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



 
      NATURAL GAS EXPORTS: ECONOMIC AND GEOPOLITICAL OPPORTUNITIES
=======================================================================



                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 25, 2013

                               __________

                           Serial No. 113-17

                               __________

        Printed for the use of the Committee on Foreign Affairs


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

                                 ______




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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida                ALAN S. LOWENTHAL, California
TREY RADEL, Florida                  GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           BRAD SHERMAN, California
ADAM KINZINGER, Illinois             ALAN S. LOWENTHAL, California
MO BROOKS, Alabama                   JOAQUIN CASTRO, Texas
TOM COTTON, Arkansas                 JUAN VARGAS, California
PAUL COOK, California                BRADLEY S. SCHNEIDER, Illinois
SCOTT PERRY, Pennsylvania            JOSEPH P. KENNEDY III, 
TED S. YOHO, Florida                     Massachusetts


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Rob Bryngelson, chief executive officer, Excelerate Energy...     5
W. David Montgomery, Ph.D., senior vice president, National 
  Economic Research Associates...................................    28
Michael A. Levi, Ph.D., director, Program on Energy Security and 
  Climate Change, Council on Foreign Relations...................    49
Mr. David Mallino Jr., legislative director, Laborers 
  International Union of North America...........................    56
Mr. Michael Ratner, specialist in energy policy, Congressional 
  Research Service...............................................    64

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Mr. Rob Bryngelson: Prepared statement...........................     8
W. David Montgomery, Ph.D.: Prepared statement...................    30
Michael A. Levi, Ph.D.: Prepared statement.......................    51
Mr. David Mallino Jr.: Prepared statement........................    58
Mr. Michael Ratner: Prepared statement...........................    66

                                APPENDIX

Hearing notice...................................................    94
Hearing minutes..................................................    95


      NATURAL GAS EXPORTS: ECONOMIC AND GEOPOLITICAL OPPORTUNITIES

                              ----------                              


                        THURSDAY, APRIL 25, 2013

                     House of Representatives,    

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2:13 p.m. in 
room 2200, Rayburn House Office Building, Hon. Ted Poe 
(chairman of the subcommittee) presiding.
    Mr. Poe. The subcommittee will come to order. Without 
objection, all members may have 5 days to submit statements, 
questions, extraneous materials, for the record, subject to the 
length limitation in the rules.
    Five years ago, companies were building terminals to import 
natural gas at the cost of billions of dollars because analysts 
agreed that the United States' economy was going to need 
natural gas from overseas. Today, that scenario has changed 180 
percent. Import terminals lie dormant. The Department of Energy 
has 19 applications waiting to get permission to export natural 
gas. Thanks to breakthroughs, the United States' natural gas 
reserves have climbed 72 percent since 2000 and 49 percent 
since 2005. The amount of natural gas that is technically 
recoverable in the United States is 97 times greater than all 
of the natural gas we consumed in 2011. In plain terms, this 
means we have an abundance of natural gas that we are not 
using. It is just sitting there, and this is really not smart 
policy, or smart business.
    A big reason why is the Department of Energy. The 
Department of Energy has not approved an application to export 
to a country we don't have a Free Trade Agreement with in 2 
years. When the DOE says you can't export, that floods the 
domestic market with natural gas because producers have no 
place to sell it. Prices domestically have now dropped so low 
that it just isn't worth it for producers to even pull any more 
natural gas out of the ground.
    So we have recoverable natural gas that is unused because 
the government refuses to let it be produced. Let me give you 
an example. There is one company that has a permit pending with 
the DOE for 2 years. If the DOE would give the green light, the 
company would immediately create 3,000 new construction jobs, 
20,000 to 30,000 more jobs would also be created for 
exploration, drilling, and pipe laying. In all, the economy 
would see an infusion of $10 billion from the project alone. 
Jobs are important and it is important that the government 
understand that we should move forward with jobs in this 
industry.
    It is not just one project; there are others like this one 
project that can't get started. No matter what economic study 
someone looks at, even those commissioned by the DOE, the 
result of opening up our natural gas exports is an economic 
gain for the United States. Real income and the GDP will all 
rise. More exports would be a big gain for our business sector; 
91 percent of firms in the oil and gas extraction industry have 
fewer than 20 employees. Many family-owned small businesses 
really can't wait for 2 years for the Department of Energy to 
approve a permit. They really don't have that kind of 
flexibility or money. So the longer the process takes, the 
harder it is on mom-and-pop companies to survive.
    In Europe, countries who rely on natural gas have been held 
hostage by the Russian energy company, Gazprom. Our friends in 
Poland, Hungary, and the Czech Republic know this better than 
anyone. Cheap U.S. natural gas exports would reduce the Russian 
stranglehold on the European market and give the U.S. more 
political clout at the expense of Russia. In the Pacific, 
allies like Japan and Korea pay very high prices for natural 
gas. They would be immediate importers of cheaper U.S. natural 
gas if we were allowed to sell it to them.
    Perhaps more than anyone, our friends in India have been 
the most vocal. The current Indian Ambassador to the United 
States recently wrote in a Wall Street Journal op ed that U.S. 
natural gas exports to India, ``would provide a steady, 
reliable supply of clean energy that would help reduce 
[India's] crude oil imports from the Middle East and provide 
reliable energy to [India].''
    Without U.S. natural gas, the Indians might have to 
participate in the Iran, Pakistan gas pipeline. We have given 
the Indians a reasonable alternative. We should use it. 
Liberalizing our natural gas export policy will provide 
certainty to allies and economic partners around the world that 
the United States is an advocate of free trade.
    On a side note, we have the problem with the World Trade 
Organization. The WTO punishes countries that limit exports to 
keep their own domestic prices down. The U.S. has a World Trade 
Organization case against China for doing exactly that with its 
rare-earth minerals. But here the DOE is limiting our own 
natural gas exports. If this policy continues, there is a 
possibility we could be sanctioned by the WTO and our entire 
trade regime could be hurt.
    So the DOE should let the free market work and approve 
pending applications. The U.S. has the best technology and the 
safest technology in the world, but our competitors with their 
own natural resources, like China, are catching up.
    The purpose of this hearing is to explore natural gas 
exports from the United States to other nations.
    And now, I will yield to the ranking member, Mr. Sherman 
from California, for his opening statement.
    Mr. Sherman. Thank you, Mr. Chairman. I commend you for 
holding these hearings. Ordinarily, people don't think natural 
gas is a focus of the Foreign Affairs Committee, let alone this 
subcommittee. But the fact is that while the Ways and Means 
Committee is the primary committee to deal with imports and 
taxation thereof, it is our committee that has primary 
jurisdiction over exports, export promotion, and export 
control. It is interesting that the private sector invested 
billions in building terminals to import liquefied natural gas 
and now wants to retool them to export. And it is clear that 
the price as structured now justifies that. My fear if I was an 
investor, and I am not, is that by the time we are ready to 
export, we will have already exported our fracking technology, 
which we are exporting now, and there will be discoveries of 
natural gas on the Eurasian landmass that will allow the piping 
of natural gas to the very people that anticipate buying our 
liquefied natural gas.
    Whether to develop in full our natural gas resources, and 
whether to export natural gas brings up environmental, national 
security, and economic concerns. From a national security 
standpoint, I am particularly interested in vehicle propulsion. 
Vehicle propulsion is the domain of petroleum worldwide, and it 
is our dependence on petroleum imports and the world's 
dependence on petroleum imports that determines much of foreign 
policy around the world. Right now you can get twice as many 
miles per dollar with a natural gas vehicle as with a 
petroleum-based vehicle. If we start exporting natural gas that 
may change. We may need to have a huge differential between the 
price of natural gas and the price of gasoline in order to 
encourage use of natural gas to propel trucks and perhaps even 
cars.
    On the other hand, it is in our national security interest 
as the chairman points out, to provide secure natural gas 
supplies for our allies and to prevent India from turning to 
Iran for a natural gas pipeline.
    As to economics, there are jobs involved in developing the 
infrastructure to export our natural gas. There are also jobs 
involved in our manufacturers and our petrochemical companies 
having cheaper natural gas than anyone else. Many countries 
with a valuable export deliberately prevent the export of the 
raw material in order to give the processing jobs and the use 
of that raw material jobs to their domestic market. In 
addition, we are currently exporting coal. So if we start 
exporting natural gas, we will be burning more of our own coal, 
and if we choose not to, will we simply be exporting more of 
our own coal?
    As to the environmental side, natural gas is the best 
fossil fuel, which may--environmental-wise, not be a particular 
compliment. But to the extent that we don't develop our natural 
gas resources, or that we export them, will we be burning more 
coal? How will that count against us in the international 
calculations of carbon emissions, and eliminate our efforts or 
deter our efforts to be able to get other countries to stop 
exporting. I believe my time is expired, but if I can go on for 
a little bit longer, I hope.
    Mr. Poe. The gentleman is recognized for a little bit 
longer.
    Mr. Sherman. Okay, thank you. So, and finally on the 
economic side, we have consumers. The only thing my 
constituents will understand about these hearings after they 
get point and counterpoint is that their natural gas bills are 
lower now than they used to be and they would like to keep it 
that way.
    We want to find out what is the expense of shipping natural 
gas compared to shipping coal because they are usable by the 
customer for the same purpose. We will want to focus on what 
advantages our manufacturers and petrochemical companies will 
have if they can pay half for natural gas what other people are 
paying or less than half. So it cannot be said that we are here 
to make sure that there are jobs in one industry without 
hearing what jobs might be available through another process.
    With that, I think my little bit longer has been exhausted 
and I yield back.
    Mr. Poe. I now recognize the vice chair of this 
subcommittee, the gentleman from Illinois, Mr. Kinzinger.
    Mr. Kinzinger. Thank you, Mr. Chairman, and thank you for 
holding this important hearing on gas exports. Since the 1930s, 
we have exported natural gas via a pipeline to Canada and 
Mexico, and more recently, starting in 1969, the U.S. began 
exporting natural gas to Japan, at that time a non-free trade 
agreement country from the Kenai Peninsula in Alaska.
    However, given this history of exporting natural gas, the 
Department of Energy has only granted a single permit to export 
liquefied natural gas to another non-FTA while approximately 20 
remaining LNG export applications remain in limbo. What would 
approval of these 20 remaining LNG export applications mean for 
the American economy? I believe that the answer is somewhat 
simple. It means American jobs. The majority of the economic 
studies analyzing a wide range of scenarios found increased LNG 
exports would produce a net economic gain to the U.S. economy, 
resulting in an increase in U.S. households' real income. At a 
time when the economy continues to struggle, we need to support 
policies that encourage domestic job growth.
    I do want to, however, say a note of caution. I represent 
an area of heavy manufacturing, and especially in the Rockford 
area in Illinois. We have a lot of manufacturing, and cheap 
energy has actually been very effective in bringing 
manufacturing back to the United States and making us 
competitive with the rest of the world. A question that I do 
legitimately want answered is, what will exporting natural gas 
do to natural gas prices here at home because I fear that a 
skyrocket in domestic natural gas prices would, in fact, lead 
to a hurt in the manufacturing sector as energy prices 
skyrocket again.
    But that said, the Department of Energy concludes that for 
every one of these market scenarios examined, net economic 
benefits increase as the level of LNG exports increase. And I 
am interested in hearing from our panel about the impact 
increased LNG exports will have on our national security 
interest around the world. LNG exports ought to support our 
allies, and I believe they could provide an important 
alternative to Middle Eastern or Russian competition that 
currently dominates the market.
    And thank you, chairman, I yield back.
    Mr. Poe. Anyone else wish to make an opening statement? 
Without objection, all of the witnesses' prepared statements 
will be made part of the record. I ask each witness to keep 
your presentation to 5 minutes, so that we can move along in 
this process and have questions and answers.
    I will introduce each of the witnesses at this time, and 
then we will have the witnesses' opening statements.
    Mr. Rob Bryngelson is the president and chief executive 
officer of Excelerate Energy in The Woodlands, Texas. Before 
helping found Excelerate Energy he worked as managing director 
in El Paso Corporation's Global LNG Group where he was 
responsible for LNG infrastructure development, supply, 
procurement, and downstream marketing for North America. Dr. 
David Montgomery is a senior vice president at NERA Economic 
Consulting, and helped lead the study that the DOE commissioned 
on the economic impact of LNG exports. Prior to NERA, Dr. 
Montgomery held a number of senior positions in the United 
States Government, including Assistance Director of the United 
States Congressional Budget Office, and Deputy Assistant 
Secretary for Policy in the U.S. Department of Energy during 
the Carter administration. Dr. Michael Levi is the David 
Rubenstein senior fellow for Energy and the Environment at the 
Council on Foreign Relations, and director of the CFR program 
on Energy Security and Climate Change. Before joining CFR, Dr. 
Levi was a fellow at the Brookings Institution and director of 
the Federation of American Scientists Strategic Security 
Project. Mr. David Mallino is the legislative director at the 
Laborers International Union of North America. He previously 
worked for the American Federation of Labor, Congress of 
Industrial Organizations, and National Environmental Education 
and Training Center. And Mr. Michael Ratner is a specialist in 
energy policy at the Congressional Research Service focusing on 
natural gas and all markets. His recent CRS work has addressed 
U.S. LNG exports and U.S. natural gas demand and prior to 
joining CRS, Mr. Ratner was a senior energy analyst at the 
Central Intelligence Agency.
    Mr. Bryngelson, we will start with you. You have 5 minutes.

