cannot produce a horizontal gas well at $3 gas. The gas we are
    getting out of these horizontal wells is being produced along
    with oil or other liquids. It is not economical to even pursue
    it. We could lose this boom if we do not get a market. I guess
    I want to make sure you all are aware of the urgency of getting
    this done.
        Then you look at what is going on now in Japan after the
    terrible tragedy there, they are looking to decommission their
    nuclear facilities and go with natural gas. Wouldn't it be cool
    to actually have something to sell back to them for all those
    electronics we are bringing over here to get the balance of
    trade? This is the time. I just want to make sure you guys
    understand that. There really is that sense of urgency.
        Mr. Smith. Thank you for those comments, Congressman. Those
    are all factors we are considering. I grew up in Ft. Worth,
    Texas in the Labar Neck Shale. I have seen firsthand the
    difference that some of these developments can make.
        We also understand all the other balancing factors. We want
    to make sure we make a good public interest determination and
    we need to move forward as quickly as possible in a way that is
    open and transparent.
        Mr. Farenthold. I appreciate that. I am a relatively
    newcomer in Washington but I do know one of the best ways to
    kill something is delay. I hope any delay we are doing is
    necessary and not intentional.
        My time has expired. Mr. Horsford, you are next for five
    minutes.
        Mr. Horsford. Thank you, Mr. Chairman. Thank you to the
    panelists for being here today.
        I am from Nevada and we also have natural gas facilities in
    our State. It is both a blessing and a curse. On the one hand,
    prices are at an all time low. These low prices have benefitted
    the manufacturers, the consumers and household users. On the
    other hand, these low prices are at adversely affecting many
    producers of natural gas.
        Going forward, as policymakers, we have difficult questions
    to answer. One of the areas I feel we have to address beyond
    corporate profitability also pertains to our security, jobs and
    households. I would like to ask the panel, Mr. Cicio, you say
    in your testimony your organization is not opposing LNG exports
    but you ``remain very concerned that exports could negatively
    impact manufacturing competitiveness and U.S. jobs.'' Why is
    that and is there a way to calculate how many U.S.
    manufacturing jobs could be lost or not created if LNG exports
    are allowed to proceed?
        Mr. Cicio. It is difficult to answer the second part of you
    question. What I can do is tell you that these prices have
    clearly started the manufacturing renaissance. There are
    upwards to $95 billion of new capital investments by chemical
    companies, nitrogen fertilizer for plastics, steel, glass and
    these new facilities are going to create upwards to six to
    eight bcf a day. With those announcements, we are talking about
    a 10 percent increase in demand for natural gas.
        Every month, there are new announcements. In our view when
    I talk to my companies, in my view this is the first wave. The
    commodity, as we call them, the building blocks, the kind of
    companies I mentioned they supply energy intensive block
    products to every manufacturer in the country. As this new
    capacity for this building block material--the plastics,
    chemicals and nitrogen fertilizer--comes on stream, our
    customers will be expanding.
        We are quite optimistic about the demand side, but it is
    very difficult, other than to do a study much like the DOE has
    done, to determine what negative impact it would have at a
    specific price going forward.
        Mr. Horsford. As we have heard, those in the oil and gas
    sectors believe that failure to permit foreign exports of LNG
    could severely undermine that industry and would ultimately
    affect current and future jobs. Do they have a valid concern,
    do you think?
        Mr. Cicio. Manufacturers have a valid concern, yes, they
    do. Higher prices, just from 1999, natural gas prices doubled,
    then tripled and peaked in 2008. In that time period, I saw
    almost 55,000 manufacturing facilities shut down. A lot of it
    was related to high prices of natural gas. There is an absolute
    relationship between the price of natural gas, the price of
    electricity and manufacturing competitiveness.
        Mr. Horsford. Is there the proposition of you said the kind
    of winner take all where it is to the benefit of one sector and
    to the detriment of another?
        Mr. Cicio. No.
        Mr. Horsford. Can there be a balance?
        Mr. Cicio. That is correct. Our testimony bears this out.
    If we have a process at the Department of Energy that takes
    into consideration the public interest and balances, we should
    be able to export and we should be able to provide affordable
    prices of natural gas for domestic consumers.
        Mr. Horsford. Mr. Choi, what do you say about that?
        Mr. Choi. First of all, I think we need to realize that
    between 2004 and 2008, U.S. natural gas prices rose to
    unprecedented sustained levels. Prices during that time ranged
    from about $7 to $10 per mmbtu. Nobody I am aware of is saying
    exports will bring prices up to those levels.
        The advent of the shale gas revolution, which used the
    hydraulic fracturing and horizontal drilling to make vast
    amounts of shale gas economical, has fundamentally changed the
    picture. Even with exports, we are not going to see prices at
    that level in the future.
        Mr. Horsford. Thank you, Mr. Chairman. I will wait for
    additional questions.
        Mr. Farenthold. Thank you. It is interesting where we see
    this side of the aisle agreeing with the DOE and Brookings and
    not always with the industry.
        At this point, I need to ask for unanimous consent for the
    gentleman from Louisiana, Dr. Fleming to sit as a member of
    this subcommittee. Without objection, so ordered.
