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



         H.R. 6, THE DOMESTIC PROSPERITY AND GLOBAL FREEDOM ACT

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 25, 2014

                               __________

                           Serial No. 113-129


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


                                   ______

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee          JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi            Islands
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BILL CASSIDY, Louisiana              JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
CORY GARDNER, Colorado               BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois             JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

                                 7_____

                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
RALPH M. HALL, Texas                 JERRY McNERNEY, California
JOHN SHIMKUS, Illinois               PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania        JOHN A. YARMUTH, Kentucky
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas            GENE GREEN, Texas
ROBERT E. LATTA, Ohio                LOIS CAPPS, California
BILL CASSIDY, Louisiana              MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas                    JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia     DORIS O. MATSUI, California
CORY GARDNER, Colorado               DONNA M. CHRISTENSEN, Virgin 
MIKE POMPEO, Kansas                      Islands
ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         JOHN D. DINGELL, Michigan (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)    HENRY A. WAXMAN, California (ex 
                                         officio)

                                  (ii)
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     2
Hon. Cory Gardner, a Representative in Congress from the State of 
  Colorado, opening statement....................................     6
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     8
    Prepared statement...........................................     9
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     9
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................    10
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    10
Hon. Jerry McNerney, a Representative in Congress from the State 
  of California, opening statement...............................    11
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, prepared statement......................................   144

                               Witnesses

Paula Gant, Deputy Assistant Secretary for Oil and Natural Gas, 
  Office of Fossil Energy, Department of Energy..................    12
    Prepared statement...........................................    14
    Answers to submitted questions...............................   145
Anita Orban, Ambassador-at-Large for Energy Security, Ministry of 
  Foreign Affairs, Hungary.......................................    33
    Prepared statement...........................................    35
James Bacchus, Chair, Global Practice Group, Greenberg Trauig LLP    46
    Prepared statement...........................................    49
David G. Schryver, Executive Vice President, American Public Gas 
  Association....................................................    58
    Prepared statement...........................................    60
    Answers to submitted questions...............................   155
Kenneth H. Ditzel, Principal, Charles River Associates...........    80
    Prepared statement \1\.......................................    82
    Answers to submitted questions...............................   157
W. David Montgomery, Senior Vice President, NERA Economic 
  Consulting.....................................................   102
    Prepared statement \1\.......................................   105
    Answers to submitted questions...............................   162

                           Submitted Material

H.R. 6, the Domestic Prosperity and Global Freedom Act, submitted 
  by Mr. Whitfield...............................................     4
Letter of March 24, 2014, from Paul N. Cicio, President, 
  Industrial Energy Consumers of America, to Mr. Whitfield and 
  Mr. Rush, submitted by Mr. Rush................................   139

----------
\1\ Additional supporting documents are available at http://
  docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=101953.

 
         H.R. 6, THE DOMESTIC PROSPERITY AND GLOBAL FREEDOM ACT

                              ----------                              


                        TUESDAY, MARCH 25, 2014

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:04 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Ed 
Whitefield (chairman of the subcommittee) presiding.
    Members present: Representatives Whitfield, Hall, Shimkus, 
Terry, Burgess, Latta, Cassidy, McKinley, Gardner, Pompeo, 
Kinzinger, Griffith, Barton, Upton (ex officio), Rush, 
McNerney, Tonko, Green, Doyle, Barrow, Christensen, Castor, and 
Waxman (ex officio).
    Staff present: Nick Abraham, Legislative Clerk; Gary 
Andres, Staff Director; Charlotte Baker, Deputy Communications 
Director; Sean Bonyun, Communications Director; Allison Busbee, 
Policy Coordinator, Energy and Power; Tom Hassenboehler, Chief 
Counsel, Energy and Power; Jason Knox, Counsel, Energy and 
Power; Ben Lieberman, Counsel, Energy and Power; Brandon 
Mooney, Professional Staff Member; Chris Sarley, Policy 
Coordinator, Environment and the Economy; Jeff Baran, 
Democratic Senior Counsel; Alison Cassady, Democratic Senior 
Professional Staff Member; and Caitlin Haberman, Democratic 
Policy Analyst.
    Mr. Whitfield. I would like to call the hearing to order 
this afternoon. The topic of the hearing this afternoon is on 
H.R. 6, The Domestic Prosperity and Global Freedom Act. And at 
this time I would recognized myself for 5 minutes opening 
statement.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    And, as I said, we are excited about this hearing today. 
This is on the legislation introduced by our colleague Cory 
Gardner of Colorado. One of the subject matters that is really 
being discussed throughout the world today is the abundant 
energy supply in America, and, of course, one reason for that 
is the recent finds in natural gas in America. And we believe 
that, while we need further discussion on it, of course, that 
the export of liquid natural gas, not only would it be 
beneficial to our allies in Europe who find themselves 
dependent on expensive natural gas coming from Russia, but it 
would also be beneficial to our own economy because of the low 
cost of natural gas. And with the expansion of infrastructure 
to get that natural gas to market, it is going to create a lot 
of jobs. Another benefit from the export of liquefied natural 
gas would, of course, be to improve our trade account deficit, 
which has been negative for many years.
    And so, despite all of these benefits, though, the current 
process for approved LNG exports is very slow and 
unpredictable. Just yesterday the DOE did approve an 
application to export LNG from the Jordan Cove terminal in Coos 
Bay, Oregon. This marks the seventh application to be approved 
by DOE, but there are still over 20 applications pending. While 
the world waits for natural gas from America, a backlog of 
applications to export languishes at the Department of Energy. 
Now, we also understand that getting the permit approved at DOE 
is just the beginning. You still have to go through FERTH, the 
environmental process, so it is going to take a while. But this 
is an important development for America. We believe that it is 
important for the entire world.
    And at this time I would like to yield the balance of my 
time to the author of this legislation, Cory Gardner of 
Colorado.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    This subcommittee has spent a great deal of time analyzing 
the impact of the Nation's oil and natural gas boom. One 
recurring theme throughout our work is that Federal policy has 
not yet adjusted to the new reality of American energy 
abundance, and in fact Obama administration red tape often 
stands in the way of the potential benefits of the energy boom. 
This is clearly the case with regard to the administration's 
barriers to natural gas exports, which is why my friend and 
colleague Cory Gardner has introduced H.R. 6, the ``Domestic 
Prosperity and Global Freedom Act,'' which would facilitate the 
export of natural gas.
    According to the Energy Information Administration, 
America's natural gas output has been rising since 2006. EIA 
projects the increases to continue through 2040, and expects 
domestic production of natural gas to remain well above 
domestic demand. And at the same time that we have this natural 
gas surplus, many of our allies round the world urgently need 
additional natural gas supplies.
    The case for mutually beneficial trade in liquefied natural 
gas (LNG) is a strong one. This was the conclusion I drew from 
our two hearings on energy exports, as well as our October 10, 
2013 forum that invited representatives from 11 foreign 
governments to discuss their perspectives on U.S. LNG.
    At the forum, we had the opportunity to hear from three 
European allies--Hungary, Lithuania, and the Czech Republic. 
All three face the difficulties of being reliant on Russia for 
natural gas. In particular, they explained that they bear the 
brunt of Russian economic and political pressure backed up by 
the threat of raising prices or even cutting off gas supplies.
    Our European allies expressed a strong interest in being 
able to import LNG from the U.S. They stressed that even 
relatively modest volumes of U.S. LNG reaching the European 
market can greatly reduce Russia's leverage. They also noted 
that the mere signal that America is serious about natural gas 
exports would immediately strengthen their negotiating 
position, long before the first LNG shipment goes out. This 
subcommittee is grateful to Anita Orban, Hungary's Ambassador-
at-Large for Energy Security, for participating in that forum 
and for appearing before us again today.
    And I might add that our efforts to better understand the 
geopolitical benefits of U.S. LNG exports were underway well 
before the current crisis in the Ukraine erupted. But the 
Ukraine situation further underscores those benefits.
    There is no question that American LNG exports would be 
great news for our allies in Europe as well as other nations 
around the world that want to buy our LNG. But it is also great 
news for our economy here at home. A study conducted for the 
Department of Energy concluded that LNG exports would provide 
net benefits for American consumers and the economy overall. A 
subsequent update of that study confirmed those benefits and 
also highlighted the net jobs created by LNG exports. I am 
happy to have the lead author of these studies, David 
Montgomery, appearing before us today.
    Despite all of these benefits, the current process for 
approving LNG exports is very slow and unpredictable. Just 
yesterday, the DOE approved an application to export LNG from 
the Jordan Cove Terminal in Coos Bay, Oregon. This marks the 
7th application to be approved by DOE, but there are still over 
20 applications pending. While the world waits for natural gas 
from America, a backlog of applications to export languishes at 
the Department of Energy. H.R. 6 cuts the red tape, approves 
the pending applications, and provides future applicants with a 
much more reasonable process.
    U.S. LNG exports would be an economic success story and a 
foreign policy success story, and would come at a time where 
the Nation could use a lot more of both.

    [H.R. 6 follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. And at this time I would like to yield the 
balance of my time to the author of this legislation, Cory 
Gardner of Colorado.

  OPENING STATEMENT OF HON. CORY GARDNER, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Gardner. I thank the gentleman. Thank you, Chairman, 
for this hearing today on H.R. 6, The Domestic Prosperity and 
Global Freedom Act. I would also like to thank Representative 
Tim Ryan and all of the Members who have chosen to co-sponsor 
this legislation. This bill that I have introduced is short and 
straightforward. It grants approval for completed LNG export 
applications that are currently languishing at the Department 
of Energy, and would modify the standard of review for future 
export applications by shifting the benchmark from free trade 
agreement countries to World Trade Organization member 
countries. Rarely in Congress do we get chances to pass 
legislation that creates economic opportunities here at home, 
strengthen and help our allies around the globe, weaken our 
enemies, and not spend the American taxpayers' money all at the 
same time. Rarely do we even get to do one of those at the same 
time. But H.R. 6 gives us a chance to do all of these.
    I want to first give praise to what has brought us to the 
point of even being able to discuss selling some natural gas to 
other countries. American ingenuity has propelled the United 
States to the number one natural gas producing nation in the 
world. The shale gas revolution has provided enormous economic 
benefit to our Nation. With the ability to sell some of the 
natural gas we produce, we can see even more economic benefit.
    To paraphrase Pulitzer Prize-winning author Dr. Daniel 
Yergin, when he testified before this subcommittee last year, 
the United States is demand constrained, not supply 
constrained, when it comes to natural gas. In my home State of 
Colorado, on the western slope, the Peyonce Basin has been 
suffering due in part to the overabundance of natural gas 
supplies, which are saturating the market. Expanding the market 
for U.S. natural gas will encourage greater investment and new 
production.
    H.R. 6 also offers immense geopolitical benefits. The near 
monopolistic control Russia has on the LNG market in Europe has 
given them immense power, and reforming the LNG export process 
would send an immediate signal to the rest of the world that 
would help check Russia's aggression. But for its natural gas 
and oil production and exports, Russia's economy is no match 
for our industrial know-how and ingenuity.
    It is this American ingenuity that discovered there is 
enough natural gas to use domestically and to export to our 
allies around the globe. We have reached a turning point in 
this country that is moving towards energy independence. We no 
longer need to be at the mercy of nations that mean us harm. 
Being less dependent on foreign energy keeps our troops at 
home, keeps them safe, and keeps them from serving abroad. 
Energy produced here at home and sent overseas means we are 
sending energy, and not our troops.
    It is a false dichotomy to say that we must choose between 
allowing for the sale of natural gas to other nations or 
keeping it here. We will have enough for both for generations 
to come. There are some that are opposing LNG exports who still 
cling to the failed notion of Nixon era price control efforts. 
Like the leisure suit and eight-track player, it is time to let 
it go. We have heard from former Senator Jay Bennett Johnston 
and others that history is littered with the failed policies to 
control prices. It is time for us to move forward.
    I want to thank those that will be testifying here today, 
and I look forward to this debate. Thank you, Mr. Chairman. I 
yield back.
    Mr. Whitfield. Gentleman yields back. At this time 
recognize the gentleman from Illinois, Mr. Rush, for a 5-minute 
opening statement.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Mr. Chairman, for holding 
today's hearing on the potential impacts of exporting liquefied 
natural gas to overseas markets, as laid out in H.R. 6. Mr. 
Chairman, I look forward to today's hearing of experts, 
stakeholders, to clarify questions I have regarding the 
consequences of exporting LNG, and the impact it may have on 
several key issues that I am concerned about, including 
domestic natural gas prices, the potential for jobs, the effect 
on our manufacturing base, as well as the impact on the U.S. 
trade balance.
    As I understand the issue, Mr. Chairman, proponents of 
exporting natural gas say that doing so will lead to a net 
positive impact on American jobs, on the American economy, and 
the U.S. trade balance. Supporters also contend that exporting 
LNG to Japan, South Korea, Europe, and other U.S. allies will 
lower their natural gas prices, and provide them with leverage 
in negotiating with other natural gas suppliers, such as 
Russia. Opponents, primarily from within the U.S. manufacturing 
sector, disagree with those conclusions, and argue that 
exporting LNG will raise natural gas prices in the U.S., harm 
domestic manufacturing in energy intensive industries, and also 
hurt other natural gas consumers.
    The underlying bill, H.R. 6, will amend the Natural Gas Act 
to increase the number of destination countries for LNG exports 
for which DOE is required to deem applications consistent with 
the public interest. Under current law, DOE is required to 
grant applications for LNG exports to the 20, I want to 
emphasize that, to the 20 countries that have free trade 
agreements with the U.S. However, H.R. 6 will instead require 
DOE to approve ``without modification or delay'' applications 
for LNG exports to all 159 members of the WTO, including all 
likely importers of LNG, such as China, India, Japan, and 
European countries. While increasing our exports of LNG may 
have positive impact on our economy, I believe that it is 
imperative that we do so in a manner that is both reasonable, 
that is safe, and that is truly in the public's interest, Mr. 
Chairman.
    Mr. Chairman, today I am eager to engage our panel of 
witnesses to gain more insight into both the impacts of 
exporting LNG generally, as well as to learn more about the 
effects that H.R. 6 will have specifically. With an abundance 
of natural gas domestically, due to our technological advances, 
including hydraulic fracturing and horizontal drilling, it is 
important for the members of this subcommittee to fully 
understand the consequences of increasing exports, and the 
impact that will have on our consumers, our manufacturing base, 
and our economy as a whole.
    So I look forward to today's witnesses on this important 
matter. And with that, Mr. Chairman, I yield back the balance 
of my time.
    Mr. Whitfield. Thank you, Mr. Rush. And at this time I 
would like to recognize the chairman of the full committee, Mr. 
Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. And before I 
start, I just want to welcome back Ranking Member Rush. I know 
his family has experienced some real health concerns, and you 
have been out of the saddle, and we really do welcome you back, 
so good to see you.
    Three weeks ago the House overwhelmingly, rightly so, 
passed a billion-dollar loan guarantee aid package for Ukraine. 
And today the House Foreign Affairs Committee is marking up yet 
another package of support as Russia's aggression continues. In 
this committee, we would debate on a bill that would help not 
only Ukraine, but literally every other Eastern and Central 
European Country, as well as other allies in Asia, and around 
the world, who are dependent on Russia's natural gas. And 
although passage of H.R. 6, The Domestic Prosperity and Global 
Freedom Act, won't certainly immediately turn on the spigot of 
American gas to Ukrainian or Hungarian homes overnight, it will 
indeed send a message, the right message, and a very powerful 
signal.
    The U.S. will be well positioned as a global energy 
superpower. We have the resources, the expertise, and the 
technology to deliver growing amounts of our domestic energy 
bounty to the market in the years and decades to come. 
Increasing exports would also result in the flow of billions of 
dollars into the United States economy. We can do that with 
this bill.
    This committee has an extensive record on the issue of LNG 
exports, including multiple hearings, an international forum, 
and a comprehensive report. And with continued technological 
innovation and access to production, a diverse electricity 
portfolio that indeed keeps all fuel sources in the mix, and a 
commitment to new infrastructure to get surging supplies to 
needed areas of demand, America has the ability to deliver a 
natural gas supply well in excess of our domestic needs. And by 
putting our extra natural gas capacity to use, by entering the 
global marketplace, the U.S. can supplant the influence of 
other exporters, like Russia, while strengthening ties with our 
allies and trading partners around the world. Overall, U.S. 
natural gas exports truly offer this win-win scenario.