   STATEMENT OF MR. ROB BRYNGELSON, CHIEF EXECUTIVE OFFICER, 
                       EXCELERATE ENERGY

    Mr. Bryngelson. Thank you, Chairman Poe, Ranking Member 
Sherman, members of the subcommittee. My name is Rob 
Bryngelson. I am the president and CEO of Excelerate Energy. I 
appreciate the opportunity to appear before the subcommittee 
today to share Excelerate's views on the current status of the 
natural gas industry relating specifically to liquefied natural 
gas exports, the positive impacts both to Texas and the Nation 
associated with LNG exports, and finally, Excelerate's views on 
the Department of Energy approval processing to export LNG.
    I have submitted more extensive written testimony for the 
record, therefore, I will use this time to summarize a few key 
points. Excelerate Energy was established in 2003 and is based 
in the Woodlands, Texas. We are the world's largest provider of 
floating storage and regasification vessels, and are engaged in 
the development, construction, and operation of liquefied 
natural gas, transportation and regasification infrastructure 
worldwide.
    In 2009, Excelerate initiated front-end engineering design 
efforts to construct the world's first floating liquefaction, 
storage, and offloading unit capable of taking U.S. 
domestically-produced natural gas and processing it into LNG 
for export. The project is referred to as the Lavaca Bay LNG 
project, and will be located in Calhoun County along the Texas 
Gulf Coast.
    U.S. residential, commercial, and industrial consumption is 
not expected to increase quickly enough to offset the growth of 
natural gas production which has led to projections of 
sustained low prices in the U.S. rapid growth in U.S. natural 
gas production has driven gas prices to historically low 
levels, resulting in decreased investment by the natural gas 
industry, and a reduction in associated economic activity. It 
is our belief that exporting domestically produced LNG will 
meaningfully contribute to the public interest in a variety of 
ways including creating more jobs, greater tax revenues, and 
increased economic activity; introducing new competitive 
supplies into world gas markets leading to improved economies 
among America's trading partners and providing better 
opportunities for U.S. products and services abroad; promoting 
greater national security through a larger role in 
international energy markets; increasing production capacity 
that will better adjust to varying domestic demand scenarios; 
reducing the volatility of domestic natural gas prices; and 
improving the U.S. balance of payments by between $2.4 billion 
and $4.4 billion annually per project through the export of 
natural gas and the displacement of imports of other petroleum 
liquids.
    On October 28, 2012, Excelerate filed its application with 
the Department of Energy for the export of LNG to non-free 
trade agreement countries. Excelerate remains in the queue with 
18 other companies awaiting DOE approval. In its non-FTA 
application to DOE, Excelerate included two independent 
economic studies focused on the specific project area and the 
U.S. as a whole. The independent studies concluded that the 
project would have a positive impact on the region surrounding 
the project site comprising Calhoun and Jackson Counties as 
well as on Texas as a whole and the Nation.
    After receiving approval from the FERC to proceed, 
Excelerate will begin the nearly 4-year construction process to 
complete Phase I of the Lavaca Bay LNG project. The 
construction and operation of the project will stimulate local, 
regional, and national economies through job creation, 
increased economic activity, and tax revenues. Much of the 
technology, equipment, and material needed to construct the 
project will be obtained domestically. I have included in my 
written testimony specific data concerning jobs, tax revenue, 
and other key benefits of the project.
    DOE is required to authorize exports to a foreign country 
unless there is a finding that such exports will not be 
consistent with the public interest. We concur with the DOE 
policy guidelines which emphasize free market principles and 
promote limited government involvement in Federal natural gas 
regulation. Previously, other issues considered in making the 
public interest determination have included local interests, 
international effects, and the environment.
    Excelerate's primary concern is the timing of such non-free 
trade approvals. As you are aware, there are a multitude of 
projects around the world offering LNG supplies that are 
competing with the U.S.; specifically, Australia, East Africa, 
and the Eastern Mediterranean.
    Further delays are likely to result in buyers concluding 
that other potential LNG sources provide greater certainty and 
the focus on U.S. exports will diminish. This would be a 
considerable economic loss for our Nation. In addition, with 
only authorization to sell to free trade nations, we are 
limiting the potential pool of potential customers. As one 
would expect, with a limited customer base, those volumes of 
natural gas liquefied and exported will see lower prices than 
if a more expanded pool of purchasers were available.
    In conclusion, the overall outlook for domestic natural gas 
production is promising. Without a significant increase in U.S. 
residential, commercial, and industrial demand, the current 
rate of consumption is not enough to offset growth and 
production, and may contribute to artificially low prices for 
natural gas in the U.S. This rapid growth without increased 
demand is already resulting in decreased investment by the 
natural gas industry and a reduction in associated economic 
activity.
    It is crucial that DOE move expeditiously to act on the 
pending export applications before other countries lock up 
customers with their own exports and the U.S. loses this 
opportunity.
    Thank you again for allowing me the opportunity to appear 
before the subcommittee today, and I look forward to answering 
any questions that you may have.
    Mr. Poe. Thank you.
    [The prepared statement of Mr. Bryngelson follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. Dr. Montgomery, you have 5 minutes, please.