        Up next is Mr. Turner. Mr. Turner, you are recognized for
    five minutes.
        Mr. Turner. Thank you, Mr. Chairman.
        I appreciate our panelists because it is certainly an
    important discussion as we look to the issue of job creation
    and energy policy. In Ohio alone, it is expected that Utica
    Shale would have a $5 billion economic impact and create or
    supply nearly 66,000 jobs in Ohio by 2014. I appreciate the
    discussion that we have great opportunity to export and that
    the price spikes we had in the past were the result of the fact
    we did not have the access to or the abundance of supply that
    we are now seeing.
        Dr. Ebinger and Mr. Choi, in your reports you both touched
    on the issue of the geopolitical implications of exporting U.S.
    natural gas. I would like to speak to that for a minute and ask
    you a question.
        When we look to the U.S. interests and certainly domestic
    economic benefits, we also need to look to the issue of the
    geopolitical implications of our being able to export. As both
    of you have noted, Russia has a major role as a supplier of
    natural gas and is a non-reliable exporter to the European
    countries. They use it as a political tool, punishing our
    European allies, especially eastern Europe, and use it to try
    to divide the EU and NATO countries as they put pressure on
    individual countries to adopt policies favorable to Russian
    positions.
        I have a bill, H.R. 580, the Expedited LNG for American
    Allies Act, that would expand the ability to export LNG to our
    NATO partners and to Japan to allow expedited approval for that
    export. This is a bill that initially had been championed by
    Senator Lugar. It is a bipartisan and bicameral piece of
    legislation. I think it would be very important to give that
    expedited opportunity, not only increasing our markets,
    lowering the overall bureaucratic process for export, but also
    have an impact in the Pacific region with respect to Russia's
    export.
        Dr. Ebinger and Mr. Choi, would you please elaborate on
    your positions and thoughts as to the geopolitical effects of
    U.S exports to those regions?
        Dr. Ebinger. Thank you, Congressman.
        Yes, I would thoroughly agree with your characterization of
    what LNG cargoes diverted from the U.S., since we no longer
    need them, have played in the European market. The big reason
    for that is that in most of the world outside the United
    States, petrochemicals are derived from naphtha, an oil-based
    product, rather than from natural gas, making them much more
    costly.
        We have seen LNG cargoes allow the Europeans, as some of
    their longstanding contracts with Gazprom have come up for
    renegotiation, to use the availability of natural gas to delink
    a large portion of their supply from Russia and in some cases,
    get significant price concessions from the Russians.
        My only concern about your bill, I think it is very
    admirable and we certainly support our NATO and European
    allies, is that one has to be very careful because having just
    returned from a significant gas conference in Amsterdam, it
    does appear, listening to the Europeans, that they believe for
    the next ten years the European gas market is saturated.
        Part of that is, of course, the depressed economic
    condition prevailing in Europe, which obviously can switch
    around at some point in time, we hope, but I will only caution
    that if we were to direct U.S. LNG cargoes there, it might be
    good that we could drive prices down further but it might not
    necessarily be good for our own exporters if they found that to
    penetrate that very glutted market, they had to significantly
    redirect it.
        Mr. Turner. The bill doesn't redirect it, but streamlines
    the bureaucratic process for those who are doing that.
        Mr. Choi?
        Mr. Choi. In our latest paper, we looked at the global
    implications of U.S. LNG exports. In order to understand what
    the impacts would be, you have to look at each market and
    examine what the marginal source is. The marginal source might
    not be just what is currently being exported, it could also be
    future supplies. These supplies could be marginal either
    because they have high production costs or high transportation
    costs, or possibly because of political hurdles that make these
    supplies effectively more costly to come to market. I am
    talking about the supplies such as from Iran or possibly
    Venezuela.
        You mentioned Russia. Russia is the largest gas exporter to
    Europe. They are vulnerable, according to our study, because
    not only do they have the largest volumes, but they are also
    the highest cost contract supplied to the European market. We
    believe if the U.S. exports to Europe, which is one of our
    scenarios, Russian supplies would be vulnerable.
        Mr. Turner. Thank you, Mr. Chairman.
        Mr. Farenthold. Thank you, very much.
        We will now recognize the gentleman from Louisiana, Dr.
    Fleming, for five minutes.
        Mr. Fleming. Thank you, Mr. Chairman. I thank the committee
    for allowing the courtesy today to sit in and I appreciate the
    panel here today.
        I come from the 4th District of Louisiana which has the
    Haynesville Shale. The Haynesville Shale, as you know, in the
    period around 2007 to 2008, we had nothing less than a
    revolution in marrying the old technology of hydro-fracking and
    the new technology of horizontal drilling, which has released
    tremendous wealth and economic activity which has really
    sustained my district through difficult economic times.
        We are victims of our own success, unfortunately. As a
    result of that, as you know, the price has been well displayed
    here, and has been depressed because of all of the production,
    so we have gone from excessive demand and little supply to
    excessive supply and relatively the same demand, which is kind
    of interesting because our friends on the other side of the
    aisle assure us the high cost of gasoline and oil has nothing
    to do with supply and demand, it is speculation.
        We would like to have a little speculation in natural gas
    if that would be okay with you gentlemen just to get that price
    up a little bit because we have had a number of actual drilling
    sites that we have not moved forward on because it is just not
    economically viable.