    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Three weeks ago, the House overwhelmingly passed a billion-
dollar loan guarantee aid package for Ukraine, and today the 
House Foreign Affairs Committee is marking up another package 
of support as Russia's aggression continues. In this committee, 
we begin debate on a bill that would help not only Ukraine, but 
every Eastern and Central European country, as well as other 
allies in Asia and around the world who are dependent upon on 
Russian natural gas. Although passage of H.R. 6, the Domestic 
Prosperity and Global Freedom Act, certainly won't turn on the 
spigot of American gas to Ukranian or Hungarian homes 
overnight, it will send a clear and powerful signal. The U.S. 
will be well positioned as a global energy superpower. We have 
the resources, the expertise, and the technology to deliver 
growing amounts of our domestic energy bounty to the market in 
the years and decades to come. Increasing exports would also 
result in the flow of billions of dollars into the U.S. 
economy. We truly can do well and do good with this bill.
    The committee has an extensive record on the issue of LNG 
exports, including multiple hearings, an international forum, 
and a comprehensive report. With continued technological 
innovation and access to production, a diverse electricity 
portfolio that keeps all fuel sources in the mix, and a 
commitment to new infrastructure to get surging supplies to 
needed areas of demand, America has the ability to deliver a 
natural gas supply well in excess of domestic needs. By putting 
our extra natural gas capacity to use by entering the global 
market, the U.S. can supplant the influence of other exporters 
like Russia while strengthening ties with our allies and 
trading partners around the world.
    U.S. LNG would fight back against Russia in two ways. 
First, by providing more natural gas to the global market, it 
would reduce the price Russia can get away with charging. And 
second, by providing our allies in Europe with an independent 
source of natural gas, it would limit Russia's political 
leverage over these nations. It is highly unlikely that the 
current crisis in Ukraine will be the last time Putin tries to 
bully a neighboring country.
    While the geopolitical benefits of LNG exports are 
substantial, the economic benefits alone should make H.R. 6 a 
no-brainer. Free trade strengthens the U.S. economy, and 
natural gas exports are no exception.
    H.R. 6 is a net jobs creator, including the jobs 
constructing and running the LNG export facilities as well as 
the additional energy industry jobs as natural gas producers 
expand their output to meet the increase in demand. These 
benefits are on top of the indirect jobs created as the 
billions in export revenues work their way through the economy.
    Overall, U.S. natural gas exports truly offer a win-win 
scenario. The U.S. has the chance to sell a product we have in 
abundance and other nations need, and at the same time provide 
a lifeline to our allies in that region for many years to come. 
I look forward to working with Cory Gardner and all of my 
colleagues to see H.R. 6 become law. Thank you.

    Mr. Upton.Yield now to Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Chairman Upton, and thank you, 
Chairman Whitfield, and Ranking Member Rush for hosting this 
hearing today. I am proud to be an original co-sponsor of H.R. 
6, along with Congressman Gardner from Colorado. We do need to 
streamline the regulatory process for liquefied LNG exports. In 
the Energy Policy Act of 2005 we gave the FERC the authority to 
conduct the environmental review and make the final decision, 
but we gave the Department of Energy the authority to determine 
whether it was in the national interest to even go forward with 
that.
    I want to compliment the Department of Energy on approving 
the latest project yesterday. I am told they did that in 35 
days. These days, that is a world record lightning speed 
approval, and we are very appreciative of that. Unfortunately, 
there are still more than 20 export applications pending, and 
hopefully, after today's hearing, and with the passage of this 
piece of legislation, we can get that process hopefully even to 
be a little bit more timely. In any event, I look forward to 
today's hearing, I appreciate the witnesses, and I yield to Mr. 
Shimkus the balance of the time.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Well, I thank my colleague. We should not 
underscore the importance of this legislation for freedom and 
democracy. The countries of Eastern Europe, and even Europe as 
a whole, have been, and will continue to be, to be extorted by 
the Russian Federation. It is a known fact. They extort on oil, 
they do trade, and the like. This bill is really an energy shot 
for freedom for these countries that are trying to get out of 
the Russian sphere of influence. I want to thank Cory for his 
effort. Cory, I know I can speak for all my friends in Eastern 
Europe to say thank you for this effort. It is really 
monumental and incredibly helpful to these countries who are 
looking to release themselves from the yoke of the Russian 
Federation, and of totalitarian regime.
    I don't want to seem melodramatic. I have dealt in this 
area for 18 years, and this is incredibly important at this 
time for these former Eastern European countries, also known as 
the former captive countries, because they once were captive to 
Soviet Union. And I yield back my time.
    Mr. Whitfield. Gentleman's time has expired. At this time I 
will recognize the gentleman from California, Mr. Waxman, for 5 
minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. Today we are 
examining Congressman Gardner's bill to change the approval 
process for liquefied natural gas exports. I said it when we 
first started discussing the possibility of LNG exports, I have 
an open mind, but I want to talk about some of my concerns. A 
number of studies predicted that LNG exports would have mildly 
positive economic effects, and since then DOE has moved 
aggressively to approve LNG exports. Today they have approved 
seven export proposals, and they are continuing to examine 
other applications as well.
    We need to carefully consider the impact of LNG exports on 
natural gas prices, and the impact of higher prices on American 
consumers and manufacturers. And we also need to look at the 
impact of LNG exports on global carbon emissions. Increasing 
U.S. exports would allow other countries to move from coal to 
natural gas, reducing their carbon emissions abroad, but LNG 
exports could increase U.S. carbon pollution by shifting 
electricity generation back to coal, and increasing fugitive 
methane emissions. I am not opposed to DOE's considering 
applications for additional LNG exports, but I want those 
reviews to be thorough.
    I am concerned about the approach of this bill. The bill 
would short circuit the established review process for pending 
and future LNG export applications. It requires DOE to approve 
essentially unlimited LNG exports to all 159 World Trade 
Organization countries without any determination that such 
exports are in the public interest, or whether they would have 
significant adverse impacts on domestic natural gas prices, 
manufacturing, and jobs. DOE would have to immediately grant 
the 25 LNG export applications currently pending. In doing 
that, by the way, that would result in approved export amount 
of 36 billion cubic feet per day. That is almost half of all 
natural gas consumed daily in the United States. Unlimited LNG 
exports would have serious impacts on consumers and 
manufacturers. That is why major companies like Dow, Ocoa, and 
Newcourt have raised concerns about this bill.
    Proponents of unlimited LNG exports contend we need to help 
Ukraine and our European allies resist Russian aggression. This 
bill will not result in LNG exports to Europe for several 
years, if at all. No LNG export facilities currently exist in 
the continental United States. The first export terminal will 
not begin initial operations until late 2015. Export capacity 
will not ramp up into other facilities until 2017 or 2018.
    When the U.S. actually begins to export significant 
quantities of LNG 3 or 4 years from now, where will it go? 
Well, it won't go directly to Ukraine, because Ukraine does not 
have any facilities to import or re-gasify LNG. In fact, it may 
not even go to Europe. We send be sending a clear message to 
Russia its aggression will have costly consequences, but I 
worry whether this really has the impact we want on a foreign 
policy basis. Russia is a member of the World Trade 
Organization. This bill adds Russia to the list of countries 
that can receive American natural gas without any DOE review. 
That is a very strange way to send a signal to support our 
American allies in Europe.
    This hearing should help us have an opportunity to think 
carefully about the bill, and I want to yield the balance of my 
time to Mr. McNerney.

 OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF CALFORNIA

    Mr. McNerney. Thank you. I am in favor of LNG exports, but 
I have four concerns. First of all, gas production in this 
country needs to be done cleanly, and that means eliminating 
fugitive gas, it means don't use fresh water, it means prevent 
well leakage to groundwater, and it means treating waste water. 
Until we are sure that we have national standards of some kind 
to make sure that that happens, I am very skeptical. Second, 
these large exports could impact U.S. manufacturing 
renaissance, and the price of natural gas generally in this 
country.
    Third, LNG export facilities are already being approved 
faster than they can be built, so this isn't really needed. And 
as Mr. Waxman mentioned, Ukraine doesn't even have LNG import 
facilities. And lastly, automatic approval seems pretty extreme 
to me. I mean, this could encourage the worst kind of 
applications to be submitted, knowing that they are going to be 
approved no matter what. So, until those concerns are 
addressed, I don't think I can support this bill. Thank you. I 
yield back.
    Mr. Whitfield. Gentleman's time has expired, and that 
concludes the opening statements. Today we have two panels of 
witnesses, and on the first panel we have one person, and that 
person is Dr. Paula Gant, who is the Deputy Assistant Secretary 
for Oil and Natural Gas at the Department of Energy. And part 
of her portfolio certainly has responsibility for this area. 
So, Dr. Gant, we will recognize you for your 5-minute opening 
statement. Turn your----

STATEMENT OF PAULA GANT, DEPUTY ASSISTANT SECRETARY FOR OIL AND 
   NATURAL GAS, OFFICE OF FOSSIL ENERGY, DEPARTMENT OF ENERGY