STATEMENT OF W. DAVID MONTGOMERY, PH.D., SENIOR VICE PRESIDENT, 
             NATIONAL ECONOMIC RESEARCH ASSOCIATES

    Mr. Montgomery. Thank you, Mr. Chairman. I am honored by 
your invitation to appear before the committee today. My name 
is David Montgomery, and I am the senior vice president of NERA 
Economic Consulting, and I would like to start by stating that 
I am speaking on my own behalf today.
    Mr. Poe. Is your microphone on, Dr. Montgomery?
    Mr. Montgomery. It is not, thank you. I am sorry. I am 
senior vice president of NERA Economic Consulting, and I would 
like to start by stating that I am speaking on my own behalf as 
an expert on the issues being discussed by the committee today, 
and not representing positions taken by my employer NERA, and I 
am certainly not speaking for the Department of Energy.
    I would like to begin with a quick summary of the key 
findings of our study that we did for the Department of Energy, 
and I will talk about economic principles and not numbers at 
this point. Then I will address some of the controversies that 
have arisen since the study was issued, and then I would like 
to conclude with a few observations on geopolitical effects of 
LNG exports.
    In the study we did for the Department of Energy, we 
examined a wide range of scenarios for export levels. We had 
different assumptions in these scenarios about the costs and 
availability of natural gas in the United States, and also on 
levels of global demand, and the supply from competing sources 
in the world market. We found that in some cases the U.S. might 
not export gas at all, as Mr. Sherman suspected. But in those 
cases, allowing exports had no effect; they did no harm and did 
no good.
    In all of the scenarios in which the U.S. did export, we 
found that there were net benefits to the U.S. economy from 
those exports. The larger the exports were, the greater the 
benefits were. Limiting exports never produced greater benefits 
in any of the scenarios we looked at than unlimited exports. 
This shouldn't be surprising or controversial. It is exactly 
what the basic principle of comparative advantage that 
underlies all of international trade theory says will happen. 
All countries are better off when they specialize in exporting 
what they are good at, rather, what they are better at, and 
importing what others are better at producing.
    We wanted to be sure of our ground. We asked one of the 
leading trade economists in the country, Professor James 
Markusen at the University of Colorado, to advise us on this 
work and to review the study. He concurred in these conclusions 
as did studies that were released by the Brookings Institution, 
and by Rice University. They all apply essentially the same 
principles of international trade theory and reached the same 
conclusion about net benefits.
    Another way of putting this is that the advent of shale gas 
creates a new opportunity, and it changes the nature of the 
United States' comparative advantage in trade. That produces 
some changes in patterns of imports and exports and industry 
outlook. But we have never found that shutting off 
opportunities or preventing change increases national wealth. 
It works the other way around.
    So let me talk a little bit about prices. Since the world 
won't buy gas from the United States if it costs more than the 
natural gas that they can get from other sources, there are 
limits on how large the price increase caused by LNG exports 
could be. In most of the scenarios that we looked at, U.S. 
prices increased by about $0.50 and that is looking out to, 
say, 2025 and it is on a base forecast of $6 of what natural 
gas prices would go back up to even if we had no LNG exports.
    In some cases, at most, we had $1 as the increase in cost 
that would be attributable to gas exports. In other words, with 
abundant gas, we can supply ourselves and export gas, and with 
limited supplies of gas, we can't do either. But even with the 
largest price increases, U.S. energy-intensive industries will 
still be getting natural gas for half the cost of their 
competitors in natural gas-importing industries. That is 
because the cost of moving gas from where it is produced in the 
United States to where it is burned in countries like Japan, 
Korea, China, or even Europe, just about doubles the U.S. 
wellhead price. So I mentioned some of the importing countries.
    I can't believe that the U.S. chemicals industries, for 
example, is so inefficient that it can't survive if these 
competitors are still paying twice as much for natural gas as 
it is even after we are exporting natural gas. U.S. energy-
intensive industries no matter what we export of LNG will still 
be getting natural gas at perhaps half the cost of the 
competitors that we worry about, like China, Europe, and Japan.
    Overall, the benefits of LNG exports that we found in our 
study were clear, but they weren't large. And this is 
instructive. The U.S. is not going to become a one-crop 
economy. Natural gas is not a large part of the U.S. economy. 
Natural gas exports won't be a large part of U.S. exports. And 
I think this is helpful in understanding that the U.S. is not 
going to become a country like a small African country that is 
exporting copper and is swung back and forth by commodity 
markets. This is one part of a large portfolio. Let me see, I 
am running very short on time, so let me make several other 
points I would like to cover.
    Mr. Poe. Dr. Montgomery, if you would, summarize and then 
end your statement and then we will file your statement with 
the record. We have some questions for you, too.
    Mr. Montgomery. I will, yeah. I agree with the chairman, 
LNG exports will help our friends and limit Russia's ability to 
extract higher prices. I think they will distribute to 
nonproliferation goals as well as energy security because of 
the countries like India that need the exports. I don't believe 
the LNG exports will increase local CO2 emissions. If the gas 
is burned elsewhere, it will substitute for coal and it is 
pretty much awash. But mainly my points is, limits will be 
self-defeating. Free trade areas will receive gas. Canada is a 
free trade area. If we have abundant gas and don't export it 
ourselves as LNG, it will move to Canada, and that gas will 
displace Canadian gas which then can be exported. We will 
suffer all of the costs of exporting natural gas and get none 
of the benefits of selling it at the high price as a nation. 
Thank you, Mr. Chairman, I appreciate your indulgence.
    Mr. Poe. Thank you, Dr. Montgomery.
    [The prepared statement of Mr. Montgomery follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. Dr. Levi.

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

    Mr. Levi. Chairman Poe, Ranking Member Sherman, members of 
the subcommittee, thank you for inviting me to speak with you 
about the geopolitical implications of U.S. LNG exports. As you 
know, in order to export LNG to countries with which the United 
States does not have a special Free Trade Agreement, companies 
must be granted permits by the Department of Energy. Approving 
some or all of those permits would benefit U.S. economic and 
security relationships. The United States has long been a 
promoter of open international energy markets as a way of 
separating commerce from diplomatic intrigue. In particular, in 
recent years it has challenged Chinese restrictions on exports 
of various raw materials at the World Trade Organization. A 
U.S. decision to disallow LNG exports would undermine 
Washington's strength when challenging Beijing and when 
promoting open markets more generally.
    Some have gone further and argued that the United States 
should abolish even the current permitting process for LNG 
exports. Doing this, however, would remove valuable U.S. 
leverage in international trade negotiations. Maintaining some 
limited uncertainty about U.S. openness to exports, does create 
useful incentives for other countries to enter Free Trade 
Agreements with the United States.
    Now, what would actually happen if the Department of Energy 
approved a substantial number of export permits? It is entirely 
possible that few or no export facilities would ultimately be 
built and used. Export facilities cost several billion dollars 
each and take years to build, and their economics only work if 
gas prices stay well below overseas ones. Many analysts, 
nonetheless, project that small but nontrivial volumes of U.S. 
natural gas will be exported. Those exports would give large 
LNG buyers, including Korea, Japan, and India, an alternative 
to Middle Eastern and other producers for part of their 
supplies. That would provide those countries some leverage in 
negotiations with the traditional suppliers, who have long 
insisted on rigid contracts that link the price of natural gas 
to the price of oil and that entangled gas trade with 
international relations as a result.
    It would also provide them with some protection from 
economic damage that can result from volatile prices. It is 
unlikely, however, that U.S. LNG exports alone will 
fundamentally transform the highly politicized world of natural 
gas trade.
    The prospect of U.S. LNG exports would also help Europe 
maintain leverage against Russia, even if, as it appears 
likely, little U.S. natural gas is actually shipped to Europe. 
Europeans are increasingly forcing Russia to sell its natural 
gas on transparent market-based terms rather than through 
opaque politically-charged contracts. And even the possibility 
of U.S. exports will help sustain pressure on Russia to sell 
natural gas on European terms.
    Now, analysts have raised two major geopolitical risks that 
might result from natural gas exports. Some argue that the 
United States will be better off using its natural gas to 
replace oil in its transportation system. But the best way to 
make that happen is not to block exports. It is to create 
incentives that directly encourage the use of natural gas in 
our cars and trucks. Similarly, efforts to promote natural gas 
as a lower carbon substitute for coal in power plants, while 
important, would be far better pursued through direct 
incentives to electric utilities rather than through export 
restrictions.
    Others warn that allowing exports would link the price of 
U.S. natural gas to volatile world markets. Such an outcome is 
unlikely, though not impossible. U.S. natural gas prices will 
remain well below overseas ones due to the high cost of 
liquefying and transporting the fuel, and in addition, as long 
as U.S. export facilities are fully utilized, fluctuations in 
overseas prices will not influence the price of natural gas 
within the United States.
    Despite the geopolitical and macroeconomic benefits of 
allowing exports, there remains substantial domestic opposition 
on other grounds. Congress would be wise to address opponents' 
legitimate concerns in order to maximize the odds that the 
country will capture the benefits of allowing exports.
    Two areas are critical here: First, while the impact of 
exports on U.S. natural gas prices would likely be small, it 
could still be significant for low-income consumers. Congress 
can help address this by ensuring that the Low Income Home 
Energy Assistance Program, or LIHEAP, is fully funded.
    Second, natural gas exports would boost U.S. gas 
production. That would be good news for the economy, but it 
would increase environmental risks. The prospect of exports 
makes it all the more important that Congress makes sure that 
strong rules are in place to ensure that shale gas development 
is done safely.
    Members of the subcommittee, I thank you for the chance to 
speak with you today and look forward to answering any 
questions you have.
    Mr. Poe. Thank you, Dr. Levi.
    [The prepared statement of Mr. Levi follows:]
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. Mr. Mallino, you have 5 minutes.