        The other piece is in Lake Charles, we have the Cheniere
    plant which is an incoming supply depot for LNG because we have
    been net importers. Now they are spending $10 billion to make
    it a net export facility and we are glad about that. We will be
    well positioned for the future not only to take care of our own
    needs, but to take care of the needs of the world when it comes
    to this revolution.
        I have a couple of questions today. Mr. Smith, what are the
    criteria for approving one terminal over another? Is geography
    a factor, a region already has a facility or other projects
    that may be less advantageous? How do you decide about that
    because we are waiting on final permitting and approval with
    our plant?
        Mr. Smith. As you are aware, and as you stated in your
    comments, we have already approved one export facility and that
    is the Sabine Pass facility in Louisiana. Subsequent to that,
    now that we are looking at cumulative impact of another
    additional 28.2 billion cubic feet a day of potential exports,
    one of the things we have announced as we go through our
    process is we do have a queue, we have a sequence we are going
    to use in order to determine the order in which we are going to
    evaluate the export opportunities.
        We took all of the applicants before the Department and
    divided them into two categories, ones which had submitted
    their FERC pre-filing application, the process where you start
    spending more significant quantities of money, and those who
    had no filed for pre-filing. Within those, it is on a first
    come, first serve basis.
        There is a list. There is a pdf on the DOE website and you
    can see the next applicant we are going to consider and you can
    see the last applicant. We are going to work through that queue
    looking at all the factors we have announced as part of our
    public interest determination, everything from jobs, balance of
    trade, economic impact on consumers, prices, impact on
    industry, international issues, economic and environmental
    issues, a wide range of factors we are going to use in order to
    evaluate each one of those applicants.
        Mr. Fleming. Do you do some en bloc or are they all one on
    one?
        Mr. Smith. We are compelled by statute to evaluate each of
    these on an individual basis.
        Mr. Fleming. What about the non-FTA countries? What is the
    policy towards them? Are they still in the queue?
        Mr. Smith. The law breaks up applicants into two
    categories, FTAs and non-FTAs. Free Trade Agreement countries
    essentially are approved without delay or modification by the
    Department. There is no discretion that is exercised, under
    statute, by the Department. Those are being approved as we
    receive them. It is the non-FTA applicants we are evaluating.
        Mr. Fleming. Is that there to say there is going to be
    difficulty in approving them? What are going to be the
    challenges in getting approvals for them?
        Mr. Smith. There is a process. As I mentioned earlier, it
    is illustrative that even on this panel you have individuals
    who think should be approved immediately and all of them should
    be approved; there are a lot of voices who think there are
    concerns with exporting LNG in terms of rising prices. There
    are lots of arguments being made.
        We received somewhere on the order of 200,000 comments in
    addition to the studies we received, some of which we
    requested. It is our job to look at all the factors so that as
    expeditiously as possible as transparently as possible and as
    quickly as possible, we get to a public interest determination
    that is going to inspire the right type of confidence in terms
    of its ability to withstand the scrutiny it is certain to
    attract. That is the process we are in right now.
        Mr. Fleming. I certainly want to underscore that we should
    encourage approval of non-FTA countries as well. It will be
    good for the global economy, it will help our prices. You just
    heard that we have more natural gas now than we ever thought we
    had in the past and probably with newer technologies coming
    online, we will have even more in the future.
        It is not that we want to drive up prices; we want prices
    to be at real market rates. That is going to be the sweet point
    for consumers and for jobs.
        With that, I yield back and again, I thank you for your
    courtesy.
        Mr. Farenthold. Thank you very much.
        At this point, we will start a second round of questioning.
    I will recognize myself for five minutes and then move across
    the aisle.
        Mr. Cicio, the gist of your concern is that as we start to
    export natural gas, there will either be a shortage or an
    increase in cost of natural gas that is used either as a raw
    material or feedstock for domestic manufacturing and to keep
    domestic electricity prices low as natural gas, certainly in
    Texas, is a major source of energy. Is that a reasonable
    summary of what you are saying?
        Mr. Cicio. No. Natural gas is different. That is what makes
    this public interest determination so critical. Natural gas is
    very influenced by the public process. There is legislation and
    regulation that can impact the access to natural gas in terms
    of whether it is in a moratorium or not, and Congress can deal
    with the intangible drilling cost tax benefit and that is going
    to change the economics.
        Mr. Farenthold. Intellectual property is highly regulated
    and with music, their ability to profit is determined almost
    entirely on government regulation of copyright. We could go in
    and regulate almost any other industry.
        Mr. Choi, do you agree with that characterization that
    natural gas is unique over any other product or commodity?
        Mr. Choi. No, I would not. First, I would note that at the
    margin, there are some regulations that affect the amount of
    drilling, but for the most part, we have deregulated the supply
    markets and the market determines how much to produce.
        Mr. Farenthold. Thank you.
        Mr. Cicio, let me ask you this. As we get more natural gas
    through pipelines to our ports doesn't that make the liquids
    that are oftentimes produced with natural gas more available to
    your industrial customers to use for other products?
        Mr. Cicio. Drilling for natural gas, drilling for oil, it
    increases potentially natural gas liquids, so the answer would
    be yes.