                    STATEMENT OF PAULA GANT

    Ms. Gant. Thank you, Chairman Whitfield, and Ranking 
Members Rush and Waxman, and the members of the subcommittee. I 
very much appreciate the opportunity to appear before you 
today, and to have the opportunity to explain and answer your 
questions about the Department's process for regulating the 
export of natural gas, including liquefied natural gas, or LNG 
exports.
    As Representative Gardner and Representative Rush have 
noted, we are enjoying an incredibly abundant natural gas 
supply, and observing the tremendous opportunities presented by 
that in recent years. It certainly makes my job quite a lot of 
fun, and these are extraordinary times for the country. There 
is tremendous opportunity, and we at the Department are very 
much focused on helping ensure that the country realizes that 
opportunity.
    Over the last several years, domestic gas production has 
increased significantly, outpacing demand growth, and resulting 
in declining net natural gas imports. This production growth is 
primarily due to the use of improved drilling technologies and 
practices, including largely the ability to extract natural gas 
from shale formations. Productions from shale formations 
amounted for a little less than two percent of domestic natural 
gas production in 2000. By 2012, that had risen to 40 percent 
of natural gas production, quite a dramatic change.
    Historically, the Department of Energy has played an 
important role in the development of technologies that have 
enabled the access to energy resources like this. Beginning in 
the late 1970s, public research dollars were invested in the 
development of hydraulic fracturing and horizontal drilling 
technologies that were later picked up and refined with private 
investment, and continued industry innovation. This has 
unlocked billions of dollars in economic activity associated 
with shale gas production.
    Thanks to American ingenuity and know-how applied to this 
tremendously abundant natural gas resource, the U.S. is now the 
world's number one gas producer, and is poised to become a net 
exporter of gas in 2018. This is according to the Energy 
Information Administration. And this is an extraordinary shift 
in our fortunes. Our outlook is shifting from one framed by 
energy scarcity to one framed by energy abundance. This 
presents tremendous opportunity and tremendous responsibility 
that we get it right.
    Today domestic natural gas prices are lower than 
international prices of delivered LNG to overseas markets. As 
in the United States, demand for natural gas is increasing 
rapidly in these other markets. Due primarily to these 
developments, DOE has received a growing number of applications 
to export domestically produced natural gas to overseas markets 
in the form of LNG, or liquefied natural gas. DOE's authority 
to regulate natural gas arises under the Natural Gas Act, as 
mentioned previously. It provides two statutory standards for 
processing applications to export LNG from the United States.
    By law, applications to export LNG to countries with which 
the U.S. has a free trade agreement that provides for natural 
treatment of trade in natural gas are deemed to be consistent 
with the public interest, and the secretary must grant 
authorization without modification or delay. As of March 24, 
DOE has granted 35 such applications. For applications to 
export liquefied natural gas to non-free trade agreement 
countries, the secretary must grant that authorization unless, 
after an opportunity for hearing, the proposed export is found 
not to be consistent with the public interest. In executing 
that requirement, DOE has established a robust process to 
assess the public interest, a process that provides for robust 
public input and transparency, and also allows a balancing of 
the many aspects of the public interest that must be 
considered, and that may potentially be affected by the export 
of natural gas.
    While Section 3(a) of the Natural Gas Act establishes a 
broad public interest standard, and a presumption favoring 
export authorizations, the statute neither defines the public 
interest, nor identifies criteria that must be considered. In 
prior decisions, however, the Department has identified a range 
of factors that it evaluates when assessing the public 
interest, including economic impacts, international 
considerations, environmental impacts, security of natural gas 
supply, among others. To conduct this review, the Department 
looks at the record evidence, as presented by applicants and 
participants in the proceeding. Applicants and interveners are 
free to raise new issues or concern relevant to the public 
interest that may have not been address in prior cases. And, in 
fact, we have seen that to be the case.
    To date, DOE has granted seven conditional authorizations 
for long term export of domestically produced lower 48 natural 
gas to non-FTA agreement countries. This is equivalent to 9.3 
billion cubic feet a day of capacity. This includes, as was 
noted, the Jordan Cove Energy Project, which the Department 
approved yesterday. As of today, there are 24 applications 
pending to export LNG to non-free trade agreement countries. 
The Department will continue to process these applications on a 
case by case basis in the order of precedence that had been 
established and made public on DOE's Web site. During this 
time, as we have done previously, we will continue to monitor 
market developments and assess their impact in the assessment 
of the public interest, and consider information as it becomes 
available.
    In conclusion, Mr. Chairman, I would like to emphasize that 
DOE is committed to moving this process forward as 
expeditiously as possible. We understand the importance of this 
issue and its significance, and the importance of getting our 
process right. Thank you, Mr. Chairman. I would be happy to 
answer questions.