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

    Mr. Mallino. Thank you, Mr. Chairman. I am going to beg 
your indulgences for my loss of a voice. Washington, DC, 
pollen, and a loud, raucous rally yesterday in support of the 
Keystone XL Pipeline has left me a little bit wounded so I 
apologize, but I am going to croak through this as best I can.
    Mr. Chairman, on behalf of the 500,000 members of the 
Labors International Union of North America, I would like to 
thank you and Ranking Member Sherman and the members of the 
subcommittee for allowing us to testify today. As you know, too 
many Americans are out of work. Within the construction 
industry, the unemployment rate reached over 27 percent in 
2010, and joblessness in the sector still remains far higher 
than any other industry with over 1 million construction 
workers currently unemployed in the United States.
    However, one bright spot for LIUNA members has been the 
growth in work hours associated with natural gas pipeline 
construction. As you know, the production of North America's 
natural gas supply has increased dramatically in recent years 
through the development of shale gas reserves, which is largely 
the result of the development of hydraulic fracturing for the 
extraction of natural gas. The development of these domestic 
reserves of natural gas has dramatically increased work 
opportunities for our members, and the continued development of 
these resources will not only lead to job creation and expanded 
economic opportunities for America's workers, but will also 
help put the United States on a path toward energy 
independence.
    Affordable domestic natural gas supplies have the potential 
to be an economic game changer across many sectors of the 
economy. However, in order to realize the full economic 
benefits of the expanded U.S. gas resources, the industry must 
be able to find a price for its product that makes continued 
development profitable.
    In 2012, LIUNA members worked over 11 million hours on 
pipeline projects under the National Pipeline Agreement, and we 
are just one of four crafts that are signatories to that 
agreement. America workers need the access to the good paying 
jobs, family-sustaining wages, and the kind of jobs that the 
oil and natural gas sector provide. In addition to the drilling 
operations to recover the gas, there is extensive pipeline and 
compressor station infrastructure required to move the gas to 
facilities for processing or export.
    Often, in an attempt to kill new domestic energy sources, 
the enemies of job creation call these jobs dangerous and 
dirty. The fact of the matter is, construction is, in fact, a 
dangerous occupation, but when performed by trained workers it 
can be less dangerous. It is also less environmentally damaging 
when done by properly trained construction workers.
    Opponents of the industry also try to disparage these jobs 
by passing a value judgment that holds these jobs to be of 
lesser value because by its very nature, the construction 
project has a completion date and therefore, that individual 
job will come to an end at some point. They call these jobs 
temporary in order to diminish the importance, and they recruit 
others to join with them in a course of negativity in the 
mistaken belief that these jobs have no real value to society.
    The report issued by the Energy Information Administration, 
the statistical arm of the U.S. Department of Energy, predicts 
that shale gas production will continue to increase, while 
expected natural gas consumption and the industry power 
generational sector is to increase significantly.
    In order to find a price point that makes extraction of 
these tight gas reserves economically feasible, gas producers 
must be able to move natural gas to international markets. A 
number of LNG facilities' liquefied natural gas terminals have 
been proposed for construction, which will themselves be 
economic engines that will create good jobs and other benefits. 
These are large-scale projects that cost billions of dollars to 
build and employ thousands of workers for several years during 
the principal construction.
    One of these proposed LNG export terminals, the Jordan Cove 
Energy Project in Coos Bay, Oregon, is expected to be built 
under a project labor agreement which will maximize the quality 
of the jobs for the construction trades on that project. This 
PLA will ensure that the workers on this massive project will 
possess the highest skills and best training while ensuring 
that the workers receive fair wages and working conditions.
    This project is expected to provide millions of work hours 
for the buildings trade crafts and will invest approximately 
$5.7 billion into the local economy. Natural gas development 
also produces needed government revenues at the Federal, State, 
and local levels. The Coos Bay Project is expected to generate 
$20 million in revenue for local and State governments in the 
first 3 years of operation, and $30 million to $40 million a 
year thereafter. These resources can help our State and local 
governments protect their communities from harmful budget cuts 
that have led to layoffs and the elimination of much-needed 
services.
    I will try to wrap up. I am sorry, guys. Responsible 
development of our natural gas resources is essential to the 
United States and is going to fully maximize the economic 
benefits of our oil and natural gas reserves. Best industry 
practices based on innovation and technology, combined with a 
highly-trained, skilled workforce represents an important step 
in addressing public concern. Through our affiliation with the 
Building Construction Trades Department of AFL-CIO, LIUNA is a 
partner of the Oil and Natural Gas Labor Management Committee. 
This joint business and labor committee has developed a set of 
principles that we believe companies engaged in the extraction 
and transportation of natural gas and oil should adhere to. 
They are in my formal submitted record. I will not read them to 
you.
    To be clear, LIUNA is also committed to helping advance 
policies that reduce our greenhouse gas emissions. We believe 
that an aggressive, science-based approach to emissions 
reduction is not only necessary from the perspective of 
achieving a sustainable environment, but that it will, in 
itself, be good for our economy and for working families. 
However, we reject the notion that natural gas resources should 
be abandoned or constrained as a path toward greater 
sustainability. We believe that responsible development of 
natural gas is essential for the future economic prosperity of 
the United States, and we will continue to advocate for 
policies that foster growth in this sector.
    We look forward to working with the members of the 
committee and other policymakers who want to see our economy 
recover and produce American jobs that can foster middle-class 
families. Once again, the laborers thank you for this 
opportunity to testify before you today.
    Mr. Poe. Thank you, Mr. Mallino.
    [The prepared statement of Mr. Mallino follows:]
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Poe. Mr. Ratner.

 STATEMENT OF MR. MICHAEL RATNER, SPECIALIST IN ENERGY POLICY, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. Ratner. Thank you, Chairman Poe, Ranking Member 
Sherman, and members of the subcommittee. My name is Michael 
Ratner, and I am a specialist in energy policy at the 
Congressional Research Service. CRS appreciates the opportunity 
to testify on the important issue of liquefied natural gas 
exports. Additionally, in accordance with our enabling 
statutes, CRS takes no position on any related legislation.
    Prior to the advent of shale gas in 2007, the United States 
was viewed as a growing natural gas importer. Terminals were 
built in the 2000s to import LNG from overseas and prices were 
rising. The success of shale gas production has reversed these 
trends. Prices have come down since peaking in 2008, and the 
U.S. price for gas is lower than other regional markets. 
Natural gas imports are down and LNG imports terminals sit idle 
with many having applied for export permits. This brings us to 
where we are today, weighing the benefits and costs of LNG 
exports. I will touch upon four components of the debate: 
Economic impacts, trade issues, environmental concerns, and the 
Department of Energy's approval process.
    First, all else being equal, LNG exports should raise 
domestics prices because they increase total demand. However, 
whether LNG exports are good or bad for the economy in part 
depends on one's perspective. Most gas producers who have faced 
low domestic prices would like to export to expand their market 
and access higher international prices. Some large industrial 
consumers of natural gas argue that allowing exports will raise 
domestic prices and stifle the economic benefits of having a 
low-cost input.
    For the Federal Government, LNG exports may or may not lead 
to a net increase in Federal revenue. Taxes paid by LNG 
exporters because of higher gas company profits could be offset 
by a decline in taxes paid by large consumers of natural gas 
because of higher domestic prices. Federal royalties would only 
increase if new natural gas production comes from Federal 
lands. Meanwhile, directly taxing exports raises constitutional 
issues. Natural gas is used for three primary purposes: 
Electricity generation, residential and commercial heating, and 
industrial processes. The specifics of each of these market 
segments will determine the effect of LNG exports. For example, 
the price of natural gas is just one component of the total 
cost of residential heating.
    While LNG exports may raise gas prices, new supplies may 
reduce transit costs. In addition to current uses, there has 
been discussion of using natural gas as a transportation fuel. 
Although some progress is being made, it is more a long-term 
prospect because of the infrastructure and technological 
changes that would have to occur. Price is just one factor that 
companies and consumers would consider before investing in 
natural gas-fueled vehicles.
    Second, the decision to permit or restrict LNG exports also 
raises trade considerations. As a member of the World Trade 
Organization, the United States could be subject to cases under 
the general agreement on tariffs' and trades' general 
prohibition against quantitative restraints if exports were 
limited. While certain exemptions from this prohibition may 
apply, export restrictions may put the United States in a 
contradictory position vis-a-vis cases that it has brought to 
the WTO.
    Third, as shale gas came to market, it was hailed as a way 
to reduce emissions from dirtier fossil fuels, but 
environmental concerns were also raised, primarily because of 
the industry process known as hydraulic fracturing or fracking. 
Environmental groups against exports assert that additional 
production from shale for export implies more fracking.
    Finally, to deny an LNG permit to non-Free Trade Agreement 
countries, DOE must determine that exports would not be in the 
public interest. To make its determination, DOE evaluates many 
factors: Domestic need, previously approved capacity, adequacy 
of supply, the environment, geopolitics, and energy security, 
among other things.
    DOE commissioned two studies as part of its evaluation. One 
by the Energy Information Administration on price effects, and 
one by NERA Economic Consulting on macroeconomic impacts of LNG 
exports. Both studies have received praise and criticism by 
various stakeholders. For example, EIA scenarios were viewed as 
unrealistic because of the high volumes considered, but those 
are now well below the level of export applications. NERA's use 
of data from EIA's 2011 Annual Energy Outlook was considered 
dated. The data did not include potential domestic industrial 
demand, nor did it include recent improvements in shale gas 
extraction. However, EIA bases its projections on existing 
policy, technology, and data, not possible changes in any of 
these.
    Despite recent testimony, DOE has not laid out a clear 
timetable for approving pending permits, nor how it weighs each 
input in its decision. Some stakeholders have faulted DOE for a 
lack of transparency.
    Thank you for the opportunity to appear before the 
committee. I would be happy to address any questions you may 
have.
    Mr. Poe. Thank you, Mr. Ratner.
    [The prepared statement of Mr. Ratner follows:]
    
    
    
    
    
    
    
    
    