        Mr. Farenthold. Using your argument that natural gas is
    special, does that mean we should add regulations to the export
    of other basic chemicals like ethylene and propylene?
        Mr. Cicio. I will say it again, natural gas is different
    because let us say if DOE approves a terminal, they are
    approving it for up to 30 years. The terminal operator then
    negotiates long term contracts that are mostly take or pay.
    That locks in demand for a 30 year time period. Meanwhile,
    consumers are exposed to the risk of public policy on the
    production side and on the demand side of natural gas.
        Mr. Farenthold. Can any consumer, whether an electric
    company generating for the public, negotiate a long term
    contract the way exporters can?
        Mr. Cicio. No.
        Mr. Farenthold. Why not?
        Mr. Cicio. There are very, very few long term natural gas
    contracts negotiated.
        Mr. Farenthold. At $3.00 and something, I might be
    negotiating long term ones myself.
        Mr. Cicio. We would like to do so.
        Mr. Farenthold. Mr. Ebinger, would you like to comment on
    this line of questioning?
        Dr. Ebinger. Congressman, I would only say I am old enough
    to remember when we could not burn natural gas in industrial
    boilers or powerplants because ``it was a noble fuel'' and we
    should not do that. We have made major disastrous decisions
    through the years whenever we tried to not allow market forces
    to work. It is precisely for that reason that in our analysis,
    we see plenty of NGOs being available for the American
    industrial renaissance and used the dry gas for export.
        As I said in my formal testimony, I think we have to be
    careful because this idea that Dr. Fleming seems to think, and
    I would agree with you, sir, I would love to see more natural
    gas exported but we think the realities of the marketplace are
    not going to allow all these projects before DOE to ever be
    developed in any time frame any of us can reasonably foresee
    here.
        As a result, we find some of the arguments put forth by the
    petrochemical industry and others to be somewhat spurious to
    the realities of the marketplace.
        Mr. Farenthold. Let me ask, Mr. Choi, you studied this,
    what is the environmental impact of this? It seems to me as we
    have low cost natural gas that is cleaner burning than oil and
    in most cases, coal, isn't it a positive net environmental to
    get more people burning clean natural gas?
        Mr. Choi. Yes, it is. If you look at the carbon emissions
    in the United States, we are at I believe the lowest point we
    have been in the past decade. Most of it is because we are
    burning more natural gas than we ever have.
        One other comment I would like to make is that just because
    there is a rush to apply for DOE approval to export doesn't
    necessarily mean that all these applications, if approved,
    would be built.
        Mr. Farenthold. Thank you very much. I apologize for
    cutting you off but I am out of time. As a courtesy to my
    colleagues, we do need to keep moving.
        I will now recognize Mr. Horsford for five minutes and turn
    the Chair back over to Chairman Lankford.
        Mr. Horsford. I want to get back to this issue of who
    should be involved in this process. Mr. Choi, would you agree
    that all interests, those of the producers and those of the
    consumers, should be considered by the Department of Energy in
    their determination of what is a public interest?
        Mr. Choi. I would rather not speculate on the role of the
    Department of Energy but I can say that the market does
    consider interests of all parties.
        Mr. Horsford. Mr. Cicio, from what I understand, you are
    here representing some very large companies that use natural
    gas as an energy source and as an input in their production
    process. What is your view on being able to have a say in this
    process?
        Mr. Cicio. Absolutely. All interested parties impacted on
    the producing and consumer sides. Let us take a look at when
    the DOE was confronted with dealing with determination on
    imports. They did a rulemaking process to develop the criteria
    and allowed for all parties to comment, both verbally and in
    writing, to help develop that criteria. It was done in a very
    transparent way.
        My comments earlier today were that there has not been any
    rulemaking that has allowed for a set of criteria for exports.
    That is what we believe is the best process to move forward.
        Mr. Horsford. The fact that your report accurately
    estimates the impact of exportation on your member companies is
    a concern?
        Mr. Cicio. It is interesting. The NERA report said that
    energy prices go up, wages go down and the return on capital of
    all industries are impacted in a negative way.
        Mr. Horsford. Mr. Chairman I think this hearing
    demonstrates, at least to me, that there are many sides to the
    question of allowing LNG exports on a scale never before
    considered in U.S. history. The law requires the Department to
    do what is in the public's interest. I know none of us want to
    be motivated to pushing the Administration into picking winners
    and losers and it is something that of course the majority has
    talked about, not only in this committee, but in others and has
    objected to that type of consideration.
        The last Congress I know is in the past but I would hope we
    would not do anything to try to push the Administration into
    selecting winners and losers in this process.
        At this hearing, which concerns something the oil and gas
    industry wants, federal permission to export LNG and thereby
    raise gas prices and profits, I get the feeling that some
    members of the majority want the Administration to go in this
    direction so long as oil and gas are the winners. I hope we
    have the public's interest in mind rather than merely just one
    industry's welfare or profit.
        Thank you.
        Mr. Lankford. [Presiding] I would recognize myself for the
    next line of questioning.