    [The prepared statement of Ms. Gant follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thank you very much, Dr. Gant. We appreciate 
your statement, and taking time to come over and talk about 
this important issue. At this time I recognize myself for 5 
minutes of questions.
    Of course, one of the developments with Mr. Gardner's 
legislation is it creates WTO countries the same as free trade 
agreement countries. And in your written testimony, you stated 
that you were concerned that H.R. 6, one of your concerns, that 
it would leave out public input. And I wanted to just explore 
that a little bit with you. When DOE made the NERA study 
available, that study was made available for public comment, 
and that was kind of the baseline for reviewing these 
applications.
    And in yesterday's Order on the Jordan Cove project, DOE 
concluded that NERA's explanation of its modeling design, 
methodology, and results provided a sufficient basis both for 
the public to provide meaningful comments, and for the 
Department to evaluate NERA's conclusions. And also DOE 
concluded in this recent Order that, ``We are not persuaded 
that using post-Annual Energy Outlook after post-2011 energy 
productions'', you are not persuaded that anything post-2011 
would have materially affected the findings of the LNG export 
study.
    So it would appear that the DOE non-FTA filing and 
authorization, since it is just one permitting process, because 
we have to get FERC involved also, it appears to me that your 
concerns about public input, maybe it is not that much of a 
concern, because the NERA study is sort of the baseline anyway, 
with the comments that you all made on these recent approvals. 
So would you agree with me that maybe you are being too 
concerned about the implications of what you perceive to be the 
lack of public input?
    Ms. Gant. Thank you, Mr. Chairman, and I agree the language 
in our Orders can be quite hard to read out loud sometimes. I 
struggle with it myself. I think there are a couple pieces to 
your question, and if I can take them in two? There are a 
number of aspects that inform our public interest 
determination, economic factors being some of them, as framed 
by the NERA analysis to a great extent, including environmental 
implications and geopolitical consideration. So the public 
interest is broader than the economic aspects of it.
    As I understand the legislation, and I am not intimately 
familiar with it, it would remove DOE's requirement to conduct 
a public interest determination. And the public interest 
determination is the means by which we solicit public input, so 
it would remove the public's opportunity to provide input on 
our process.
    The second piece of your question----
    Mr. Whitfield. But if you had that public input in the NERA 
study, wouldn't that compensate for the----
    Ms. Gant. The NERA study was cut out for public comment, 
and then it is put on the record in each of our subsequent 
Orders, so it applies to each of those Orders. And each of the 
applications, and the dockets that are established for them, 
must be given their own individual consideration on a case by 
case basis, as established by the statute. Could I answer the 
second part of your question, with regard to the NERA?
    Mr. Whitfield. Yes, go ahead.
    Ms. Gant. And I believe the reference you are referring to 
in our Order refers to the new information that has been 
provided. So the NERA analysis was based on the Annual Energy 
Outlook 2011, as released by EIA. In December, EIA released 
their Annual Energy Outlook 2014. They do this every year. The 
information provided therein, particularly with regard to the 
AEO 2014, demonstrates a projection for natural gas supply 
growth that is greatly outpacing expected natural gas demand 
growth. And so the finding, from our perspective, is that 
integrating the AEO 2014 into our analysis would not create a 
conclusion inconsistent with what we have already come to in 
2011, which indicates that exports of natural gas generate net 
positive benefits for the U.S. economy.
    Mr. Whitfield. Now, has DOE taken an official position on 
the Gardner legislation?
    Ms. Gant. I am aware of the proposal. It has not made its 
way through interagency review, so I am not in a position to 
comment on the specifics.
    Mr. Whitfield. My time has expired. At this time I 
recognize Mr. Rush for 5 minutes of questioning.
    Mr. Rush. Dr. Gant, thank you again for appearing before 
this subcommittee. And a lot of this--have under consideration 
is pretty timely now because of what is happening in Eastern 
Europe now. And I think that all the members of this 
subcommittee, in fact, all the Members of the Congress, we all 
stand together because we want to ensure that there are 
effective sanctions against Putin, and what he has done in 
Crimea, and we want to stop him. I don't think that there is 
any doubt in anybody's mind that we want to stand resolute and 
united, and trying to do all that we can to ensure that the 
democratic process is available to all those who are in Eastern 
Europe.
    But, with that said, the question came up earlier today, or 
the topic came up earlier today about H.R. 6, and its having 
such a tremendous impact on the future of Eastern Europe. And 
my question to you is, if H.R. 6 was, in fact, enacted today, 
when is the earliest possible time that exports of LNG will 
have their impact on decreasing Russia's hold on the Ukraine, 
or on the other of our European allies, whom right now have 
been paying Russia for their natural gas supply? When do you 
see, or can you estimate, that Russia and Putin will feel the 
effect of the decrease of the Eastern European countries' 
dependence on Russian natural gas?
    Ms. Gant. Thank you for that question, Ranking Member Rush. 
A couple of things that I think I can share that are 
responsive. And first I would say that we are tremendously 
concerned in moving to take immediate action to help our allies 
in Ukraine, and across Europe, and take the situation very 
seriously. To answer your question with regard to the 
legislation, again, I will just have to ask the committee to 
understand I haven't had a chance to really assess the 
legislation and what impact it would have. But what I can say 
is that our understanding of the way that the timeline on which 
projects are moving is that the earliest point at which we 
could export substantial volumes of liquefied natural gas from 
the lower 48 would be the third quarter of 2015. So, regardless 
of what happens with a change in legislation, because the 
project that has final approval is moving along in its process 
at FERC.
    However, there are other things that we can do to help the 
Ukraine and our European allies. The administration is keenly 
aware of these, and engaged in looking for ways to provide 
financial and technical existence. Also, there is the 
possibility of reversing pipeline flows in the Ukraine, should 
Russia actually turn off the tap, so to speak. That hasn't 
happened yet, but there are efforts underway to prepare for 
that eventuality and reverse pipeline flows so that gas could 
flow from Europe into the Ukraine.
    And, importantly, as has been noted before, our increase in 
domestic production in recent years has allowed us to 
significantly reduce our reliance on imported liquefied natural 
gas. Those cargoes that would have been destined for U.S. 
markets have made their way to other places on world markets. 
And we do know that increased supplies of natural gas on global 
markets, and increase diversity of those supplies, increases 
our energy security, and those of our allies and trading 
partners. So things are happening that could have a positive 
impact.
    Mr. Rush. But you have not been able to really look at and 
do your due diligence on this bill? That is understandable. But 
is there any way the effect of this bill, or any bill right now 
that would come out of the Congress on remediating the issue, 
or helping the Ukrainian people, it is not really certain right 
now any legislation that this Congress won't have an immediate 
effect. Is that what you are saying, in essence?
    Mr. Whitfield. The gentleman's time has expired, but I 
would like you to go on and answer his question.
    Ms. Gant. I would have to beg your patience that I am not 
in a position to opine on actions that this body might take, 
but I can say that we are proceeding with the guidance that you 
have given us, and working as expeditiously as possible.
    Mr. Whitfield. At this time recognize the gentleman from 
Texas, Mr. Barton, for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman, and I thank our 
witness for being here. First I am going to make a comment, and 
then I am going ask you some questions. Mr. Waxman referred to, 
and you also, I think, referred in your opening statement to 
the number of projects that are pending, and the amount of LNG 
that would be exported, if they were all to be approved. There 
is one minor point, they also all have to be built, and they 
are not all going to be built. You could approve 30 projects. 
My guess is you will have one or two built on the East Coast, 
one or two on the West Coast, and perhaps two or three on the 
Gulf of Mexico.
    Now, I could be totally wrong about that, but the cost of 
these projects, and the long term financing commitment, and the 
uncertainty of the foreign markets, as soon as we start 
exporting LNG, these prices that look so lucrative overseas, 
they are not going to stay at $16 and NCL for 12 or $13. When 
people see that the U.S. is going to export to Hungary, or to 
Japan, or to Eastern Europe, or wherever, those prices are 
going to change, and there is going to be an equilibrium point. 
We don't know where that is, but you are not going to build 20 
LNG terminals to export natural gas. That is just not going to 
happen.
    Could you give an example, at least hypothetically, of what 
would not be in the national interest? I mean, so far every 
project that has been reviewed has been approved, and the law 
is such that you have to find it is not in the national 
interest. If it is where we already have a trade agreement, it 
is an automatic, and if it is not, you do have to do this 
review, but so far the yeses have won every time. So what would 
be an example that would not be in the national interest, 
hypothetically?
    Ms. Gant. Thank you, Congressman. We would agree that it is 
unlikely that all of these projects will get built, that the 
success of these will depend on a number of factors. These are 
decade old commitments. They require very sophisticated 
engineering and construction capacities, and very large capital 
commitments, and very significant steel in the ground, if you 
will. The guidance that we have been given in the Natural Gas 
Act is to conduct a public interest review. As I noted, we 
didn't get a lot of guidance on what that meant, so we have 
tried to create a process that is very transparent, and we are 
working our way through that process.
    Considering the public interest in the criteria that we 
have set out, what I can tell you is that the considerations 
that we take into account in making that determination are all 
part of the public record. And given the information that is 
placed on the record to date in those proceedings, weighing all 
of that, and balancing those interests, our determination has 
been that----
    Mr. Barton. You----
    Ms. Gant [continuing]. Export is in the public interest.
    Mr. Barton. You have talked for a minute and a half and 
haven't said a thing. You know, that is not an adversarial 
question. Let me give you a hypothetical. If Barton LNG Exports 
presents an application to the Department of Energy to export 
LNG to North Korea to help build manufacturing capability to 
build missiles that would then be capable of attacking the 
United States, would that be in the national interest?
    Ms. Gant. I would imagine that quite a bit of information 
would be put into the public record for us to consider in that 
proceeding, and we would do so.
    Mr. Barton. I would hope the answer to that question would 
be no. I mean, well, my time is evaporating, so let me move on. 
Is it safe to assume that the geopolitical considerations that 
Mr. Rush has talked about, and Mr. Shimkus talked about, are 
reasons to approve LNG exports, that there is a geopolitical 
strategic component to the review?
    Ms. Gant. Yes, sir. In all of our orders that we have 
approved to date, and authorizations have granted, geopolitical 
considerations, international considerations, are factored in. 
We take very seriously our Nation's commitment to free trade, 
and very much understand that increasing the supply and 
diversity of natural gas on global markets benefits our energy 
use security, and that of our allies.
    Mr. Barton. OK. This is my last question, and I want you to 
give me, in the spirit of John Dingle, who is not here, a yes-
or-no answer. And I will give you a hint that these questions 
are designed to make your report look good, OK? Question one, 
isn't it true that the Department of Energy rejected the claim 
that the NERA study overstated the likely macro benefits from 
LNG exports? Yes or no?
    Ms. Gant. Yes, sir.
    Mr. Barton. OK. Isn't it true that DOE observed that more 
natural gas is likely to be produced domestically if LNG 
exports are authorized than if they are prohibited?
    Ms. Gant. Yes, sir.
    Mr. Barton. OK. Isn't it also true that the Department of 
Energy rejected the claim that there is a one for one tradeoff 
between gas used in manufacturing and gas diverted for export?
    Ms. Gant. Yes, sir.
    Mr. Barton. OK. And isn't it also true that DOE was not 
persuaded that LNG exports will substantially increase the 
volatility of domestic natural gas prices?
    Ms. Gant. Yes, sir.
    Mr. Barton. And this is my last question. Isn't it true 
that DOE believes that the public interest generally favors 
authorizing proposals to export natural gas that have been 
shown to lead to net benefits to the U.S. economy?
    Ms. Gant. Yes, sir.
    Mr. Barton. Thank you very much.
    Mr. Whitfield. Gentleman's time has expired. At this time 
recognize the gentleman from California, Mr. Waxman, for 5 
minutes.
    Mr. Waxman. Thank you, Mr. Chairman. The Department of 
Energy has established a process for considering applications 
to export LNG, if the LNG would go to a country that has a free 
trade agreement with the U.S., the application is quickly 
granted. But if the LNG is going to a country without a free 
trade agreement, DOE does a public interest determination. That 
takes some time, but DOE has granted seven of those 
applications so far. Dr. Gant, I would like to ask you about 
how the Gardner bill would change this approval process. 
Everyone should understand what this bill would actually do. 24 
applications to export LNG to non-free trade agreement 
countries are currently pending before DOE. Under the Gardner 
bill, what would happen to those applications?
    Ms. Gant. Thank you, Congressman. Again, I have had the 
chance to only briefly review the bill, but as I understand the 
basic concept, it would grant status to WTO nations like that 
is currently granted to FTA nations under the Natural Gas Act, 
and in doing so, would remove DOE's requirement to conduct a 
public interest determination.
    Mr. Waxman. So they would be granted without modification 
or delay?
    Ms. Gant. If that is what the legislation instructs.
    Mr. Waxman. OK. It is my understanding it does. So for 
these applications, there would be no public interest 
determination, or analysis of whether the exports would have 
adverse impacts on domestic natural gas prices or consumers, is 
that right?
    Ms. Gant. As my understanding of the proposal is, yes, sir.
    Mr. Waxman. OK. Automatically granting those applications 
would result in the approval of a total of 36 billion cubic 
feet per day in LNG exports. That is equal to almost half of 
our total domestic consumption. Has DOE done any analysis of 
how this level of potential exports would impact domestic 
natural gas prices?
    Ms. Gant. Yes, sir. My understanding is that the capacity 
presented in the 24 applications that have not been granted 
non-FTA approval status is 36 BCF a day. The economic analysis 
that we have conducted to date does not consider exports at 
that level.
    Mr. Waxman. OK. So these are just the pending applications? 
Under the Gardner bill, future applications to export LNG to 
any of the 159 World Trade Organization member countries, DOE 
would be required to just deem them in the public interest and 
grant them, isn't that right?
    Ms. Gant. Again, not being familiar with the specifics of 
the legislation, if there is no public interest determination 
required, my understanding is, yes, the Secretary would be 
required to deem them----
    Mr. Waxman. If there is no public interest----
    Ms. Gant. Right.
    Mr. Waxman [continuing]. Requirement for analysis?
    Ms. Gant. Yes, sir.
    Mr. Waxman. OK. The WTO membership includes all likely 
importers, and the automatic approval doesn't depend on the 
proposed LNG export levels. Every application to export any 
amount of LNG to virtually anywhere in the world would be 
automatically granted under this bill. Dr. Gant, that is really 
just unlimited LNG exports, isn't it?
    Ms. Gant. My understanding is if the exports were 
authorized, then market forces would determine how many LNG 
cargoes would actually be exported from the United States.
    Mr. Waxman. Well, as far as the Government is concerned, an 
application from anywhere in the world would be automatically 
granted under this bill. Market forces, of course, would 
determine another----
    Ms. Gant. Yes, sir. The----
    Mr. Waxman [continuing]. Be another factor. OK. Is there 
any way under this bill for DOE to ensure that the total level 
of LNG exports will be in the public interest, or not have 
significant adverse impacts on domestic natural gas prices, 
consumers, and manufacturers?
    Ms. Gant. Our current process considers these applications 
on a case by case basis, and looks at the macroeconomic 
benefits and impacts of LNG exports. To the extent that we 
weren't conducting that review, we wouldn't be opining on that.
    Mr. Waxman. And is it your understanding the Gardner bill 
would not require that review?
    Ms. Gant. Again, I have very limited understanding.
    Mr. Waxman. OK. I have an open mind on LNG exports, but I 
have concerns about this bill. Rubber stamping what I think is 
unlimited LNG exports without any determination that they are 
in the public interest could have serious unintended 
consequences. That is why many of the largest manufacturers in 
the country oppose this bill. Yield back my time, Mr. Chairman.
    Mr. Whitfield. Gentleman yields back. At this time, 
recognize the gentleman from Illinois, Mr. Shimkus, for 5 
minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. Let me ask, 
permitting doesn't mean building, is that correct?
    Ms. Gant. Correct.
    Mr. Shimkus. And I take it my colleagues didn't understand 
that. The markets will determine whether these get built, and a 
lot of jobs for steelworkers, a lot of jobs for laborers. These 
LNG facilities are major construction projects, and that would 
be good for the economy also. I have spent 18 years as a Member 
of Congress, dealing with Eastern European issues. I have spent 
3 years on the West German border. I have a passion for freedom 
and democracy in the former captive nations.
    To my friend Mr. Rush, who I know shares the same thing, 
these countries are already seeing benefits of lower natural 
gas prices because of the ability to export. I want to read an 
article from Climate Change Science and Technology on 6 March. 
``Last week Lithuania took another important step towards the 
creation of its own liquefied natural gas terminal. The 
floating storage and re-gasification unit that is being built 
in South Korea by Hyundai Heavy Industries was put to water for 
initial testing, and christened by Lithuania's president. The 
ship should arrive in Klaipeda, the location of Lithuania's LNG 
terminal, by the end of the year and is planned for initial 
processing of LNG to start in December.'' My opening was just a 