    
                              ----------                              

    Mr. Poe. I want to start the 5-minute questioning by each 
member. I will start with Mr. Bryngelson. How many jobs will 
the Lavaca Project create?
    Mr. Bryngelson. During construction, it is approximately 
2,500, and in long-term operation, Phase I would be about 200. 
Phase II would double that to about 400.
    Mr. Poe. How long have you been waiting for the Department 
of Energy approval?
    Mr. Bryngelson. We filed in October of last year.
    Mr. Poe. When do you expect a decision? Do you know?
    Mr. Bryngelson. We don't know. We are hopeful soon, but a 
lot of the project is depending on that at this point. We have 
no clear idea.
    Mr. Poe. How much does it cost you a day or a month while 
you wait for that permit?
    Mr. Bryngelson. Well, right now, we are moving through the 
permitting process, so it is not impacting our costs 
specifically. What is impacting us is our ability to secure 
customers, and that could jeopardize the whole project.
    Mr. Poe. What does that mean?
    Mr. Bryngelson. That means if we can't sign up non-free 
trade customers, we don't have customers. We don't have a 
project. And every day that goes by it is harder and harder to 
keep just the baseline spend to get permitting, which over the 
next year is approximately $10 million.
    Mr. Poe. Let me ask you this, and all of the members of the 
panel will weigh in, why does the permitting process take so 
long to get approved by the Department of Energy? How come it 
takes so long?
    Mr. Bryngelson. I wish I had an answer to that question, 
sir.
    Mr. Poe. You don't know. Dr. Montgomery? You are the 
expert. Do you know?
    Mr. Montgomery. No, I don't know what DOE is doing.
    Mr. Poe. Dr. Levi?
    Mr. Levi. I trust that because this is such a new area, 
this country has changed from being very much a consumer into 
also a major energy producer, that it is taking time to analyze 
the cost and benefits and ins and outs, just like this 
committee is. But I agree that time does matter, and that there 
is a limited market, and different companies around the world 
are trying to do contracts, particularly with key buyers in 
Korea and Japan, and so the timing of our approvals will have 
consequences.
    Mr. Poe. How long does it take normally to get a DOE 
approval for a permit?
    Mr. Levi. We don't know because we have had only one 
experience.
    Mr. Poe. And that took how long?
    Mr. Levi. Anyone else know?
    Mr. Poe. No one knows. Mr. Ratner, do you know?
    Mr. Ratner. I would say probably about a year or so. I 
can't remember exactly when Cheniere applied for it. But one 
thing I would also add that I find interesting, I mean, 
everybody, for good reason, is focusing on the DOE process, but 
the FERC process, which also takes over a year to 2 years, 
people aren't complaining about in part because they know the 
FERC process. You know, Excelerate knows what it needs to do to 
apply to FERC in order to move that application along.
    Mr. Poe. Can do both processes move together, or does DOE 
have to finish theirs before FERC starts?
    Mr. Ratner. They can move together.
    Mr. Poe. All right. Let me ask you this, Dr. Levi. When I 
was in India, I talked to the foreign minister. The only thing 
they wanted to talk about was getting natural gas from the 
United States to India. They made it really simple for me; the 
cost of their production and transportation in India is higher 
than for us to produce it in the United States, transport it, 
make a profit, and they still get a good deal in India.
    And the question was, why aren't we exporting natural gas 
to India? Can you help me out with that a little bit?
    Mr. Levi. Well, it will take time to build terminals and 
export to India, but the way you describe the economics is 
correct. Natural gas production in India is expensive. There 
are barriers to production, and so there will be incentives to 
export natural gas to India. It would help them reduce 
emissions relative to building more coal-fired capacity. That 
said, it is not clear to me that it will be an alternative to 
other sources of natural gas. India has rapidly-growing demand 
for energy, and it will probably try to bring in resources from 
wherever it can.
    But there is no doubt that the more we are engaged in a 
positive way with them on natural gas, the more influence we 
will have on the other decisions they make.
    Mr. Poe. Politically, for the United States, wouldn't it 
help the relationship to have India look to the United States 
instead of look to China, or Pakistan, or somewhere else, even 
Russia for natural gas? Would this help us politically with 
this nation?
    Mr. Levi. There is no doubt that being open to natural gas 
exports to India would help the United States politically. 
There is a long history in the U.S.-India relationship, as 
least as the Indians see it, of the United States interfering 
with free trade to India's detriment, and this goes back a long 
way in the Indian political memory.
    So when we talk about trade restrictions on a commodity 
that India cares about, this isn't just an isolated issue, it 
speaks to a broader set of concerns and a broader set of trust 
issues with the United States. So certainly allowing those 
exports would help. Of course, whether natural gas went from 
the United States to India would be the decision of private 
companies based on where they thought the contracts were most 
attractive.
    Mr. Poe. I understand there was a contract signed today 
with India and a Houston-based company for a 20-year contract 
and there is also a contract with a Maryland corporation for 
the same thing.
    Last question. Mr. Ratner, if you could answer really 
quick. The WTO, we have got them sitting over here. Is the 
United States going to be in court if we don't fix this problem 
with the WTO?
    Mr. Ratner. Very possibly. It will depend upon, you know, 
some of the countries that we discussed. I mean, the odds of 
Japan suing us in international court is possible, but how 
likely it would be, you know, remains to be seen.
    Mr. Poe. I hope the Department of Energy knows that that is 
a possibility as well. I now will yield 5 minutes to the 
ranking member, Mr. Sherman from California, who is also the 
timekeeper.
    Mr. Sherman. Of three major fossil fuels, the one that is 
most versatile is petroleum because you can move it from one 
continent to another rather cheaply. We export coal, India and 
China don't really care very much about whether they create 
twice as much carbon for every kilowatt they generate.
    Mr. Ratner, why are you even talking about exporting 
natural gas to China and India when instead, they could 
purchase our coal? That has to relate to the cost of shipping. 
Can you provide some estimates as to what it costs to export an 
MCF of natural gas, that means liquefy it and move it across 
oceans, versus what it costs to move coal that would have the 
same number of BTUs? And if you don't know, just answer for the 
record.
    Mr. Ratner. I am not sure of the cost of shipping coal. I 
know relative to gas, it is a lot cheaper and a lot easier than 
liquefying gas and putting it on a cryogenic tanker which, I 
mean, some of the numbers I have seen to liquefy is about $3 
per thousand cubic feet, and to ship it to Asia would be about 
$2, or $2.50.
    Mr. Sherman. So maybe $6 per MCF. I have no idea. You know, 
coal is heavy. It is not as dense in its energy so I have no 
idea what it would cost, but I know CRS is great at research 
and I know you will get an answer for the record.
    [Material submitted to the subcommittee by Mr. Ratner after 
the hearing follows:]




    Mr. Sherman. We have heard from both Dr. Levi and Dr. 
Montgomery about economic theories. I will just point out first 
that while the economic theory is that free trade works 
perfectly, and will enhance everybody, no one has been able to 
explain why we have a $600 billion trade deficit. It is 
theoretically impossible, and economists are in the same 
position as those aerospace engineers who said we have got a 
great theory, but we can't explain how a bumblebee can fly. 
There is nothing the matter with the bumblebee. And the fact is 
that we do have a huge trade deficit.
    The other thing I will point out to Dr. Levi is, you said 
okay, if we want to adjust for this, we could provide more 
funding for low-income consumers, and we could provide 
incentives, which would mean subsidies for natural gas 
vehicles. We don't have any money. So if we want both vehicles 
and low-income consumers to get cheap natural gas, we are going 
to have to keep natural gas cheap. The other way to do it from 
an economic perspective would be to provide an incentive for 
natural gas vehicles by taxing gasoline. And I see you nodding 
because you are an economist. If you were a political 
consultant, you would not be nodding.
    Mr. Mallino, you talk about jobs, but what we really need 
are good jobs at good wages. You are looking at certain 
applications that have been filed. They are just the tip of the 
iceberg if we open this. With the ones that you are focused on, 
you have got project labor agreements or expect them, so those 
will be good jobs.
    Mr. Mallino. Correct.
    Mr. Sherman. But the vast majority of the focus on where to 
build these facilities, they are all in Right to Work States 
with the exception of Oregon. Can you give us an idea of what, 
you know, what right to work, or what I call right to work for 
less will mean in terms of the wages and working conditions of 
those who work on these projects?
    Mr. Mallino. As you know, Congressman, sometimes we also 
refer to it as a so-called right to work because it is 
everything except for an actual right to work. Right to Work 
States generally have, and I will have to look up the specific 
number, but generally have a wage and benefits scale about 30 
percent less than those States that are not Right to Work 
States. And I will get the specific numbers for you. But there 
have been a number of very good studies that show that in Right 
to Work States workers have a much lower standard of living, 
and wage and benefit package. We like to believe that there 
should be a right to prosperity, not just a right to work.
    Mr. Sherman. Or at least a right to organize according to 
the U.N. Declaration of Human Rights.
    Mr. Mallino. Right.
    Mr. Sherman. Finally, I will point out, because my time is 
nearly expired, that I don't think congressional action just 
opening this will pass by itself through the Senate, but if we 
marry any legislative fix to this to nationwide standards for 
fracking, designed to assure environmental safety, it is much 
more likely to pass.
    I would have said also, perhaps, some revenue from an 
export tax, but unfortunately, the Constitution was written at 
a time when we were worried about the export of cotton and corn 
and seems to have prohibited that. I will go back to my office 
and try to find a loophole in what Mr. Ratner points out to be 
in the U.S. Constitution--not loophole, provision applicable to 
these modern circumstances, and I yield back.
    Mr. Poe. Well said.
    Mr. Levi. Can I briefly address the question of cars and 
trucks because I think it is important.
    Mr. Poe. Okay.
    Mr. Levi. Prohibiting exports and creating new incentives 
to get natural gas for our cars and trucks aren't alternative 
options for achieving the same goal. Prohibiting exports would 
not get a lot of natural gas into our cars and trucks. And we 
do have ways of encouraging natural gas use that don't require 
new spending on the part of government. We are already 
encouraging it through new corporate average fuel economy 
standards. We could further encourage it by modifying the 
advanced biofuel part of the Renewable Fuel Standard which is 
not being met and is repeatedly waived each year in a way that 
encourages the use of gas to liquid fuels.
    So there are creative ways to do this without incurring 
additional debt or having everyone lose their congressional 
seats by trying to pass a gasoline tax.
    Mr. Montgomery. Could I also respond, I think, to a 
question that was addressed to me? I think there is a general 
consensus among economists that we understand exactly where the 
trade deficit comes from. It is the observation of the twin 
deficits, which I, unfortunately, remember going all the way 
back to the 1980s and colleagues at Brookings explaining it to 
me, simply meant that the trade deficit comes from our huge 
budget deficits, that when the government borrows, the 
borrowing leads to a differential between what we are importing 
and what we are exporting.
    Mr. Sherman. Let me just note for the record, when we had a 
budget surplus in the latter years of the Clinton 
administration we had a huge trade deficit, and Japan runs a 
much larger national deficit than we do and they have a huge 
trade surplus. Once again the bumblebee is flying, but the 
theory doesn't work.
    I yield back.
    Mr. Poe. I thank the ranking member. Just to follow up on 
the question to Mr. Mallino, in Texas until recently, until Mr. 
Weber took over some of my congressional area, I represented 
all the energy industry down in southeast Texas. My 
understanding is in the energy industry and Right to Work 
States you have a lot of union workers and you also have 
nonunion workers.
    Mr. Mallino. We do.
    Mr. Poe. I would ask Mr. Ratner, can you find out the 
percentage of union and nonunion workers in the energy industry 
and get back with this committee.
    Mr. Ratner. Sure.
    [Material submitted to the subcommittee by Mr. Ratner after 
the hearing follows:]