        Mr. Horsford, I would agree, this shouldn't benefit one
    group or another, but there are tens of thousands of jobs on
    the sidelines currently that in a 7.6 percent unemployment rate
    for the Nation, we would love to see. The jobs that are
    happening take an area like North Dakota, an area where there
    are a lot of jobs that are $80,000 and above as a starting
    position for a high school education. It would be great to see
    this promulgated across the country. A lot of families would
    enjoy that kind of benefit to see that in the days ahead.
        I apologize that I had to slip out for a moment. I need to
    come back to several things on this. I am still trying to
    process through how we make the decision and how we move
    forward in timing on this.
        Mr. Smith, is DOE anticipating setting a numeric number of
    bcf to export a day? Is that an expectation, there will be some
    moment or some decision to be made to say we are going to find
    a magic number of bcf, we are going to limit that?
        Mr. Smith. I thank you for the question Mr. Chairman. The
    Department has not made any determination about a volumetric
    limit or cap or any sort of quantified figure, so that is not a
    determination the Department has made.
        Mr. Lankford. That decision has not been made or that
    decision is irrelevant, it is going to be market-based? I am
    trying to figure out will this be centrally determined, that
    someone in DOE will determine we can do up to 6 bcf a day but
    that is all we can do economically based on studies or will the
    market decide?
        Mr. Smith. The market has made no determination about the
    imposition of any cap, quantification, the calculation of any
    caps. That is not a decision the Department has made. We have
    not come to that conclusion.
        Mr. Lankford. You have made a decision at least 2 bcf are
    going to happen a day because the existing export facility has
    that capability of 2 bcf a day, correct?
        Mr. Smith. We have decided to permit 28.2 bcf per day.
        Mr. Lankford. I am trying to figure out where does this go
    from here. Is it a situation where we have 19 applicants, we
    are going to let the market decide what is appropriate or will
    there be some decision to say we have two to permit, we are
    going to allow two more, then wait a couple years, allow two
    more, wait a couple years or is there going to be a decision we
    think eight is the limit and try to figure out some process to
    get us to eight?
        Mr. Smith. Mr. Chairman, we simply have not made that
    determination. We are in the process right now of making this
    determination. The comment period literally closed three weeks
    ago, so there is a very large volume of analysis the Department
    still has to do.
        Mr. Lankford. I do have to have some concern on the large
    volume because there 186,000 individuals. My understanding is
    that was about 300 actual comments and they all came in in the
    thousands. Am I right or wrong on that because 300 comments you
    are working through, just a large quantity of the same 300
    comments?
        Mr. Smith. There were a total of almost 200,000 comments.
    Many of those were letter writing campaigns but you also have
    to go through those because any campaign, people write things.
    You have private citizens who are voicing their opinion.
        Mr. Lankford. I definitely understand that. We get letter
    writing campaigns, I assure you, but the comments, as they come
    in, as far as in your decision-making, you have 300 unique
    comments really there, you have thousands to reply to, but as
    far as your decision-making process, you are really filtering
    through 300, is that correct?
        Mr. Smith. I do not want to characterize the 300 as being
    unique from the other very large volume because we have to go
    through all those comments.
        Mr. Lankford. I understand. I am just trying to figure out
    the decision-making process. As we are trying to process
    through this, the assumption was the decision has been made we
    are going to exports on non-FTA. That decision is done, it is
    behind us. We are going to do it. Now it is how many additional
    facilities. What will be the process and time? That is all that
    is left at this point to determine. We have already determined
    we are going to export.
        I am trying to figure out is the timing because there are a
    lot of contracts globally that depend on this, there are a lot
    of jobs here in America scattered across the country. Mrs.
    Lujan Grisham mentioned before, there are areas in New Mexico
    and other areas all across the country that are dependent on
    job development increasing.
        With a 14 year low in production of natural gas happening
    right now, that is a lot of jobs sitting on the sideline that
    turn around almost immediately if production begins to increase
    for export if there is some sort of advance planning, if we
    know the timing. I am trying to figure out what is the timing
    and what is the process.
        Mr. Smith. I can say a couple things, Mr. Chairman. First,
    we are committed to dedicating resources, dedicating personnel,
    lawyers, to move as quickly and expeditiously as possible to
    get to a transparent and defendable decision.
        Mr. Lankford. You still don't know whether that is a month
    from now or ten years from now?
        Mr. Smith. Mr. Chairman, we are in the middle of the
    analysis right now. I could opine on that but I would be making
    something up that is trying to foresee the outcome of the
    analysis we are currently doing.
        Mr. Lankford. Do you have an expectation when you make a
    decision, will they be made one at a time or based on a set of
    merits where you will say this is the criteria. If your permit
    application meets this set of criteria, we are going to permit
    you and let the market decide or will this be, whatever system
    it was, we are going to permit this company and then three
    years, six months later or whatever it is, we are going to
    permit another one? Will it be that order or will it be open it
    up and let them go pursue capital, see who gets the capital and
    who gets contracts? How will that work?
        Mr. Smith. Again, that would be, to a large extent,
    prejudging the analysis we are doing now. I can say we have
    announced an order, we know what the next applicant is going to
    be, what the subsequent applicant is going to be.
        Mr. Lankford. How was that determined as far as the order,
    the next one that is going to go down?