passion plea. These countries need to free themselves from the 
extortion of Russian energy markets. And it is not just Eastern 
European. It is the Western European countries too. 50 percent 
of energy in Western Europe is from Russia. This is a big deal, 
folks.
    And now let me tie it to this whole FTA/WTO debate. The key 
component is we don't have a free trade agreement with Europe, 
is that correct?
    Ms. Gant. That is my understanding.
    Mr. Shimkus. So if we want to help Europe, we have to move 
to the WTO format. There was another bill that I sponsored by 
Mike Turner, a member of the NATO Parliamentary Assembly, and 
that was to grant this same provision to NATO countries. And in 
the permutation of how legislation gets written, it was deemed 
an easier way to include the WTO members than to go to a 
defensive treaty alliance type issue.
    Again, I want to make sure that I highlight, in this day 
and age, at this time in the world's history, with what is 
currently going, if you had any interest in a democratic, free 
Europe, whole and free, this is a big deal. The Russians extort 
by trade, they extort by energy. They get involved in political 
campaigns, legal and illegally. We are not making this up. Talk 
to any ambassador from an Eastern European country of Russian 
influence to try to destabilize their country. This is our 
opportunity, another way, without troops, bringing a measure of 
security to our European friends.
    And, of course, Shimkus is ethnically Lithuanian. I am glad 
that they have moved on an import terminal, at great expense to 
them. They have already seen the benefits of being able to 
negotiate lower natural gas prices because of the 
acknowledgement that now they are going to be able to go to the 
world market, outside of Russia, for their energy needs.
    So I want to thank you for the permits that you have 
already rendered. I hope that you will keep an open mind on 
this bill, and the WTO implications for our allies in Europe. 
It is a key component in this current struggle that we have. 
Thank you for, Mr. Chairman, a great hearing. I want to thank 
again Mr. Gardner. There couldn't be a more important time to 
move this legislation than now. So, with that, I will yield 
back my time.
    Mr. Whitfield. Gentleman yields back. At this time 
recognize the gentleman from California, Mr. McNerney, for 5 
minutes.
    Mr. McNerney. Thank you, Mr. Chairman. I agree with my 
colleague from Illinois that natural gas is a geopolitical 
tool, and it would be beneficial to have LNG import to Ukraine, 
but Ukraine doesn't have LNG import facilities, and we are 
already approving LNG export facilities far faster than they 
can possibly be built, so I question the need for this bill. 
But I do have one question for Dr. Gant.
    You know, with the deeming and automatic approval of LNG 
export facilities, that makes me worry about the quality of 
applications that you are going to be receiving, if that was to 
be enacted into law, in terms of safety, in terms of fugitive 
gas emissions, and all kinds of environmental problems. Is that 
something that would be a problem, in your mind, in your 
estimation?
    Ms. Gant. Thank you for the question. I would just note 
that DOE has responsibility for considering the impact of 
actually exporting the natural gas molecule, while our partner 
agency, the Federal Energy Regulatory Commission, is 
responsible for the permitting and siting of the actual 
physical facility, and safety, and engineering quality, 
environmental impacts actually associated with the facility.
    Mr. McNerney. So those aspects are OK, as far as you are 
concerned?
    Ms. Gant. Again, as I understand the legislation, it only 
addresses DOE's responsibilities.
    Mr. McNerney. OK. All right. That was my only question. I 
yield back.
    Mr. Whitfield. Gentleman yields back. At this time we will 
recognize the gentleman from Nebraska, Mr. Terry, for 5----
    Mr. Terry. To follow on that line of questioning, from the 
day that a permit is filed with DOE, what has been the average 
timeline for the seven that have been granted?
    Ms. Gant. Each individual application presents its own 
unique----
    Mr. Terry. That is why I said average----
    Ms. Gant [continuing]. Individually.
    Mr. Terry [continuing]. Between the seven.
    Ms. Gant. So once the comment period finished on the 
rulemaking, it was 3 months before we issued the first 
conditional authorization.
    Mr. Terry. 3 months?
    Ms. Gant. And we are on an average of about a 2 month pace, 
give or take a week or 2----
    Mr. Terry. And that is----
    Ms. Gant [continuing]. Depending on how fast we can----
    Mr. Terry. Very good. I understand that. Then what happens 
to the process one DOE signs off on a permit?
    Ms. Gant. So the statute gives us a little bit of 
flexibility. An applicant can proceed in parallel at the 
Department of Energy and the Federal Energy Regulatory 
Commission. We have established a process by which those 
applicants that have started their pre-filing process at FERC 
are entered into our order in the order at which they apply to 
us after initiating that process, and that they proceed through 
our process in parallel, if you will, to the FERC application 
process.
    However, we are a coordinating agency with the Federal 
Energy Regulatory Commission on the environmental impact 
assessment. So once we have given the conditional approval for 
export, then we wait until the Federal Energy Regulatory 
Commission has completed their environmental review, and then 
we consider that in our determination of a final authorization.
    Mr. Terry. OK. Now, even though you may be sped up, the 
reality is FERC still has to deal with it, so if there is one 
agency that wants to delay, for whatever political purposes, 
like Keystone pipeline and that, FERC can do that?
    Ms. Gant. In the vast majority of the applications before 
us, the Federal Energy Regulatory Commission has the lead 
Federal agency responsibility----
    Mr. Terry. Right.
    Ms. Gant [continuing]. For conducting environmental reviews 
of these projects.
    Mr. Terry. Couple of miscellaneous type questions here. A 
former member of this committee used to say that if we exported 
any, then that means the prices of natural gas in the United 
States would automatically go to the world prices on natural 
gas. That person always lost me on the logic. What is DOE's 
opinion on whether or not, if we fill up one ship with liquid 
natural gas and send it over to the Ukraine, or Lithuania, that 
that means that we will be on a world price for natural gas?
    Ms. Gant. The analysis that we consider in assessing the 
public interest is based on the analysis conducted by EIA and 
NERA previously, particularly in NERA analysis across all 
scenarios envisioned where an export were provided for, were 
allowed, and taken up in global markets, we saw overall 
benefits to the U.S. economy. And, importantly, in the EIA's 
AEO 2014 that was released in December, that projects a 
significant increase over the forecast period in LNG exports 
relative to the base case used in our NERA analysis. We see an 
actual decrease in projected Henry Hub prices for natural gas 
in the U.S., so that the----
    Mr. Terry. OK.
    Ms. Gant [continuing]. Baseline of 39----
    Mr. Terry. Very good. And have you been to the Balkan 
Fields, or the Eagleford Place?
    Ms. Gant. I have not, but I imagine I will have----
    Mr. Terry. You should. The chairman and I, and a couple 
others, Cory, did that. Fly over at night and see how much of 
the natural gas is being flared off, or wasted, in my view.
    Ms. Gant. Um-hum.
    Mr. Terry. And that is an extremely disappointing picture 
to me. So when we talk about whether or not exporting LNG is 
going to create a demand issue for us when we are burning off, 
flaring, almost a third sounds almost silly to me.
    Ms. Gant. Um-hum.
    Mr. Terry. Has DOD, in your last 30 seconds, looked into 
how to better capture that \1/3\ that is just lit off?
    Ms. Gant. Yes, sir. A couple of important things, we are 
very focused on reducing methane emissions from natural gas and 
oil systems, and other sources across the economy, as part of 
the President's climate action plan. Specifically with regard 
to natural gas associated with oil production, increasingly 
producers are looking at gasifying their drilling sites, so 
moving off of diesel engines, onto natural liquefied natural 
gas engines, so you are looking at ways to increase the value 
of that fuel on site. In addition, the quadrennial energy 
review will provide an opportunity to look at obstacles to 
building gathering lines that would allow you to capture 
natural gas.
    Mr. Terry. It would, if you would get one.
    Mr. Whitfield. The gentleman's time has expired. We have a 
vote on the House floor. We are going to try to do two more 
questions because Dr. Gant is going to be leaving, and we are 
going to be gone 50 minutes, and we are going to be coming back 
for the second panel. But the next on the list is Mr. Doyle. He 
will be recognized for 5 minutes, and then Mr. Gardner. And if 
you all wanted to----
    Mr. Doyle. Thank you, Mr. Chairman. Well, let me just say 
this. This hearing is not about whether or not we should export 
natural gas. We are doing that. Having said that, I have some 
great concerns about this bill.
    Dr. Gant, you said that your average approval time is 
around 2 months, every 2 months you are approving a permit. And 
I also heard you say that, when Mr. Barton asked you, when the 
first permit that you approved would actually come online, you 
said around the third quarter of 2015, is that correct? So that 
is about 15 months from now. So, based on your granting permits 
on an average of about 2 months, you could conceivably grant 
another seven or eight permits before the first facility 
actually goes online, assuming it goes online by the third 
quarter of 2015. At that point we would have 15 permitted 
facilities to go to non-free trade agreement countries.
    Now, you said that the difference between granting a permit 
to a non-FTA country versus an FTA country is you go through a 
process to see if it is in the national interest to do so. But, 
under Mr. Gardner's legislation, that would be waived. It would 
be treated just like an FTA permit, where you don't go through 
that process, is that correct?
    Ms. Gant. As I understand.
    Mr. Doyle. So, conceivably, if somebody wanted to export 
natural gas to Russia, which is a WTO country, there wouldn't 
be a review process by DOE whether or not that was in the 
national interest? It would just be approved like an FTA 
country? Is that correct?
    Ms. Gant. Correct.
    Mr. Doyle. I would say to Mr. Gardner, and people that are 
co-sponsors of this bill, you may want to consider, based on 
what is going on in the world with the Russians, the Chinese, 
Pakistani, Turkey, how these countries are flaunting our trade 
laws and cleaning our manufacturers' clocks. We just came from 
a steel caucus hearing this morning where these same very 
countries that we could be sending natural gas to, without any 
review to see if it is in the natural public interest, are 
using our trade laws to put our companies out of business.
    The one edge our manufacturers have in this country is 
cheap energy, and we are about to take that from them too. 
Right now we have natural gas at $4 to $5 at MCF. They are 
paying $14 to $16 over there. Mr. Barton has it right. What is 
going to happen is our prices are going to come up a little, 
and their prices are going to come down a little, and we will 
eventually hit some sort of a leveling off period of pricing 
where it doesn't make any more sense to export. And the market 
will determine how many of these facilities actually get built, 
because they cost billions of dollars to build. And even if you 
approve 30 permits, the likelihood is nowhere near 30 
facilities are going to get built.
    Well, if the sweet spot ends up a $9 or $10, it then 
becomes the world price. Now we have lost our competitive edge, 
our manufacturers have, in this world market, because they no 
longer have the benefit of cheaper energy than their 
competitors overseas, whose companies still illegally subsidize 
their industries, and put the steel industry out of business. 
We lose 20, 30 companies before we get relief at the 
International Trade Commission.
    I would just say to Mr. Gardner, and anyone else that is 
for this bill, let us sit down and think about the countries we 
want to actually do this to. Let us not open up to every WTO 
country. Let us talk about who our allies are, and who our 
partners are, and what we are trying to accomplish over in 
Europe and Eastern Europe, and maybe limit it to those 
countries. And let us make certain that if somebody can put an 
application in to send natural gas over to Russia right now 
that the review process that would be waived under your bill 
isn't waived. If you are not going to do that, I would suggest 
that you single out Russia and a few other countries not be 
eligible for this kind of favorable treatment.
    I am not against exporting natural gas. I am for it. I am 
for doing it. What I hate to see happen is just like with the 
Keystone pipeline. You know, not an ounce of American steel in 
that pipeline. The Indians and the Russians provided the steel 
that is going to build that Keystone pipeline. We need buy 
America provisions in this bill. If we are going to build these 
export facilities, they better damn well use American steel, 
U.S. steel, not Russian steel, not Indian steel, making sure 
that our companies have a level playing field when we do this.
    I am all for exporting the natural gas. I am not for giving 
away our competitive edge, and I am certainly not for giving 
cheap gas to our enemies. And this allows that to happen 
without any review from the Department of Energy. I don't have 
any questions. I yield back.
    Mr. Whitfield. At this time recognize the gentleman from 
Colorado, Mr. Gardner, for 5 minutes.
    Mr. Gardner. Well, thank you, Mr. Chairman, and if the 
gentleman supports the exporting, I would hate to see him 
exporting. So I thank you for your passion that you bring to 
this bill, but I hope you will stay and listen to other 
witnesses who are testifying today who will completely rebut 
and refute the statements that you just made. In fact, there is 
testimony within today's hearing that talks about the price 
impact, that talks about many of those same claims that you are 
making, which are refuted by the evidence and price impacts 
that are negligible, if at all, under this legislation.
    But what we do know, of course, as the DOE witness has 
talked about, and I thank you for the opportunity to have you 
here today, is the economic impact that this would have on the 
United States right now. The DOE permit application, in your 
assumptions, you talk about the number of jobs it would create. 
Have any of these facilities resulted in less employment in the 
United States? Have any of these permits resulted in a net loss 
of employment to the United States?
    Ms. Gant. I am not aware that those calculations have been 
made.
    Mr. Gardner. I mean----
    Ms. Gant. I am not privy to them, if they have.
    Mr. Gardner. Does higher production of domestic energy 
result in more or less jobs?
    Ms. Gant. The economic analysis that we base in our Orders 
demonstrates that greater production of natural gas has 
generated overall economic impacts.
    Mr. Gardner. And the gas that we are exporting is American 
gas, is that correct?
    Ms. Gant. That is correct, sir.
    Mr. Gardner. So we are creating American jobs, yes?
    Ms. Gant. Yes, sir.
    Mr. Gardner. With American energy?
    Ms. Gant. That is what the economic analysis suggests.
    Mr. Gardner. And it is going overseas to displace energy 
that is coming from who, Russia?
    Ms. Gant. It is hard to say which natural gas is being 
displaced, but there is no doubt that----
    Mr. Gardner. Would it displace Russian gas?
    Ms. Gant. There is no doubt that we have greater supplies 
of natural gas----
    Mr. Gardner. Would that be a net benefit to U.S. allies?
    Ms. Gant. It is definitely a net benefit.
    Mr. Gardner. And why would that be a net benefit?
    Ms. Gant. Because increased supplies of gas on global 
markets, and diversity of those supplies, increases energy 
security.
    Mr. Gardner. So that means what for the United States, in 
terms of geopolitical situation?
    Ms. Gant. We are very keenly interested and invested in the 
energy security of our allies and training partners.
    Mr. Gardner. So it would increase the security of our 
allies?
    Ms. Gant. It is a key strategic interest to the United 
States.
    Mr. Gardner. OK. It would create American jobs?
    Ms. Gant. What is it? I am sorry, I have lost track of what 
it----
    Mr. Gardner. We would create American jobs developing----
    Ms. Gant. Increased production of natural gas has led to, 
yes, increased economic benefits.
    Mr. Gardner. And that would be a net benefit to the United 
States economy?
    Ms. Gant. In our analysis to date, yes.
    Mr. Gardner. I thank the witness for her time.
    Mr. Whitfield. I might make just one comment regarding the 
scenario of exporting gas to Russia, or North Korea, or 
wherever, and maybe Dr. Gant can answer this question, or maybe 
you can't, but the reason we have these hearings is to find 
out. But Mr. Doyle presented a pretty dire--and many of us 
would agree with you. We wouldn't want gas going to Russia, 
North Korea, some of these WTO countries.
    It is my understanding that the Energy Policy Act of 1975 
gave the President of the United States the authority to 
prohibit export of natural gas to any country if they deemed it 
should not be done. And I know the Gardner bill does not amend 
that Act, but do you know personally if what I have just said 
is accurate?
    Ms. Gant. Mr. Chairman, if you wouldn't mind, I would 
rather take that question for the record----
    Mr. Whitfield. Yes.
    Ms. Gant [continuing]. Because I believe I know the 
answer----
    Mr. Whitfield. OK.
    Ms. Gant [continuing]. But I would rather----
    Mr. Whitfield. All right.
    Ms. Gant [continuing]. Not----
    Mr. Whitfield. Well, if you wouldn't mind getting back in 
touch with our committee staff? Because it is our understanding 
that that is the case, that the President could intervene and 
prevent some of the scenarios that Mr. Doyle talked about. But 
we want to make sure that that is accurate. OK. That concludes 
the first panel, and we thank you very much for taking time to 
come over and give your insights on this, and we look forward 
to working with you as we move forward. So you are dismissed.
    The second panel, we are going to cast these votes, and we 
are going to be back here in 50 minutes. And, as I have said 
before, we have world class restaurants in the Rayburn 
Building, so if you want to go down and get something to 
refresh yourself?
    Mr. Rush. They have 15 minutes to get down there.
    Mr. Whitfield. Fifteen?
    Mr. Rush. They have got 15 minutes to get down to Rayburn. 
They close at 2:30.
    Mr. Whitfield. Yes, they close at 2:30, so you better 
hurry. But we will be back in 50 minutes.
    [Whereupon, at 2:15 p.m., the subcommittee recessed, to 
reconvene at 3:05 p.m. the same day.]
    Mr. Whitfield. I would like to call the hearing back to 
order. And I want to apologize once again to those of you on 
the second panel. We appreciate your patience, and certainly do 
look forward to your testimony. And on the second panel today, 
we have Dr. Anita Orban, who is Ambassador-at-Large for Energy 
Security for the government of Hungary. We have The Honorable 
Jim Bacchus, who is with Greenberg Trauig Law Firm. We have Mr. 
David Schryver, who is Executive Vice President of the American 
Public Gas Association, Mr. Kenneth Ditzel, who is Principal 
with the Charles River Associates. And we have Dr. David 
Montgomery, Senior Vice President for NERA Economic Consulting.
    So all of you have a perspective on this issue, and we 
really look forward to hearing from you. So, at this time, I 
will recognize Dr. Orban for her 5 minute opening statement. 
And just make sure your microphone is on. Thank you.