    Mr. Poe. All right, thank you.
    Mr. Mallino. Just one. The energy sector is a good sector 
for the employment of union workers, there is no doubt about 
it. One of the reasons why we are here today is because the 
jobs that those energy jobs provide do give our members a 
number of very good, well-paying jobs.
    Mr. Poe. All right. Thank you.
    I am going to yield 5 minutes to the vice chairman, Mr. 
Kinzinger from Illinois.
    Mr. Kinzinger. Thank you, Mr. Chairman.
    And thank you, gentlemen, for being here.
    Illinois is fighting its own issue with the area of 
fracking. We have, I would say, terrible leadership in the 
State of Illinois that is very slow to react to changing 
circumstances, and I think we have a real opportunity to put a 
lot of good folks to work in Illinois and we have a lot of 
laborers in my district, a lot of union members in my district 
that would love the opportunity to be part of this energy 
renaissance. If anybody in Springfield is watching, hopefully 
they will be motivated by this hearing.
    I want to be all in on this. I lean toward favoring this. 
But I do have a couple of questions. And these aren't like a 
lot of times in this when people lead you to answers to make a 
point. These are actual questions I have.
    When we come to a world-priced commodity on this situation, 
right now there is a huge disparity between obviously what we 
are paying for natural gas here and what it is paid for 
overseas. If we increase our ability to export, and over time, 
over the next 10 or 20 years the infrastructure is built up in 
a big way and we can pretty much easily get this, what is to 
prevent our cost of natural gas from being married up and 
priced on the world market and married up with what they are 
paying in Europe and everywhere else?
    I will start with you, Dr. Montgomery.
    Mr. Montgomery. What is going to prevent it is basically 
the cost of transportation. And we see this even in the United 
States where there is a difference of $1 or so between the 
price of gas in Texas and the price of gas in the Northeast, 
and that is actually changing as we have additional supplies 
being produced in the Northeast so that the transportation cost 
is narrowing.
    But unless there is some huge innovation in the 
liquifaction technology, we have a cost of moving the gas by 
pipeline from the wellhead to the liquifaction facility. To 
recover the cost of capital, liquifaction costs several dollars 
a million BTU. It is expensive moving natural gas long 
distances by ship because of the fact that you have to use the 
natural gas for fuel because it is going to boil off from the 
ship.
    But the point is, yes, there will be something like an 
irreducible $6 difference between the United States and the 
countries that it actually exports to because it takes that 
much to cover the cost of getting the gas from one to the 
other.
    Now, if we had no capacity constraints, if we had enough 
capacity to serve all of the needs, we would find there would 
be some convergence, but that convergence would be so that the 
price in the receiving countries and the price in the exporting 
countries differed by no more than that amount. That is, the 
rents that are being sought now by developers who think, hey, I 
can pay all that cost plus make a couple dollars, that would be 
competed away.
    Mr. Kinzinger. So we are limited by our capacity. And so 
again the concern was, though, is what if we get in 10, 20, 30 
years where our capacity is----
    Mr. Montgomery. Even if our capacity is unlimited it will 
still be necessary to pay that cost of shipping the gas.
    Mr. Kinzinger. Gotcha.
    Mr. Montgomery. And the prices can't get any closer than 
that.
    Mr. Kinzinger. Did you want to?
    Mr. Levi. I generally agree with what Dr. Montgomery has 
said. Some of those costs, if there is massive overinvestment, 
can ultimately be written off. Companies can go bankrupt and 
these facilities can still be operated. So in a situation where 
there was massive overinvestment you could have prices come 
closer together than the $6 differential. It is not zero. But 
that is possible. The thing that mitigates against it is that 
these are extremely expensive facilities, they take a very long 
time to build. And that gives a lot of time for them to fail.
    Mr. Kinzinger. Briefly another subject is just simply on 
the national defense side of it. What would this do in Eastern 
Europe if we begin exporting natural gas. Theoretically, some 
of it goes to Eastern Europe. What does this do with Eastern 
Europe, for instance, for their relationship with us versus 
Russia. Does it shift that balance of power at all? I guess I 
will look at you, sir.
    Mr. Levi. I don't think it makes an enormous direct 
difference. I think the bigger question in Europe is whether 
Europeans on their own will be able to negotiate more flexible 
contracts with Russia. And the prospect of U.S. exports will be 
there as a threat if Russia wants to try and push for more 
favorable terms for itself, and I think that does help us and 
it will be appreciated.
    Mr. Kinzinger. And very briefly, Mr. Mallano--did I say it 
right? Mallino.
    Mr. Mallino. It doesn't matter.
    Mr. Kinzinger. Mallino. There you go.
    Mr. Mallino. I butcher your name all the time.
    Mr. Kinzinger. I know. Everybody does.
    Hey, just quickly, you had mentioned jobs in other sectors 
as well. Can you just expand on that a little bit, what it 
means to your folks?
    Mr. Mallino. And part of that is about finding kind of a 
sweet spot. I mean, we recognize that cheap gas can lead to a 
resurgence of manufacturing like we haven't seen, and while 
that will help our brothers and sisters in the manufacturing 
sectors and in those unions, constructing those facilities will 
also help us. And we know that there are a number of projects 
on the books, or at least in the planning phases, hopefully 
they get on the books, to build some new chemical facilities 
and others that we look forward to participating in.
    So literally finding the right price, whether that is 
through market or through whatever, is important because we 
should be able to export gas, but we also need to keep enough 
of it here that we can bring those jobs back. You know from 
your district and your State how important manufacturing jobs 
are. We are construction workers, but we want to see all 
sectors of the economy revitalized by this energy boon. We are 
an all-of-the-above union when it comes to energy. We don't 
think any type of energy should be advantaged over the others. 
We just want to see these jobs come back to the United States.
    Mr. Kinzinger. Thank you. This was helpful.
    And I yield back, Mr. Chairman.
    Mr. Poe. Thank you very much.
    We will now hear from Mr. Vargas from California.
    Mr. Vargas. Thank you very much, Mr. Chairman.
    My question is really about keeping natural gas cheap. I 
liked it when you talked about keeping it cheap. I liked that 
part of it. And that is my concern. If we get the idea to send 
it all overseas and we see it go up two, three, four times 
here, no one will think we were geniuses. No one will be 
thanking us for how quickly we went through this process, they 
will say what the hell did you guys do? Why did you double, 
triple, quadruple the cost of natural gas when it was so cheap? 
And that is my concern. So I want to ask you a little bit about 
that, if I could.
    Now, I know gas a little bit better than natural gas. What 
is the price of gas, a gallon of gas in the United States, 
$3.60, $3.70 cents? Depends on where it is. In California it is 
four bucks because we have more of that EPA stuff. That is the 
truth. But you go to Europe, and how much is it in Belgium for 
a gallon of gas?
    Dr. Levi or somebody who knows that?
    Mr. Levi. I haven't traveled to Belgium recently. It is 
much more expensive because of high taxes on gasoline.
    Mr. Vargas. Right. And in other places also because of 
transportation and other issues you have got gas that is two, 
three, four times as expensive, it seems, as gas here in the 
United States.
    Mr. Levi. We are talking about natural gas now?
    Mr. Vargas. No. No. No. I am talking about gasoline.
    Mr. Levi. Gasoline price differences in different parts of 
the world are primarily due to different levels of taxation on 
gasoline and to some degree due to the environmental 
requirements, just like the difference between California and 
other States.
    Mr. Vargas. But also production. So, for example, in 
Venezuela they are very cheap because that is what keeps that 
government afloat, right, because they have a whole bunch of 
it. And my concern is that right now it seems to be that we are 
producing a whole bunch of natural gas, and I think that that 
is fantastic, and I absolutely believe that we can do this 
safely. I mean, I think if you have unionized labor doing it, 
you know, with the PLA, they always do a good job. I mean, that 
is just the way it is. We develop standards.
    My issue is with the cost, so if you could address that a 
little bit more, because I think it would be a terrible mistake 
if we rush this thing through and all of a sudden we double it. 
I mean, for some States it would be fantastic, I am sure, but 
for my constituents, they wouldn't be so excited about that.
    Mr. Montgomery. If I could just start. I think the primary 
determinant of the cost of natural gas is not going to be 
whether or not we are exporting it. It is the balance between 
supply and demand in the United States. And I agreed with Mr. 
Bryngelson, right now we have a glut of natural gas. We have 
more production capacity and less demand than it takes to 
balance the market.
    And most forecasts that I look at, including the most 
recent ones by EIA, have the price of natural gas going up in 
the United States, say, roughly doubling from its lowest point 
over the next 10 years or so simply because of domestic supply 
and demand, even if we don't allow any LNG exports at all. So 
that is the first point. We are in a time that consumers might 
as well enjoy, but that it is not the way the market is going 
to be over the next 10 years.
    If we allow LNG exports, the exports are only going to 
occur if we have a willing buyer overseas. And I agree with Dr. 
Levi that if we have built lots of excess capacity we might 
find that there is a big demand for our gas. But over the next 
10 years we are not going to have a great deal of capacity. We 
are not going to come close to the 20 TCF or two-thirds of U.S. 
gas production for which applications are in at DOE. The most 
that anyone I have talked to in the industry thinks it is 
feasible to do would be to build maybe a quarter of that, which 
means we might at most be able to export 5 trillion cubic feet 
out of production of 25. That leads to----
    Mr. Vargas. Before I think I may run out of time, let me--I 
like the explanation--but let me make sure everybody agrees 
with you.
    Does anyone disagree that exporting some of this gas is not 
going to cause the price to go up here? Anyone disagree with 
that, or does everyone agree with that? Do you agree?
    Mr. Bryngelson. I agree. I think it is a small enough 
portion of the market you won't see the effect, and you have 
got enough production out there that will ramp up and keep up 
with this. Right now prices are lower than the marginal cost to 
produce on a lot of the wells. You are seeing rig counts drop, 
production drop, and I think the market has got to equilibrate. 
But there is enough supply in the stack out there to meet the 
demand for the exports and the domestic market.
    Mr. Mallino. I was just going to say, Congressman, the one 
concern we have based upon other fights that we have been 
engaged in over job creation is that we know that some of the 
opponents of the export of natural gas don't really care about 
keeping prices cheap. They want to keep prices cheap to strand 
the resource, so that the resource isn't developed. And that is 
our concern from our perspective.
    Mr. Vargas. Okay.
    Mr. Mallino. We believe that natural gas can revitalize the 
industry, but we don't want it so cheap that it doesn't get 
developed.
    Mr. Levi. I think there is no question that prices would be 
slightly higher as a result of exports. If more people want to 
buy the same thing, it gets more expensive. But I don't think 
it is plausible that it would be three or four times more 
expensive because that would raise U.S. natural gas prices so 
much that no one would want to buy it anymore. So for exports 
to continue and drive prices up, U.S. prices can't get too 
high.
    Mr. Poe. The gentleman's time has expired.