        Mr. Smith. In the Sabine Pass Order, we stated we had to
    look at the cumulative impact of LNG export, since we are
    looking at a total of 28.2 bcf with the number of applicants.
        Mr. Lankford. There is no way they are going to build that
    much. There is not that much capital to build that.
        Mr. Smith. That is not the argument I am making. I am just
    saying that is the total quantity of export applications we are
    looking at. We took the applicants on a first come, first serve
    basis, with priority given to those that have started the FERC
    pre-filing process. You can go to the DOE website, you can
    download a pdf that shows you the list and the order. That is
    the order in which we will proceed.
        Mr. Lankford. So it is a first come, first serve if they
    have gone through the pre-application. That is fine in some
    semblances and I am sure for the company that is number two,
    they are excited about that process and the company that is
    number 19 is probably not as excited.
        I know from being in a high school history class, when
    tests were turned in on Friday, the first person turning in
    their test didn't always get the highest grade. A process that
    says whoever got his application request in first and started
    with FERC has the highest priority seems to pull out some merit
    issues.
        Again, I am saying that and probably the number two company
    is furious I am saying but there seems to be some need for
    merit. Do they have the capital, do they have contracts, have
    they had communication on this, can they actually fulfill it,
    is this going to economically benefit the Nation?
        If we make the determination to do it, then we need to have
    some economic benefit immediately coming back to America, that
    we know they are actually going to be able to fulfill it and
    get it done. Does that come into play on this at all?
        Mr. Smith. I appreciate the comment. First of all, in order
    to get a permit before the Department of Energy, you need $50
    and a fax machine, we get the application and it goes into the
    docket. One of the ways we tried to emphasize or measure
    seriousness or probability of outcome was to first do those
    applicants that have a pre-filing before FERC. That is when you
    start to spend very large quantities of dollars. We pushed
    those to the front of the queue, the rest to the back of the
    queue.
        There are any number of algorithms one could try to come up
    with to say this company is more serious than that one or they
    have a better project than this one. We opted not to do that.
    We said we were not going to try to judge the seriousness of
    companies, or their business model or the probability of
    financing because that is not our job.
        We wanted something in terms of fairness to say we think
    generally the idea that the company first in the queue should
    go first. It was only fair.
        Mr. Lankford. Did they know that in advance, that this was
    going to be first come, first serve?
        Mr. Smith. There was no process in place. This is brand new
    ground.
        Mr. Lankford. If someone did more research and took more
    time to fill out their application, they ended up in the back
    of the line. They just didn't know at that point?
        Mr. Smith. Again, this is a new process that we are
    creating.
        Mr. Lankford. You have a difficult job in this and I
    completely appreciate this. I know you are working
    expeditiously but at the end of the day, everyone, all of us on
    the dais, you, everyone is going to have to determine and be
    able to say to people this was a fair process that worked as
    expeditiously as possible.
        I have gone well over time on this. I would like to
    recognize Ms. Speier.
        Ms. Speier. Thank you, Mr. Chairman.
        Let me say to both you, Mr. Smith and you, Mr. Chairman,
    you have done yeoman's work on behalf of each of your interests
    here this afternoon, you, Mr. Smith, in terms of recognizing
    that it is a judicial process and you cannot really offer a lot
    of information about particular applications and Mr. Lankford
    for pitching for his constituents as well. I compliment both of
    you.
        Let me just say though on your point about winners and
    losers and whether or not someone has the ability to actually
    take this approval and move forward, it appears they have done
    just that. If you have put them in two categories, those that
    have already done some precertification through FERC, they are
    in the front of the queue you just said, is that correct?
        Mr. Smith. Yes, that is the case. Those are being
    considered first. Again, that is not a capricious
    determination. Those were the companies already spending
    millions and millions of dollars on feed and pre-feed and all
    the other things they have to do in terms of determining
    environmental impact. Those are companies making a real
    investment. They are spending dollars now.
        As I said, we didn't try to grade each company but we did
    create two categories and we thought that was a fair way to
    approach it.
        Ms. Speier. Let me also ask this question. There are many
    folks in the oil and gas industry that will go out, get the
    permits and just sit on them. That is not what I think any of
    us are interested in. How do we prevent that from being part of
    this extended evaluation as to the merits of how much is
    eligible to be exported versus not?
        Mr. Smith. The Department has some flexibility and some
    leeway in the way it writes its Orders. One thing we emphasize
    is that when we write an Order, when we say yes or no, we don't
    write yes or no on a sticky and say that is a decision. There
    is actually a hundred-plus page Order the Department comes out
    with that goes through in a very open, transparent and
    dependable way, the rationale the Department has gone through
    to get to that Order. Also, we have the flexibility and the
    discretion to put in qualifications or requirements for the
    companies.
        If you look back to how we managed the Sabine Pass Order
    for Cheniere, there was a requirement that by a certain date,
    they had to have first gas going through the terminal which
    essentially prevents a company from going in for a relatively
    low price.
        Ms. Speier. Fifty dollars?
        Mr. Smith. Yes, $50, and obtaining an application which
    they can sit on ad infinitum. That is not in the public
    interest; that is not what we wanted to accomplish. That is how
    we managed that.
        Ms. Speier. Mr. Cicio, you have been very helpful and have
    raised some interesting issues. Can you list out some of the
    companies that you represent?