   STATEMENTS OF ANITA ORBAN, AMBASSADOR-AT-LARGE FOR ENERGY 
SECURITY, MINISTRY OF FOREIGN AFFAIRS, HUNGARY; JAMES BACCHUS, 
 CHAIR, GLOBAL PRACTICE GROUP, GREENBERG TRAUIG LLP; DAVID G. 
    SCHRYVER, EXECUTIVE VICE PRESIDENT, AMERICAN PUBLIC GAS 
   ASSOCIATION; KENNETH H. DITZEL, PRINCIPAL, CHARLES RIVER 
  ASSOCIATES; AND W. DAVID MONTGOMERY, SENIOR VICE PRESIDENT, 
                    NERA ECONOMIC CONSULTING

                    STATEMENT OF ANITA ORBAN

    Ms. Orban. Thank you, Mr. Chairman. Thank you, Chairman 
Whitfield, and the members of the subcommittee. I am honored to 
be here today to provide perspective on the importance of LNG 
export legalization for Central Eastern Europe. We applaud the 
leadership of this committee to look at the geostrategic aspect 
of the LNG export. On March 6 four ambassadors of the four 
Visegrad countries signed a letter to Speaker Boehner and 
Majority Leader Harry Reid to urge them to recognize the 
overall importance of U.S. engagement in Central Eastern 
Europe, and more specifically in the area of energy security. I 
would like to ask you, Mr. Chairman, to enter this letter into 
the record along with my written remarks.
    Mr. Chairman, we are in the middle of the largest security 
crisis that Europe has seen since the end of the Cold War, and 
energy dependence, especially that of Ukraine and Central 
Eastern Europe is on everybody's mind. Energy import dependence 
is one of the key factors that limit the political options 
available to the Central Eastern European countries as U.S. 
allies. The popular interpretation of energy dependence, and 
natural gas dependence in particular, is widely associated with 
supply cutoffs. Supply cut may indeed happen, with 
unpredictable consequences for countries in the region. Yet, if 
used, it would seriously hurt the supplier as well, in the 
short term with loss of revenue, in the midterm with loss of 
its markets.
    There is another aspect of dependency, however, which is 
much less discussed, and that is its price implication. It is 
prices that provide the best economic and political tool for 
the monopoly supplier. Whoever has the monopoly calls the 
shots. Higher prices inflict a very tangible cost on the 
dependent country's economy and population by stuffing the 
supplier's coffers, and allowing it to reap the economic grants 
to finance further political, economic, and military actions. 
Most importantly, it can be applied in a discriminatory manner. 
The only way to limit the monopoly supplier's ability to use 
the price weapon is to establish alternative supplies. Once 
they are in place, the monopoly supplier can no longer use the 
price discrimination tool freely.
    For Central Eastern European countries the most important 
task is today to create the credible alternative options. To do 
that, we need to do two things. First of all, we need to 
enhance and ensure the capacity of the pipeline system and of 
the infrastructure, and we need to secure the necessary volumes 
of additional natural gas import. The first is our homework. 
Only we can do that, to create robust energy infrastructure, to 
create access to alternative supply, to create access to energy 
terminals. It is beyond the limit of my presentation to go into 
details to explain how much and what we have done, but I am 
very happy to elaborate on them during the Q and A session.
    However, Europe has been much less successful in building 
up the necessary volumes for alternative supply, and this has 
been largely out of the control of Europe. EU and U.S. 
sanctions against Iran, the slower than expected progress in 
Iraq, the upheaval in North Africa postponed, or put on hold 
indefinitely, potential alternative pipeline supplies. With no 
pipeline gas option available, the most credible alternative is 
to have access to the energy market. And it is pretty much only 
the American LNG which can create the credible volume to have a 
real impact in Central Eastern Europe.
    The urgency of establishing the region's access to LNG 
means that the United States Congress has a potent tool at its 
disposal. By clearing the way for U.S. shale gas to reach 
America's Central European NATO allies, it would provide 
significant protection against the deployment of the energy 
weapon. It is simply not true that lifting the natural gas 
export ban today would not have an immediate effect in the 
region. It would. It would immediately change the business 
calculus for infrastructure investments, and send an extremely 
important message of strategic reassurance to the entire 
region.
    Access to LNG would also assist Ukraine. During 2013, two 
capacities, reverse flow capacities, were opened toward 
Ukraine, one from the direction of Hungary, another from the 
direction of Poland, enabling the supply of natural gas to 
Ukraine on purely market terms.
    Expediting LNG export is an elegant, yet very effective 
tool, which is relatively cheap to use. It is a historic 
opportunity to send a strong message of freedom to the region 
by simply letting the markets work. This is not a partisan 
issue. It is an American issue that all statesmen in this 
country must show leadership on.
    Mr. Chairman, members of the committee, I believe that 
doing away with these export limitations would make economic 
sense, even in better times, but there is nothing like a crisis 
to focus the mind. As representatives of a country that Central 
Eastern Europe has traditionally looked to for leadership, you 
know well that you do not always have the luxury of choosing 
the time to make some of the most necessary decisions. But with 
the post-Cold War settlement crumbling before our eyes, if 
there was ever a time for your leadership, it is now. And if 
there was ever an issue that would do as much good at as little 
cost, it is the issue at hand. Thank you for your attention.

    [The prepared statement of Ms. Orban follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thank you, Dr. Orban. And at this time I 
will recognize the gentleman, Mr. Bacchus, for 5 minutes.

                   STATEMENT OF JAMES BACCHUS

    Mr. Bacchus. Thank you, Mr. Chairman, and it is always good 
to be back in this House. I had the privilege some time ago of 
representing the State of Florida in this House. Today I want 
to emphasize that I am here today representing no one but 
myself. I am speaking solely for myself. Furthermore, I am here 
today not to speak on issues of policy, but on issues of law, 
specifically on issues relating to international trade law 
under the WTO treaty. And I believe I have been invited here 
today because, when I became a former Member of the House, I 
went to Geneva and became one of the seven founding Judges on 
the appellate body of the World Trade Organization, and I 
served for nearly a decade there, including two terms as the 
Chief Judge there. I have written quite a few WTO legal 
opinions.
    So that is why I am here today. I am here because, largely 
overlooked in the emerging Congressional debate so far about 
restricting exports of natural gas, is the possibility that 
such restrictions are inconsistent with the obligations of the 
United States to other members of the WTO under the WTO treaty. 
This matters, because if our restrictive energy measures are 
inconsistent with our treaty obligations, the United States 
risks losing a case in the WTO, and such a loss could cause the 
WTO to authorize expensive economic sanctions against us 
through the loss of previously granted concessions in other 
sectors of our international trade.
    Mr. Chairman, WTO rules apply to trade in natural gas and 
other energy products in the same way they apply to other 
traded products. Some suggested that energy products are 
somehow separate and apart from other treated products in how 
WTO rules apply to them. There is no legal basis for this view. 
Among WTO rules that bind us in the WTO treaty are rules 
prohibiting bans, quotas, and other forms of quantitative 
restrictions on exports, unless those restrictions take the 
form of export taxes. Now, as all the members know, taxes on 
exports are prohibited by our Constitution in the United 
States, so energy export taxes are not an option for us. WTO 
rules also permit temporary restrictions on exports to prevent 
or relieve critical shortages of essential products, but that 
can hardly be said to apply to our current situation with 
respect to supplies of natural gas.
    A number of legal concerns occur when considering the 
consistency of the current U.S. process for licensing exports 
of natural gas with WTO rules. First of all, the current U.S. 
process gives special treatment in licensing exports of natural 
gas to countries with which we have a free trade agreement. 
Natural gas exports to these countries are deemed to be in the 
public interest, and permitted without delay. In contrast, the 
Department of Energy has elected to subject licensing requests 
for LNG exports to non-FTA countries to a thorough and lengthy 
assessment intended to determine whether exploits of natural 
gas to those countries serve our public interest. In this way, 
applicants that ship LNG to FDA countries are preferentially 
given expedited review in the licensing process, as compared to 
those applicants that will ship LNG to non-FTA countries.
    When seen through the prism of WTO law, Mr. Chairman, these 
are measures affecting trade that result in discrimination 
between like traded products. The legal question under WTO law 
is whether this discrimination can be excused by an exception 
in WTO law that allows trade discrimination as part of a free 
trade agreement. But it is not at all clear that all of the 
FTAs of the United States fit within the definition in the WTO 
treaty of a free trade agreement.
    Fortunately, H.R. 6, introduced by Congressman Gardner of 
Colorado, and currently under consideration by this committee, 
would eliminate this potential legal concern by providing that 
natural gas exports to all members of the WTO would be deemed 
to be in the public interest. Depending on how the Department 
of Energy chooses to implement H.R. 6, however, it may not, in 
its present form, remedy several other legal concerns arising 
from the current U.S. licensing process under WTO rules. I, 
frankly, could not tell from the testimony earlier today by the 
representative from the Department of Energy how precisely they 
view this bill, how they would change what they do if this bill 
is enacted, or even how they engage in their process today, nor 
can, really anyone else.
    One remaining legal concern under WTO rules is the question 
of the lengthy delays in granting export licenses. H.R. 6, in 
its third paragraph, would provide for immediate approval of 
pending applications, but what about new ones? Under WTO rules, 
a license can clearly be a restriction on exports. And case law 
has defined the notion of a restriction broadly to include 
licensing procedures that post limitations on actions, or had a 
limited effect, such as by creating uncertainties, or by 
affecting investment plans. In one case, delays of up to 3 
months in issuing export licenses were found to be inconsistent 
with the rules.
    Now, to be sure, liquefied natural gas is, practically 
speaking, not just another widget. Before it can be shipped by 
sea, natural gas much be transformed in a careful way that 
requires special facilities. Some period of deliberation, and 
citing, and evaluating LNG facilities seems reasonable. The 
FERC process of environmental consideration is probably 
perfectly defensible under WTO rules. But what would WTO Judges 
be likely to say about delays in issuing export licenses that 
last much longer?
    Mr. Whitfield. Mr. Bacchus, I have let you go a couple 
minutes over. If you would just summarize, and----
    Mr. Bacchus. Let me make one more point, Mr. Chairman, and 
then I will be happy to answer questions of the members on 
these other issues. And I congratulate the committee on asking 
first about our WTO obligations before enacting legislation, 
rather than finding out about them later in Geneva.
    An additional remaining legal concern is the lack of 
clarify, and how the Department of Energy defines the public 
interest. Conceivably even lengthy delays in the licensing 
process could be excused under WTO rules if it could be proven 
by the United States that such delays are necessary to protect 
life or health, or are related to the conservation of 
exhaustible natural resources, so long as the process is not 
applied in a way that results in arbitrary or unjustifiable 
discrimination, or disguise restriction on international trade.
    Now here is my final point, Mr. Chairman, for now. If, 
however, in determining the public interest the DOE considers 
as a factor the effect the proposed exports will have on 
domestic producers that use natural gas in making their 
products and their competition with like foreign products, then 
these exceptions to WTO rules will not be available, and will 
not excuse a WTO violation caused by lengthy licensing delays.
    In fact, Mr. Chairman, the United States of America has 
been making precisely the point that I have just made just now 
in a case against China in the WTO, dealing with Chinese 
restrictions on exports of rare earth elements. Most likely the 
United States will win this case. A WTO panel ruling is 
expected tomorrow. If we have proven the facts, we will prevail 
on the arguments I have just made, that are some of the same 
arguments that we heard earlier today.

    [The prepared statement of Mr. Bacchus follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thank you so much, Mr. Bacchus. At this time 
I recognize Mr. Schryver for 5 minutes.

                 STATEMENT OF DAVID G. SCHRYVER

    Mr. Schryver. Chairman Whitfield, Ranking Member Rush, the 
members of the subcommittee, I appreciate this opportunity to 
testify before you today, and I thank the subcommittee for 
calling this important hearing on The Domestic Prosperity and 
Global Freedom Act introduced by Congressman Gardner. My name 
is Dave Schryver, and I am the Executive Vice President for the 
American Public Gas Association. APGA is a national association 
for publicly owned natural gas distribution systems. There are 
currently approximately 1,000 public gas systems located in 37 
States in the U.S. Publicly owned gas systems are not-for-
profit retail distribution entities owned by, and accountable 
to, the citizens they serve.
    As a result of advances in natural gas drilling techniques, 
U.S. consumers have enjoyed affordable energy prices, and a 
manufacturing renaissance is underway. The U.S. now has a 
unique opportunity to implement its long declared, but never 
seriously pursued, policy of energy independence, and thereby 
to fundamentally transform key variables affecting both our 
national security and domestic economy.
    However, APGA is concerned that the export of LNG threatens 
this opportunity. There have been about 30 applications filed 
at the Department of Energy, and the sum total of LNG that 
could be exported, should all these facilities go forward, 
would equate to nearly half of current U.S. natural gas 
production. This potential level of export could have serious 
adverse implications not only for U.S. national security, but 
also for domestic consumers of natural gas, and the economy as 
a whole.
    The pursuit of energy independence requires that the United 
States wean itself off of imported oil, which accounts for 
approximately 40 percent of our domestic use. The two major 
consumers of foreign oil in the United States are the 
transportation sector and the industrial sector. By converting 
commercial vehicles to natural gas, the United States can take 
giant steps towards energy independence and reducing greenhouse 
gas emissions.
    To accomplish this goal, natural gas in the United States 
must remain plentiful and reasonably priced. U.S. natural gas 
prices today are affordable, competitive, and relatively stable 
in contrast to the situation just a few years ago. This 
important change in gas pricing is the product of both the 
newly available supplies of natural gas and the fact that our 
natural gas market is largely limited to North America. At 
these prices, natural gas vehicles are price competitive with 
gasoline.
    By contrast, the large scale export of natural gas via LNG 
will not only play havoc with the current supply and demand 
situation, enhance the price of natural gas, but will also, 
because the price of LNG abroad is tied to the international 
oil market, inevitably link the domestic price of natural gas 
to international oil markets, which are substantially more 
volatile, and less transparent than our domestic market.
    APGA is not against free trade, but when important policies 
collide, nations must make choices. U.S. policymakers must 
carefully consider and prioritize the use of domestic resources 
according to the national interest over both the long and short 
terms. Ultimately, U.S. LNG will be sold by private firms to 
the highest bidder without any consideration of U.S. 
geopolitical interest. Wherever these firms can obtain the 
highest price for natural gas is where the gas will be sold.
    Proof of this assertion can be found in the already 
approved applications for export of natural gas to non-FTA 
countries. The seven approved applications have finalized 
contracts, or are negotiating contracts, to sell U.S. gas to 
Japan, South Korea, and India. Since the goal of profit 
maximization applies to all pending non-FTA export 
applications, any future exports will also go where the price 
is highest, and not where U.S. geopolitical interests may wish 
them to be sent. In addition, Ukraine, unlike its likely Asian 
competitors, currently has no LNG import facilities, and 
therefore no capacity to receive U.S. gas in the near future. 
Rather than exporting LNG, a focus should be on exporting the 
drilling technology that has enabled producers in this country 
to tap into our huge shale reserves. There are vast shale 
reserves in Europe, including in Ukraine, that are there for 
the taking.
    APGA strongly believes that natural gas has a critical role 
to play in keeping energy prices affordable for U.S. consumers, 
reducing our dependence on foreign oil, reviving domestic 
manufacturing. No matter how well intentioned, the projected 
price increases of exporting LNG threatens those three 
objectives. In lieu of exporting our affordable premium fossil 
fuel, Congress should focus on adopting policies that encourage 
greater domestic demand for natural gas. This is a much better 
choice in both the short and long term to accelerate the 
transition from imported oil to domestic natural gas to fuel 
our transportation sector, revitalize our manufacturing 
industry, and improve our balance of trade.
    We urge the committee to carefully consider the adverse 
impact that exporting LNG will have on millions of natural gas 
consumers in the U.S., who will feel the impact of higher 
prices resulting from exposure to the global export market. 
APGA thanks you for this opportunity to testify, and we look 
forward to working with this committee on this important issue.