    Mr. Vargas. I didn't hear the little buzzer. Sorry about 
that.
    Mr. Poe. We don't have a buzzer. It is on silent when your 
side is talking.
    Mr. Weber, 5 minutes.
    Mr. Weber. Great. All right, I have Freeport LNG and 
Cheniere LNG on the edge of my district, the Gulf Coast of 
Texas. Judge Poe used to have it. Gentleman, which other 
product do we tell we don't want them shipping overseas because 
it might drive our prices up? Is it Apple? Is it Nike? Is it 
Ford? Who do we tell that to?
    Mr. Mallino. We actually bring Apple in from overseas.
    Mr. Weber. Well, they do have some products that they might 
distribute from overseas. The point is whatever the company is, 
I don't think we restrict any of them from sending overseas, do 
we, because it might drive prices up?
    Mr. Bryngelson. Well, here is an interesting thing to look 
at. You can export the natural gas liquids you take out of the 
gas stream without a DOE export. The methane that is left you 
can't export. So to me that is a very odd situation for the 
same gas stream.
    Mr. Weber. Right. And I happen to have a little startup 
company in my district called Dow Chemical, and they have come 
out being opposed to exporting liquefied natural gas. But we 
did sign on a letter that we did support it.
    Mr. Ratner, you made the comments that there were a lot of 
plants sitting around that had been set up to import natural 
gas that were sitting idle now and were regearing or retooling, 
if you will, for exporting natural gas, and they have got 
hundreds of millions, sometimes billions of dollars invested. 
We need to get this process done and over with so that those 
entrepreneurs, those private industries can export that gas.
    And I would submit to you, and you all can argue with me if 
you want, we will go down the line here, that unleashing the 
energy industry would be a way to get more money into our 
economy, to get our economy refueled, no pun intended, and to 
get business going again. Those jobs created, they will have a 
multiplier effect. Talk to your chambers of commerce. They will 
plow money back into the economy. They will be paying taxes. In 
some instances many of those people will be off of the 
assistance rolls, so to speak.
    Would any of you all argue with that? Mister, is it----
    Mr. Bryngelson. Bryngelson.
    Mr. Weber. Bryngelson.
    Mr. Bryngelson. No, I wouldn't argue with that a bit. There 
is quite a bit, all the local industries, local regions will 
benefit from the project.
    Mr. Weber. Okay. Dr. Montgomery?
    Mr. Montgomery. No, I agree completely.
    Mr. Weber. We will go on. I have 2 minutes left. Dr. Levi?
    Mr. Levi. Nationally there is a net benefit. Different 
regions will gain or lose, depending on what they do.
    Mr. Weber. Is it Mallino?
    Mr. Mallino. Yes, sir, we agree.
    Mr. Weber. Great.
    Mr. Ratner. I agree as well.
    Mr. Weber. Glad to hear it. Let the record show it is 
unanimous.
    Now, let me just say that, for Mr. Sherman's benefit, for 
coal, 1.07 pounds yields 1 kilowatt of energy, electricity. For 
natural gas, 0.00798 million cubic feet or 1,000 cubic feet 
yields 1 kilowatt. Residual fuel oil is 0.00184 barrels, it 
yields 0.8--it is 0.8 of a gallon of fuel oil. So there is your 
energy difference when you want to talk about where you get the 
most. I own an air conditioning company so we deal a lot with 
BTUs. When you deal with energy output and you are talking 
about heat content, British thermal units is the heat to raise 
1 gallon of water, 1 pound per hour--1 pound of water, rather, 
1 degree, 1 hour. Natural gas is a great, great fuel source, 
and I think you said that, Mr. Vargas, and we appreciate that.
    So all in all, I think we should be moving toward exporting 
this, freeing them up so that our economy gets moving again. 
Can you give me any overriding economic reasons why we 
shouldn't? And I have got about 1\1/2\ minutes left.
    Mr. Bryngelson. No, sir.
    Mr. Weber. He is easy.
    Mr. Montgomery. It is a very interesting intellectual 
challenge, but no, I can't.
    Mr. Weber. Good.
    Mr. Levi. I can't either.
    Mr. Weber. Great.
    Mr. Mallino. Again, we just want to make sure that there is 
a price point for which we have encouraged domestic 
manufacturing. But we believe that the export and that can be 
done simultaneously with each other.
    Mr. Weber. Great.
    Mr. Ratner. As I said in my statement, I mean, there will 
be winners and losers in this. And so depending upon your 
perspective of where you are sitting will depend upon whether 
or not you support it.
    Mr. Weber. Okay. Thank you. I yield back 47 seconds.
    Mr. Poe. I thank the gentleman.
    If the witnesses would bear with us, I think we are going 
to have another 3 minutes a round for the remaining members if 
they want to stay. Mr. Vargas, if you can stay. So I have a few 
questions as well.
    Mr. Bryngelson, you work in the energy industry. I have 
heard anecdotal stories that the price of gas has gotten so low 
that people who produce, drill for natural gas, have quit 
drilling for gas and they have gone back to drilling for crude 
oil. What is your impression of that concept? Is that happening 
or not?
    Mr. Bryngelson. Well, exactly what I hear in the industry 
is that they won't drill for dry gas. Now, some of the wet gas 
where they can pull the liquids, your ethanes, your propanes, 
your butanes and pentanes where there is more value, they will 
drill those, but the natural gas price now is not enough to 
encourage dry gas drilling.
    Mr. Poe. All right. My next question is, started out 
talking about the Department of Energy. What shall we do to 
move this process along? Suggestions?
    Mr. Bryngelson. Well, I am a firm believer, and we saw this 
with the regasification projects looking to import, that the 
market is going to decide on these. We have seen this in other 
regions. Australia is an excellent one where you have multiple 
projects proposed. Each one gets incrementally more expensive 
than the last until you get to an economic indifference point.
    That is what is going to happen here. You won't have an 
infinite number of these plants built at the same level. 
Liquefaction may cost $3.00 on the first plant, it is at $3.10, 
$3.50 on the next, until you get to a point where the cost of 
liquefaction doesn't make sense and the market will say enough.
    The problem is you can't predict which of these projects 
will go forward so you can't really pick the winners or losers. 
The market will ultimately decide. We saw that happen on the 
regasification side. Companies ended up with stranded assets 
that aren't being used. But those were on entrepreneurs, 
private industries. They didn't hit the ratepayers. Now they 
are trying to be reused.
    So that is clearly my view on how this is going to work out 
and what the DOE needs to say is it is a market test.
    Mr. Poe. And a political question, Mr. Levi. Back in 2009, 
I think it was, the Russians shut off the gas to the Ukraine. I 
noticed it when I was there for the 13 days. I quickly left. It 
got cold in January. The concept, political economics if I can 
use that phrase, of expanding our natural gas resources to 
other countries, including Europe, does that help us 
politically, like the Ukrainians and our relationship with the 
former Soviet republics?
    Mr. Levi. It certainly does help us. Anything that gives 
consumers that we are friends or allies with more options in 
dealing with their traditional suppliers that use natural gas 
to exert political leverage helps them, and if they see us 
helping them, they tend to appreciate that. So I think it is a 
pretty straightforward equation on that front.
    Again, I don't think it decisively changes things. The 
biggest change we have seen is that the United States is not an 
importer. As a result, big producers, Qatar in particular, have 
had surplus gas, they have dumped it on to the European market, 
and given our European friends and allies more options with 
Russia. Our entering the LNG export market would help continue 
that trend, but the big stimulus has already happened in a 
significant way.
    Mr. Poe. Very briefly, Mr. Ratner.
    Mr. Ratner. Sir, there are just two points I would make. 
One is Europe has a lot of LNG import capacity. They use it to 
meet their peak demand in the winter, but they don't have a lot 
of storage, so they can't take in the gas during the rest of 
the season. So it is hard for them to necessarily use LNG to 
counter the Russians completely.
    Mr. Poe. Thank you.
    Mr. Bryngelson. Mr. Chairman, would you indulge me for a 
second because I have a good bit of information on this. Our 
company was set up to find new markets for liquefied natural 
gas and we focused on Europe and Gazprom here. And that is one 
small bit of the equation. Right now we are developing projects 
to bring LNG into Pakistan, Egypt, Indonesia, Bahrain. We are 
working on building one in the Emirates. We have a project in 
Kuwait where we are actually bringing LNG into these countries 
from other sources, from Nigeria, from Trinidad. It could be 
the U.S.
    And these aren't theoretical. These are projects that exist 
today. Twenty-five percent of the gas on a cold winter day that 
goes into Argentina flows across our ships, about the same on 
our largest vessel we have in Brazil. We have a project in 
Israel. As I said, Kuwait. We have one in the U.K., we had two 
in the U.S.--one we have shut down. But our list goes on from 
here. There are markets out there we are developing and it is 
other peoples' LNG.
    And one of the things we try to do is to see ways we can 
get the U.S. behind us supporting our push for a U.S. company 
going in and keeping things happening. Pakistan. We would love 
to bring LNG there and not have the Iranian pipeline built. 
That could easily be U.S. LNG going in there.
    So these aren't theoretical markets. These are real markets 
we are developing today.
    Mr. Poe. Thank you.
    I yield to the ranking member.
    Mr. Sherman. Mr. Bryngelson, you may have misspoken if you 
said you were going to import natural gas to Kuwait.
    Mr. Bryngelson. We have actually been importing. This is 
our fifth year of LNG imports.
    Mr. Sherman. Of taking natural gas, and instead of piping 
it from Qatar you are liquefying it and then taking it over to 
Kuwait?
    Mr. Bryngelson. In our case, for that process, we are not 
liquefying, but our vessels deliver regasified LNG into Kuwait.
    Mr. Sherman. The idea of carting coals to Newcastle is 
illustrated here. It surprises me that Kuwait simply wouldn't 
use petroleum to meet its energy needs. They seem to have a lot 
of it. That is an idiosyncrasy that I just want to----
    Mr. Bryngelson. Certainly. Certainly I can tell you exactly 
why they do it, though.
    Mr. Sherman. Now, the other thing I will kind of disagree 
with you on is, this is conjecture, and that is you put forward 
the idea that the cost of liquification would go up with each 
new plant. It is the experience of most of us that as new 
technologies are developed costs go down, that the tenth plant 
built in the United States will be better designed and have 
better technology. I can't see a reason why a plant built 10 
miles away from another plant is going to have higher costs 
when it has all the experience of the older plant.
    I want to get to just nail down some numbers here. Mr. 
Ratner, what is the cost per MCF in Texas or the hub of natural 
gas. What is the price now?
    Mr. Ratner. The Henry Hub right now I think is about 4-
something.
    Mr. Sherman. 4-something. Now, we have heard testimony here 
that the effect of exporting would be to increase that by 
between 50 cents and $1. Dr. Montgomery, Dr. Levi, I think that 
is consistent with your testimony. You can just nod or let me 
know.
    Mr. Levi. At the high end.
    Mr. Sherman. Okay.
    Mr. Levi. I think we don't know how much capacity will be 
built.
    Mr. Sherman. So if we are going to go back to our 
constituents, it is 50 cents or $1, although it is really not a 
quarter of the cost they are paying, because most of what they 
are paying is for the shipping, the billing process, the 
utility, et cetera.
    Mr. Levi, if it was $1 per MCF, on a basis of $4, what am I 
going to pay extra for cooking, 10 percent more or 20 percent 
more?
    Mr. Levi. I will be pleased to do the math and get back to 
you.
    [The information referred to follows:]
  Written Response Received from Michael A. Levi, Ph.D., to Question 
         Asked During the Hearing by the Honorable Brad Sherman
    You are correct: the ultimate impact on delivered natural gas 
prices would likely be 10 percent or less.