        Mr. Cicio. Actually, no. We do not list our companies on
    our website, we do not publish them. The reason why is that we
    work on some very delicate environmental issues and many of our
    companies have retail profiles. We try to protect them from
    having that exposure. IECA represents a trade association and
    the cumulative views and the consensus of those companies. We
    speak as an organization, not speaking on behalf of a company.
        Ms. Speier. I understand that, but for us to evaluate the
    impact on companies making it in America, you talked about the
    American renaissance of manufacturing which we all embrace. We
    want products made in America. I do a Make It in America forum
    in my district every year. I just want to get a sense of how
    many employees are we talking about, are these Fortune 500
    companies. Play 20 questions with me.
        Mr. Cicio. Our companies have over $1 trillion in revenues,
    they employ 1.4 million people, have some of the largest
    manufacturing facilities in the United States. These are large
    companies. They produce steel, aluminum, chemicals, plastics,
    nitrogen, fertilizer, glass, cement, food processing companies,
    these are all name brand companies.
        Ms. Speier. You said how many employees?
        Mr. Cicio. It is 1.4 million.
        Ms. Speier. You also indicated that while the export
    contracts typically are for 30 years, that is not the case for
    manufacturing companies within the United States. Could you
    elaborate on that?
        Mr. Cicio. Manufacturing companies would love to lock in
    long term, particularly fixed or advantaged natural gas prices
    but for the most part, that is not happening. They are having
    to buy natural gas prices on the spot market.
        Ms. Speier. Typically that is a decision being made by the
    actual utility that is offering you the gas?
        Mr. Cicio. No. This is a negotiation that can occur between
    a manufacturing company and a natural gas producer or marketer.
    Utilities are not part of the equation.
        Ms. Speier. So this is a producer basically saying no, we
    are not going to lock in a 30 year contract to you but in an
    export setting, they could?
        Mr. Cicio. When I referred to 30 years earlier, I was
    referring to the DOE approving an application, the terminal
    owner then is going to secure long term contracts and they have
    that ability for 30 years. The point I was trying to make
    earlier is that creates demand that is going to impact domestic
    consumer prices for a period of 30 years.
        My point is still the same. Natural gas is different than
    other trade products because it can be drastically impacted by
    public policy, by Congress and by the EPA and by the Bureau of
    Land Management that can impact the production over that 30
    years and/or drive consumption such as the EPA on utilities, on
    the industrial sector, controlling greenhouse gas emissions or
    the industrial boiler mac. Public policy does drive demand and
    can impact supply.
        Ms. Speier. Mr. Chairman, my time has expired. I just want
    to thank all of the witnesses for their testimony. It has been,
    I think, a very enlightening hearing. I think what is coming of
    it, for me certainly, is this is a process that has to be done
    carefully, one that probably in my mind should provide for some
    level of export but not to the detriment of manufacturing here
    in this country or consumers in this country.
        Unfortunately, Mr. Chairman, I have to depart to give a
    speech. I thank you.
        Mr. Lankford. Dr. Fleming, do you have another series of
    questions?
        Mr. Fleming. Thank you, Mr. Chairman.
        I will say parenthetically before I get to my question, EPA
    government policy can have impact on any of these natural
    resources. Certainly coal is a great example where that is
    happening today. Again, I have difficulty seeing where natural
    gas is unique.
        Mr. Smith, NERA issued a result of their study. I
    understand DOE received that this summer, is that correct?
        Mr. Smith. That is correct.
        Mr. Fleming. However, it was released from DOE in December.
    Can you account for that delay?
        Mr. Smith. First of all, I certainly would not characterize
    that as a delay. This is the NERA study here in my hand. This
    was a significant and substantial economic study looking at
    quantifying the impact of an unprecedented activity in the
    United States in terms of exporting hydrocarbons in the form of
    liquefied natural gas.
        This study was received by the Department, as requested by
    the Department, as something to be responsive to our need to be
    judicious about quantifying public interest so we did need some
    numbers.
        Once it was received, there was an intense process to
    understand the study, to ensure that it was clear and
    transparent, to ask clarifying questions to make sure this
    study, once entered in the public record, would be clear and
    responsive to the types of things we need to understand as part
    of the public interest determination.
        Mr. Fleming. Who made the decision when to actually release
    it?
        Mr. Smith. I made that decision.
        Mr. Fleming. Nothing that happened perhaps in November
    could have had any impact on that decision at all?
        Mr. Smith. No. The study was released when I was prepared
    to release it and when we had done the work we needed to do
    within the Department of Energy to make sure it was
    appropriate.
        Mr. Fleming. Mr. Ebinger, how do the transportation costs
    of LNG affect the price in the world market compared to
    domestic prices?
        Dr. Ebinger. Transportation costs are, of course, extremely
    high. Right now, if we are looking at what could we deliver gas
    for example if we were ready to export into the Japanese
    market, the actual transportation costs would be somewhere in
    the neighborhood of $5 to $6 per million BTU, that added on to
    the Henry Hub price plus the cost of gasification and
    regasification, I think most analysts would agree we would
    probably be able to deliver gas to Japan today if we could
    export somewhere between $9.50 to $10 per million BTU,
    significantly lower, of course, than the Japanese price.