    [The prepared statement of Mr. Schryver follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thanks very much, and, Mr. Ditzel, you are 
recognized for 5 minutes.

                 STATEMENT OF KENNETH H. DITZEL

    Mr. Ditzel. Mr. Chairman, and members of the subcommittee, 
thank you for your invitation to present testimony before the 
Subcommittee on Energy and Power. My name is Ken Ditzel. I am a 
principal at Charles River Associates, where I have authored 
three reports on LNG exports since February 2013. The client 
for these reports has been Dow Chemical. The views I express 
today, though, are mine, and do not necessarily reflect the 
views of CRA or others.
    Now, Dr. Montgomery and I have conflicting views on the 
value of LNG exports. I first want to state that Dr. Montgomery 
and I have known each other for almost 10 years, and we worked 
together for almost seven. He is a great person, and I agree 
with David on many other subjects where he is given 
Congressional testimony, but this time is different. The reason 
is that LNG exports could present serious opportunity costs. 
Why? It is because gas-intensive manufacturing creates twice as 
much GDP, almost five times the permanent jobs, and eight times 
the construction jobs as LNG exports on an equivalent 
consumption basis. Also, manufacturing distributes these 
benefits across more States, which means more people win in 
more States. Finally, manufacturing has a larger trade balance 
impact than LNG exports. Assuming equivalent consumption, 
manufacturing would create a $34 billion trade benefit 
differential.
    Given these higher benefits, we need to ask ourselves two 
key questions. One, is there a price point where the 
manufacturing renaissance will be at risk? Two, could U.S. LNG 
exports raise prices to this level? To answer the first 
question, price levels approaching almost $8 per million BTU 
would end the manufacturing renaissance. We saw these price 
levels in the mid-2000s, and the job destruction that ensued. 
The answer to the second question is yes. LNG exports, if left 
unconstrained, could raise domestic gas prices above $8 per 
million BTU. Why? It has to do with net back pricing. Today the 
U.S. net back price would be $10 per million BTU, if there were 
exports.
    Turning to the two NERA reports, I have a number of 
criticisms about their assumptions, process, and results. Given 
DOE's reliance on the first NERA report, it is surprising that 
the DOE never had the report peer reviewed, as it would have 
uncovered a number of concerns, such as, one, the NERA report 
forecasted no exports in its reference cases, even though 30 
BCF per day of applications were submitted at the time. Second, 
a lack of transparencies in results, full output data by 
scenario were missing on supply and demand by region in 
international LNG import prices. Third, resource owners win, 
while the rest of the economy loses. Fourth, assumptions that 
the LNG market is competitive. We know it is not because OPEC 
influences the oil prices by which LNG is indexed.
    In reviewing the second NERA report, I found more concerns. 
One is NERA's now forecasting five BCF per day in the long term 
in its reference scenario, even though actual LNG export 
margins have slightly decreased between the timing of the two 
reports. The second is NERA's results are inconsistent. NERA 
forecasts all have prices to be $3.44 in 2018 in its reference 
scenario. Backing into this price using NERA's output tables 
gives lower prices, which means LNG exports would be 
uneconomic, and would not occur in their model.
    Three, NERA forecasts almost one BCF per day of exports by 
2018, which is only 45 percent of the Sabine Pass capacity, yet 
Sabine has a take or pay contract that would put the facility 
near 100 percent. Also, at 45 percent, one has to wonder if 
Sabine is a losing proposition, which shareholders wouldn't 
want to hear. Fourth, NERA forecasts international gas prices 
to drop from $16 today to $11 by 2018. That is because NERA 
models the energy market as competitive, and we know it is not. 
The BG group, however, forecasts LNG import prices to remain 
close to today's levels from the next few years.
    In summary, I believe the value of LNG exports is still 
very much in question. The process employed thus far has been 
opaque, and I encourage the DOE to open up the process, and 
reconsider the reports it relies upon for determining what is 
in the public interest.

    [The prepared statement of Mr. Ditzel follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thank you very much. At this time, Dr. 
Montgomery, you are recognized for 5 minutes.

                STATEMENT OF W. DAVID MONTGOMERY

    Mr. Montgomery. Thank you, Mr. Chairman, Ranking Member 
Rush, and Mr. Green, Mr. Griffith, and Mr. Gardner. I 
appreciate the opportunity to be here, and thought I might as 
well mention all of you. I led both NERA's study of the 
macroeconomic impacts of LNG exports that we did for the 
Department of Energy, and also our recent update. I have 
provided a copy of this report with my testimony. I would like 
to request that that be entered for the record. I am also 
speaking today for myself, not for NERA, or any other 
consultant there, or any of their clients. These are my 
opinions.
    We did, as Dr. Gant mentioned, in our new study update our 
data to the most recent complete Energy Information 
Administration Annual Energy Outlook. What Mr. Ditzel refers to 
as our forecasts are simply what was in AEO 2011, when we did 
the DOE study, and 2013, in our current study. The reference 
case was calibrated precisely to the AEO forecast, as close as 
you can come. So we did the update. We also looked at higher 
levels of exports than we did in the previous study. We looked 
at the full amounts of exports that the market would take in 
each of the scenarios we developed. And what we found, again, 
was that LNG exports would provide net economic benefits to the 
U.S. in all the scenarios we examined, and the less the 
regulators restricted U.S. exports, the greater the benefits 
would be.
    Indeed, the largest net benefits were achieved when no 
limit was set on LNG exports by DOE. But that didn't mean that 
exports are unlimited, because the market would limit them. 
And, put another way, there is a sweet spot, I agree, but the 
sweet spot is only going to be found by letting the market work 
to discover it. We are not going to be able to discover a sweet 
spot through arguments here, or through analysis. The sweet 
spot is the point at which the value in domestic use and the 
value in exports are balanced off by the market.
    We also find that the benefits of LNG exports will be 
distributed broadly, and we looked at this more carefully than 
we did in the previous version. Wage growth will be slightly 
slower, but it is not true that it is only rich land owners in 
Wyoming and North Dakota that will be getting the benefits. 
Workers benefit from increased values of their 401(k)'s and 
retirement savings. Everyone benefits from a source of 
Government revenue that doesn't retard growth. And there is the 
basic point of international trade that when we increase 
exports, it directly reduces the cost of the other imported 
consumer goods that people buy. So there is an offsetting 
effect.
    You know, there is a demand for our exports. Other LNG 
exports go up, buyers need dollars. Buyers go out and acquire 
those dollars. That drives the value of the dollar up. That 
drives down the price of all the other goods that we import. 
For consumers, that is what turns out to be a wash, and it is a 
very important part of understanding the trade implications.
    Now, you have heard that the chemical industry will create 
more GDP if it were allocated the BCF of gas than the natural 
gas industry would create by exporting it. That is a false 
dichotomy, and bad economics in the bargain. The same thing 
could be said of every industry that uses a basic commodity, 
for example, grocery manufacturers, who use the same 
agricultural products that we export. Does this mean that we 
need to establish a law that creates a public interest 
requirement through determining whether agricultural exports 
are in our national interest? No. The market sorts that one out 
perfectly adequately.
    The whole notion that chemicals, or other manufacturing 
industries, need Government allocations of energy to survive is 
false. There is just no problem for the Government to solve. 
The competitive advantage of U.S. manufacturing won't be taken 
away by exports. I would like to put up one slide here which 
shows what happened. This is the manufacturing renaissance. 
This is the effect of lower natural gas prices. The blue line 
shows 2005. The United States is the highest cost producer of 
chemicals at that point. It was really on the verge of being 
knocked out of business. Now we are tied with the Middle East 
as the lowest cost producer. We have a 60 cent a pound 
advantage in ethylene production over our nearest rival.
    So I did a calculation. I asked, what is the maximum impact 
that we see from natural gas exports across all our cases? It 
is not this fantasy that we are going to be linked to oil 
prices, and suddenly jump to 10 or $12 a barrel. It is a $1 
increase above what prices would otherwise be. That $1 increase 
in natural gas prices converts to 5 cents a pound on the cost 
of producing ethylene. That is out of a 60 cent advantage that 
we have already.
    It is true, U.S. manufacturing gets a huge advantage over 
its rivals in countries that have to import natural gas, and we 
get it because our gas is so much cheaper, and that there is 
enough for manufacturing, and enough for the exports as well. 
In fact, when we looked at exports, we found that almost all of 
the increased gas for exports was coming from additional 
production. Almost none of it was coming from manufacturing. 
Manufacturing can afford to buy the gas because it has such an 
advantage. It is a false dichotomy to say it is either or.
    Let me show two other slides. This one shows that there are 
employment impacts, and they are positive impacts. There are 
direct jobs that are going to be created by building LNG 
facilities. We show them here that they will peak before 2018, 
2,000 to 40,000 jobs, depending on how fast we get on with the 
business of exporting LNG. That actually converts into reduced 
unemployment. Lot of talk about creating jobs, and putting 
people to work 40 years from now is nonsense. CBO, and most 
other forecasters, assume that once we get out of this 
recession, we will stay approximately at full employment. What 
matters is between now and 2018, because that is when CBO says 
we will be returning to full employment. Using a standard kind 
of macroeconomic theory, we looked at this and determined that 
we would get something up to 45,000 additional workers joined 
out of the unemployed and put to work at the maximum level of 
LNG exports that we came across.
    Final chart, let me show, this would have an effect on 
Russia. I will leave it to others to talk about why it is our 
strategic advantage to do this, but what this shows is that if 
we do two things, one is if we remove bureaucratic restrictions 
on exports, and the second is if we actually encourage the 
shale revolution, rather than restricting it through ham-handed 
regulations or unjustified fears, we can knock out five 
trillion cubic feet of Russian exports. It won't be because we 
are exporting directly to Russia, to Europe, it is because we 
will be going where we have transportation cost advantages to 
go, and others, in particular the Middle East and Africa, will 
be shipping their gas to Europe, and knocking Russia out of 
that market.
    That will face Russia with two choices, and it is the 
choice every monopolist has to face when a competitor appears. 
They either have to cut back their production in order to 
maintain high prices, cede most of their market, or they have 
to take much lower prices. We project that, in the optimistic 
supply case that EIA has developed in 2013, we could reduce 
Russia's natural gas export revenues between 40 and 60 percent 
if we free up LNG exports. I think that is a significant hit to 
the Russian economy, and one that should get their attention. 
Thank you for your indulgence.