                               __________
    Mr. Sherman. That really is a question about what 
percentage of what I pay my gas company is for the gas at the 
Texas price and what percentage--I don't know if Mr. Ratner----
    Mr. Levi. I can give you one estimate from a study that I 
published last year looking at what would happen to household 
bills if prices went up by $1, and what I found was that for 
the lowest 10 percent of household income earners, it would 
increase annual bills by about $50 a year if you combined 
electricity and home heating costs, and for sort of the median 
user it would be about $100 a year at that upper range.
    Mr. Sherman. And those median users tend to live in the 
colder parts of America where an awful lot more natural gas is 
used. And I don't think it would be that high in our area. And 
then I think the testimony has been that the cost to liquify 
and ship combined is roughly $6 an MCF, is that correct? I am 
seeing one panelist nod.
    Mr. Bryngelson. Yes.
    Mr. Sherman. I see another. Okay. So basically our 
manufacturers would have a $6 cost advantage on a product that 
costs $4, so they would be paying less than half of what the 
rival manufacturer would pay.
    Finally, and I know nobody has commented on this, when 
fracking technology hits the Eurasian landmass, is there going 
to be a lot more natural gas there so they won't need ours? Dr. 
Montgomery?
    Mr. Montgomery. I spent the beginning part of last week at 
a conference that was dealing exactly with this issue, and I am 
not sure I would call it a consensus, but the strong opinion of 
geologists and production companies and oil field services 
companies was not likely; that China has a very different 
kind--I mean, you can call it shale, but shale covers a 
multitude of sins--that it is a very different kind of resource 
than the U.S. There has only been, like, 20 wells punched there 
into shale to test it. And so the opinions ranged from we 
simply don't have any evidence that it is there to what we do 
know----
    Mr. Sherman. That is China. Russia already creates a whole 
lot of natural gas. When they get our fracking technology, can 
they double or triple their production?
    Mr. Montgomery. Russia, less clear. They apparently do have 
resources that are susceptible to fracking.
    Mr. Sherman. Okay. I yield back my negative time.
    Mr. Poe. Mr. Weber, do you have some more questions?
    Mr. Weber. I do. And I am sorry, I never turned my mike 
off.
    China, you mentioned 20 holes, Dr. Montgomery. I have heard 
that China is beginning to discover shale plays out in the 
western part of China but that they don't have infrastructure 
out there and it is not near their population centers. So their 
challenge is to be able to get that infrastructure in place and 
to get that natural gas to where the people can use it as 
quickly and as affordably as possible.
    What kind of window do we have for our exporters to really 
get out there and seize on this market opportunity? Would you 
say 1 year, 2 years, 3 years, 8 years? Any guesses, Mr. 
Bryngelson?
    Mr. Bryngelson. Well, my view on timing is not so much 
driven by the shale gas plays because a lot of the customers we 
deal with, potential customers, are looking for diversity of 
supply just as much as they are anything else in sourcing from 
the U.S. I think it is more of an issue of how quickly the 
other projects move along, and our biggest competitive threats 
are places like Mozambique and Tanzania with large finds there 
and the Eastern Mediterranean. So in my view this is something 
in the next year to 18 months this gets decided, if not before 
that. So we don't have a lot of time.
    Mr. Montgomery. In our analysis we did not include a lot of 
increased demand for gas from China, so I guess in that sense 
we were assuming that China would in one way or another either 
satisfy its needs or be able to get gas more economically from 
elsewhere. So I am not sure that that is the market that is 
going to be driving the growth of U.S. exports.
    Mr. Weber. You don't think it plays.
    Mr. Levi. I tend to agree Japan and Korea are more likely 
large markets. No one is going to build a multibillion-dollar 
facility on an expectation that they will make money for a year 
or 2. If they are doing it, it is because they hope to make 
money over a decade or more.
    Mr. Weber. Well, and supply their people with gas, 
obviously.
    Mr. Levi. Yes. And so the focus will be on this long-term 
payoff. The near-term question is, can you get those Japanese 
and Korean contracts, because for a lot of producers that is 
what their bankers want to see.
    Mr. Weber. That is the window.
    Mr. Ratner?
    Mr. Ratner. The only thing I would add regarding China, I 
mean, they are the only country that I have heard could rival 
the U.S. as far as quantity, but getting the gas out is going 
to be a lot more difficult.
    Mr. Weber. That is their challenge.
    Mr. Ratner. Yeah. And besides the infrastructure, there is 
no water out in western China to frack.
    Mr. Weber. All right. Thank you. I yield back.
    Mr. Poe. Thank the gentleman.
    Mr. Vargas from California.
    Mr. Vargas. Mr. Chairman, thank you very much. Now that I 
get to go after my good friend from Texas, I can brag about a 
California company in San Diego, and that is Sempra, Sempra 
Energy, a very responsible company, very responsible both 
environmentally and I think with its workers it has done a 
pretty good job. And I know that they are looking at this 
opportunity, and I got a chance to speak to them about it.
    The issue, though, that now does concern me is the math, 
the math part. And the reason the math concerns me is because 
it doesn't get really cold in California but it gets really 
hot, and as my friend Sherman told me, of course, we use that 
to fire up our electrical plants and produce energy.
    So I think that is one of the things that I think we have 
to nail down the math to figure out how much is it going to 
cost us if we do export it. I mean, there seemed to be some 
agreement there are going to be winners and losers. I just hate 
to be on the losing side of things. When I was in California 
the Democrats were on the winning side. Here we are on the 
losing side. So that is why it makes a difference.
    And I would like to know the math a little bit, and I hope 
you guys do work on that. Thank you.
    Mr. Montgomery. Could I just comment on that, because we 
did have a lot of math in our report. And I think you are 
absolutely right that natural gas prices are very important for 
electricity prices in California. Pretty much natural gas 
prices California electricity. But we did take that in account, 
at least in the work that we were doing because we have a 
comprehensive model.
    But I think I did a disservice in the way I wrote the 
report we did for DOE in talking about winners and losers in 
terms of consumers and producers, because it is always going to 
look like there is a loss if you only look at one slice of the 
economy whenever you are talking about a trade issue, because 
the benefits that we get from trade are those that come from 
our export earnings, but they are also because those mean that 
we can import more things that we can----
    Mr. Vargas. You know, I am familiar with that. I went to 
school in Boston, I went to law school, and I got a chance to 
go to Worcester, and they would probably argue that some of the 
exports there hurt them because they had all those facilities. 
If you go there now there are old brick buildings with nothing 
in them.
    Mr. Montgomery. Well, that is another case. But the point 
being that we need to look at a comprehensive picture. My 
opinion now is that the winners and losers are shareholders in 
companies that are going to be producing natural gas, building 
the infrastructure in natural gas, and the workers in those 
industries. The losers are largely going to be shareholders in 
some chemical industries and some other energy-intensive 
industries. Somebody who has a Standard & Poor's 500 portfolio 
is going to come out ahead because quantitatively the gains on 
the gas side are going to be----
    Mr. Vargas. Right. I know my time is probably over. But it 
is the $100 more per resident in California that I am concerned 
about.
    Mr. Montgomery. Yes, but a lot of those California 
residents are going to be participating in their other sources 
of income in the gains that come from trade. That is the 
picture that needs to go together.
    Mr. Ratner. If I could add just one quick comment to that, 
one thing to keep in mind, whether exports are allowed or not--
well, if exports aren't allowed and the manufacturing 
renaissance happens, that will be an additional source of 
demand which will also drive domestic prices up. So there is no 
reason necessarily to believe that if we don't allow exports 
that prices are going to stay low. There have been a lot of 
projects that have been announced and if those get built the 
increase in demand will also raise prices domestically.
    Mr. Vargas. Thank you, Mr. Chairman. I know I went over. 
Thank you, sir.
    Mr. Poe. I thank the panelists for being here--your 
information was very valuable--and also to our committee 
members. So the committee is adjourned. Thank you very much.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
                                     

                                     

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