[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


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                      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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