        Mr. Fleming. How would that compare to other forms of
    energy for Japan? Would that be a favorable price for them?
        Dr. Ebinger. At that price, it would be very favorable for
    Japan because otherwise Japan imports almost everything and
    since the Fukushima accident, the closing of the nuclear
    powerplants has added roughly 4 bcf a day to Japanese demand,
    killing them because they are importing into a very high cost
    market.
        Mr. Fleming. Obviously it is a very marketable concept to
    sell natural gas to Japan up to and including all the delivery
    costs that go with that?
        Dr. Ebinger. The concern would be, however, the longer we
    take to get some of our projects into the marketplace. I think
    some of the others at the table have different views on this,
    but if you believe the long run implications of any U.S. LNG
    going to market will be to begin to bring further competition,
    that the existing prices in Japan will begin to fall.
        They will not fall down to probably $10 but they might fall
    to $12 or $13, so the competitiveness of the U.S. while still
    probably reasonable is not going to be as great the longer we
    take to get LNG projects into the marketplace.
        Mr. Fleming. How does that affect U.S exporters compared to
    competitors and the U.S. exports compared to competitors in
    Qatar or African countries?
        Dr. Ebinger. The big loser in this competitive LNG market
    down the road may be Australia, although most of the big
    projects they have coming in they have long term contracts for,
    but they are an extremely high cost producer. It is anticipated
    Qatar is the low cost producer bar none. Although Australia
    will be volumetrically larger than Qatar when all the projects
    come in, it is anticipated the new fields in East Africa will
    be extremely competitive into the Far Eastern market and even
    some of the West African projects in Nigeria and Angola will
    probably find a competitive market there.
        The big question in my mind is will the Chinese and the
    Russians do some very, very large pipeline deals because that
    would be extremely competitive in the Far Eastern market
    against any LNG.
        Mr. Fleming. What I am really hearing is that we are seeing
    a tremendous worldwide opportunity in natural gas that will
    allow the growth of economies around the world where they will
    have very competitive energy prices, that they can be good
    producers for export/import which will be good for consumers,
    would that be a correct assumption?
        Dr. Ebinger. It will not only be good for consumers, but
    for those of us that do believe in climate change, it offers a
    unique opportunity to at least use a cleaner fossil fuel. It is
    not an answer clearly for the long run because it is still a
    CO2 emitting fuel but we do get some breathing space on the
    carbon front.
        Mr. Fleming. It is my understanding that just in the last
    three years, carbon emissions have dropped 15 percent across
    the U.S. That is due directly to the conversion to natural gas.
    Really this is a win-win-win. We get better environment on CO2
    emissions, we get better prices for manufacturing and
    production so we get better job environment, higher paying jobs
    and consumers get a better deal on the cost of energy. I cannot
    imagine what could be better for this Nation or this world.
        Dr. Ebinger. I would agree. The irony is that for those
    opposed to the U.S. signing the Kyoto Protocol, which we did
    not sign, ironically because of gas backing out; coal, we have
    actually met the reduction targets we would have been obligated
    to meet had we signed the Kyoto Protocol.
        Mr. Fleming. Thank you, sir.
        Mr. Lankford. Gentlemen, thank you for being here. I know
    this was a long afternoon. We got interrupted a couple
    different times by votes and other things. I appreciate you
    coming here and the conversation you have had.
        I would like to enter into the record the EIA, the NERA,
    the Deloitte and the Brookings study. Mr. Cicio, we had your
    study already attached to your testimony, correct?
        Mr. Cicio. My written testimony.
        Mr. Lankford. I wanted to make sure that was added. I want
    to be able to add the other studies into the record.
        Mr. Lankford. The issue that we have today is we have
    around $40 to $50 billion of private money on the sideline that
    our economy desperately needs. The best gift we can put into
    our economy is certainty, to know the rules and to fulfill
    those rules, so there is some gift of predictability as we walk
    through the process.
        Mr. Smith, you have a tall order as we have talked about
    multiple times and a delicate balancing act. You have somewhere
    between 300 and 186,000 different comments that have come in
    that we have to sort through, make a decision and predict what
    the future economy is going to be based off that. That is no
    simple thing.
        We understand that but dates of when the decisions will be
    made, then a date for how that decision is going to be done and
    a process to expeditiously work through that is a huge
    difference. It is every company that has applied into and how
    we work through the process, whether it be number 2, 19 or 1 to
    19 or whatever it may be, to know they are not six years behind
    the other one because they were two days behind them in
    submitting an application, to know there is some sort of
    process that is really fair to everyone but is also clearly
    defined.
        We don't envy you in that process but we are grateful you
    are taking it on and do look forward in the days ahead to
    hearing a clear timeline and a clear process so we will be able
    to receive that. At any point, if you need to communicate with
    this committee or we can help you in any way, we want to be an
    asset to you because of that responsibility.
        Did you have a final statement?
        Mr. Smith. I was just going to say I appreciate that
    comment. We are moving forward with all due haste. We
    understand that sense of urgency.
        Mr. Lankford. Thank you.
        With that, we are adjourned.
        [Whereupon, at 5:36 p.m., the subcommittee was adjourned.]

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