    [The prepared statement of Mr. Montgomery follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Thank you, and thank all of you for your 
testimony. We appreciate it very much. We know that, on this 
subject matter of exporting LNG, that there are a lot of 
different perspectives to review it from. One is the 
geopolitical arena, and from an economic standpoint, it sounds 
like, Dr. Montgomery, you believe that economically it would be 
a tremendous benefit for us to export natural gas. And, Mr. 
Ditzel, I guess it would be fair to say, from your perspective, 
it would be more of a negative than a positive overall.
    So, I want to get back to that in just a minute, but, Dr. 
Orban, you have heard the argument that because of the time 
that it takes to put in infrastructure to export that really 
there is not going to be any immediate benefit to European 
countries that are relying on natural gas from Russia. Would 
you agree with that assessment, or do you disagree with that 
assessment?
    Ms. Orban. Thank you, Chairman. I would disagree with this 
assessment, and let me highlight two points here. One is, if 
the decision is made to expedite U.S. energy to its allies, it 
can have two impacts. One, it is a strategic reassurance of the 
relationship between the European allies and your United States 
immediately. It sends a very important geopolitical signal at 
that very moment. Second, the economic impact. We have numerous 
cases, and in my written testimony, I also cited one case, when 
a future prospective alternative already had a price impact on 
the dominant supplier's pricing. So we believe that it would 
have an immediate price impact on the dominant supplier's 
pricing in Central Eastern Europe.
    And also let me add, when we are talking about the energy 
industry, we are talking about decades of investment. An 
investment will reach its maturity in several decades. We are 
talking here about a couple of years, which is, in the energy 
industry, it is like talking about tomorrow, or the day after 
tomorrow. And let me also take this opportunity to highlight 
that it is very important for us that this issue here, what we 
are discussing today, is a non-partisan issue in the United 
States. And I would like to highlight and recognize Congressman 
Gardner for introducing this bill, and I would like to 
recognize also Ranking Member Rush for acknowledging the 
geopolitical aspect of this important issue.
    Mr. Whitfield. Let me ask you, when you import natural gas 
from Russia by way of the Ukraine, or Belarus, or however, what 
is the length normally of those contracts?
    Ms. Orban. The current length of those contracts is 20 to 
25 years. They are long term contracts.
    Mr. Whitfield. Your microphone.
    Ms. Orban. Sorry. The length of those contracts is 20, 25 
years. They are long term contracts, which were usually 
concluded in the '90s. So a lot of countries, we see their 
contracts are expiring in the next couple of years. If we are 
talking about renegotiating of the contract, or the future of 
the gas market in Central Eastern Europe, for all these 
countries, knowing that the credible option is there to buy 
2018, 2019, onward, it gives an absolutely different 
negotiating position.
    Mr. Whitfield. So certainly, from your perspective, this is 
a crucial time, with these contracts to expire?
    Ms. Orban. It is the time.
    Mr. Whitfield. Yes. And where do you import gas from, other 
than Russia, in Hungary, for example?
    Ms. Orban. We are importing from Russia, as well as we have 
access to a hub in Baumgarten, which is in Austria, where we 
are able to import not on a long term basis, but on a spot 
basis. But if we talk about the molecules, all the molecules in 
the pipeline system are Russian, of course, in that part of 
Europe.
    Mr. Whitfield. And most of this natural gas that you are 
importing, it is used for electricity, or for----
    Ms. Orban. It is used for heating, it is used for 
manufacturing, and it is used for electricity. The case of 
Hungary is pretty important to note that \3/4\ of the 
households use natural gas for heating. As a result, it is an 
extremely important social, as well as political issue, the 
energy security, as well as the price of gas.
    Mr. Whitfield. And one time you had indicated that in 
Croatia they were in the process of building an import facility 
there that Hungary would benefit from. Is that the case?
    Ms. Orban. There is a plan to build an energy facility in 
Croatia. If it is built, Hungary would benefit from that 
immediately, as well as many other countries in the region. We 
inaugurated a pipeline between Croatia and Hungary in 2010, 
with six billion cubic meters capacity, which is a pretty big 
capacity, compared to the size of the market there. It is three 
times of the market of Croatia. It is about 60 percent of the 
market of Hungary. But for the LNG terminals to be built, you 
need the volume. You need the supply on the other end. And the 
LNG market currently is pretty tight. There is not really new 
LNG coming into the market. To get that investment feasible and 
up and going, you need the credible opportunity and alternative 
of energy entering the market.
    Mr. Whitfield. Well, my time has expired. I wanted to 
discuss this difference between Mr. Montgomery and Mr. Ditzel a 
little bit, and also the WTO, but I am going to have to 
recognize Mr. Rush for 5 minutes at this point.
    Mr. Rush. It is very interesting, Mr. Chairman, I want you 
to know. We are seeing a resurgence in American manufacturing, 
and I want to make sure that we don't do anything to undermine 
and hinder, or hamper, this resurgence in manufacturing. But I 
am also quite interested in the geopolitical aspects of this, 
and I don't know whether or not Dr. Orban could speak to this, 
but I certainly want to ask.
    I grew up on the streets in Chicago, and it has been my 
experience that a success of a bully is that there is a chance 
to be a bully until you stop them from being a bully. And you 
stand up to a bully. You call the bully out. And so, in my own 
way, I look at Putin as being a bully. And if we don't do 
something in here, in terms of the LNG, or whatever, what can 
you see, or tell us, or give us an idea, where does he go next? 
Who is he going to bully next? Do you have any idea about that? 
And then I am going to get back to the matter at hand, but I 
just want to take the opportunity, because I think if you don't 
stop a bully, he is going to keep on bullying. That is the 
nature of a bully, until you stand up to him. So is that one of 
your concerns?
    Ms. Orban. Thank you, Mr. Rush. If I understood you 
correctly at the beginning of your question, you allowed me now 
to answer, but you said that you will still----
    Mr. Rush. OK.
    Ms. Orban. --ask it. I am not sure whether anybody is able 
to answer your question.
    Mr. Rush. All right. Well, let us go back to something 
maybe somebody could answer. Mr. Schryver, the American Public 
Gas Association has been working with Alcor, Newcore, and other 
major U.S. manufacturers on the issue of LNG exports. And you 
call have significant concerns about exporting LNG. The 
Industrial Energy Consumers of America is also very concerned 
that you all will oppose the bill before the subcommittee. So, 
based on your conversations with these companies, why do you 
think that they are so concerned about LNG exports?
    Mr. Schryver. From the perspective of our members, we are 
concerned about the price impacts first and foremost. Our 
members are focused on providing safe and affordable natural 
gas to their customers, so that is one. We are also concerned 
about the impact LNG export is going to have on efforts to 
increase our energy independence. That is number two. And 
lastly, you know, there has been a number of studies out there, 
you know, whether there is a net benefit or not. And when our 
members look at their natural gas customers, half the people 
they serve on average, you know, don't own stock, and those 
that do may not necessarily own stock in a natural gas 
production company, or a company that is going to benefit from 
LNG production. So, from that standpoint, they really see no 
benefit from LNG export.
    Mr. Rush. All right. Mr. Ditzel, I understand that Dow had 
commissioned some of your work on LNG export impacts?
    Mr. Ditzel. Yes.
    Mr. Rush. Yes. Are Dow and other manufacturers right to be 
worried about the effect of LNG exports on the price of natural 
gas in the U.S.?
    Mr. Ditzel. They absolutely do. I have enumerated in all my 
studies the impact of LNG exports was going to be significant. 
If we leave it unconstrained, we will see prices rising above 
$8 per million BTU. I have raised this concern many times 
because I have some serious questions about the quality of the 
NERA report. As I pointed out in my oral testimony, and also in 
my written testimony, there are a number of flaws where the 
numbers just don't add up or make sense.
    And, for example, I pointed out that NERA comes to $3.44 
per MCF in 2018 in its reference scenario. The problem is that 
when you look at their output tables and you add it all up, it 
comes to a number that is lower, which means you wouldn't 
export. So there are a number of concerns with the NERA----
    Mr. Rush. My time is running out. What about the jobs? They 
are--large volumes of LNG exports. How many jobs are at stake?
    Mr. Ditzel. Well, when we did our analysis, and looking at 
the job impact, we found that there is a five time impact by 
manufacturing relative to LNG exports. So that is roughly 
180,000 jobs that are created from manufacturing at five BCF 
per day, and a fifth of that with LNG exports. And it is only 
something that is a concern if LNG prices rise, or force prices 
to rise above $8 per million BTU, which we think will happen.
    Mr. Rush. And Dr. Montgomery don't agree with you. He 
disagrees. And why do you think he is wrong about his----
    Mr. Ditzel. Sure.
    Mr. Rush. --analysis?
    Mr. Ditzel. He ties his reports and his analysis to the EIA 
reference case. And as I have shown in my slides, and in my 
testimony, the EIA reference case is consistently wrong, if you 
look back at history, and never hits any of the spot prices. So 
he ties it to a reference case that just, you know, that is 
likely to be wrong going forward. And in that case, we have 
analyzed the EIA analysis, and showed that the implied import 
price, in their analysis, was around $12 per million BTU in the 
long term, and that is consistent with what Dr. Montgomery 
uncovers in his analysis, and that is a big drop from today's 
prices. So his analysis thinks that the LNG exports from the 
U.S. are going to make a big dent.
    Mr. Gardner. Gentleman's time has expired. I am going to 
try to do this better than last time. I think last time I hit 
the mute all button. I guess I am going to try not to do that 
this time.
    To Dr. Montgomery, I had a question for you. Recognize 
myself 5 minutes, I apologize. We heard a lot about price 
impact, and investments in various industries. If there is an 
overabundance of supply of natural gas in the United States, 
will that erode capital investment in production within the 
United States of natural gas?
    Mr. Montgomery. Yes. The investment and the, you know, 
exploration and production moves very directly with the price 
of natural gas. If we find ourselves, again, with a glut of 
natural gas, it could lead to collapses temporarily, as we 
actually probably saw a couple of years ago. You know, $2 per 
million BTU price of natural gas were, I think, largely driver 
by overextension of production on leases that had to be 
drilled. But it is all a matter of degree. As we see additional 
demand for natural gas exports coming into the market, that 
will bring forth production. I will let EIA defend its own 
record. I think that Mr. Ditzel seems to forget that every 
forecaster misses precise numbers. The point is that EIA has 
done a very good job on average of keeping up with what we are 
thinking with kind of current thinking about the future.
    But we followed EIA's resource characterization and supply 
curves. And what they have concluded, and this is new in the 
AEO 2013, and even more so in 2014, is that we can produce a 
lot more natural gas without the price going up very much. That 
is what keeps the price of natural gas down. That is why we can 
get, in most cases, an additional four or five, six, eight TCF 
of natural gas, with less than a $1 increase in the world oil 
price. It is because production responds very aggressively to 
the new demand, and it doesn't take much of a price increase to 
get enough natural gas produced to satisfy all of that demand.
    Mr. Gardner. And Dr. Montgomery, Dr. Orban, I think this 
question could be addressed to both of you. In your testimony, 
when you talk about Russia, you say monopolists can be 
restrained as effectively by potential competition as by actual 
production by their rivals. Can you please talk about that in 
more detail?
    Mr. Montgomery. Yes. We have many examples in the United 
States, and overseas, of companies which may be the, you know, 
largest incumbents in a market, but as long as they can see 
that there are competitors ready and waiting to come into the 
market, with the capacity to, you know, meet their price, or to 
provide supplies at competitive prices, then that is going to 
discipline their pricing. We call it limit pricing phenomenon. 
Don't price any higher than what it takes to bring somebody 
else into the market and take it away from you. I think that is 
exactly what we see with Russia.
    But what is critical to it is that there not be this 
overhanging risk that all of a sudden an administration will 
decide, no, that is enough exports, and cut them off before 
enough exports can flow to take the market away.
    Mr. Gardner. Dr. Orban, I want to add to that question. 
Have you or your government experienced any issues with Russian 
energy supplies, and if you could please explain that?
    Ms. Orban. As you know, there was a case in 2009, which 
received us a lot of media attention, where for less than 2 
weeks the supply was stopped entirely on the Ukrainian pipeline 
system, which caused serious shortages in Central Eastern 
Europe. It affected the different countries differently. Some 
countries had very severe problems, like Slovakia, or Bosnia-
Herzegovina, or Bulgaria. Many countries needed to shut down 
industries, but there were also countries that residential 
heating was affected. After 2009 State level, as well as the 
European level, they introduced numerous measures, and we built 
numerous new infrastructure to prepare for a potential new 
crisis situation to be able to assist each other based on the 
principle of solidarity, as well as to sustain if there is a 
serious crisis for a longer period.
    Mr. Gardner. And the ability for the United States to 
export LNG, of course, would help mitigate that as well?
    Ms. Orban. Absolutely. As I explained, what we need is 
build the internal capacity. The pipeline system and the 
internal infrastructure in Europe is lagging behind that of the 
United States. That is our homework. We are doing that. The 
other which we need is the extra volume to create the gas to 
gas competition in the market, and that is where the United 
States could be----
    Mr. Gardner. Mr. Ditzel, is it a fair assumption to say 
that the manufacturing renaissance in this country is because 
of the price of energy, and the abundance of energy supply in 
this Nation?
    Mr. Ditzel. Absolutely.
    Mr. Gardner. Are you concerned that a lack of opportunities 
to export will impact investments within energy, and drive 
energy prices up because of a lack of investment in the energy 
sector, as wells are shut in, and production is decreased 
because of that issue?
    Mr. Ditzel. My concern is that, with unlimited LNG exports, 
it will raise domestic gas prices to a point that it will end 
the manufacturing renaissance.
    Mr. Gardner. Dr. Montgomery, what do you say to those who 
say that if there is no limit, that the levels will be 
unlimited?
    Mr. Montgomery. You have a find a buyer, and the U.S. is 
not going to find buyers for gas at the levels that Mr. Ditzel 
is assuming. You simply have to look at supply and demand in 
the global market, and there are far too many countries out 
there who could beat us by several dollars a million BTU in 
delivering gas if our wellhead price was $10. We can't find a 
scenario in which we sell gas at $10 a million BTU because 
nobody in the world wants it at that price.
    Mr. Gardner. Thank you, and my time has expired. Mr. Green, 
the gentleman from Texas, is recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and thank both the 
Chair and the ranking member for having the hearing today on an 
issue that is really important where I come from, an industrial 
area in East Harris County, chemical plants, refineries, that 
are all benefiting from our regionalized natural gas. Our 
committee, in 2005, actually federalized permitting of 
importing LNG because we thought our chemical industry in '05, 
we couldn't compete with North Sea gas, and we were losing 
chemical jobs, as you mentioned, Mr. Montgomery. But now we are 
seeing expansions.
    Of course, my concern is a balance between the producers 
needing to be certain they know their gas will have a market, 
because right now we are flaring a significant amount in South 
Texas, and I know the royalty owners would love to see that 
stop flaring and be able to ship it to someone. But our 
manufacturers need to know they have certainty of the prices 
not to skyrocket. And I would love to help our allies, 
particularly in Eastern Europe, but even if we pass the bill 
today, even--areas not going to export gas until next year. So 
even if we streamlined every permit that is in the line, it is 
not going to get there very quickly. And that is, again, 
depending on the investment that they can get.
    But the American people need to know that they will 
continue to benefit from our natural resources that we are 
seeing in the renaissance. By eliminating the regulatory 
oversight, I am concerned that we should mostly harness the 
agency expertise, and we heard that earlier, streamline the 
decision-making, which I think is being done right now, and 
also define the transparency. And so that is why I am glad we 
are having this hearing today.
    Mr. Schryver, in your testimony you state that the U.S. 
will give up a manufacturing renaissance promised on low 
prices, investing in natural gas. You cite an article in the 
New York Times that South African investment in a gas and 
liquids plant in Louisiana would cost $14 billion. Do you 
believe that the firm relied solely on the NERA study 
commissioned by the DOE to invest in that plant in Louisiana?
    Mr. Schryver. Do I believe the firm that is moving to 
Louisiana is relying solely on NERA? No. Actually, there are a 
number of factors. I don't want to speak for them, but I assume 
there are a number of factors, one of which is the low cost of 
natural gas we are enjoying right now.
    Mr. Green. Well, the CEO of that South African company 
stated that the plant becomes economical when U.S. natural gas 
prices exceed $8 per million BTU. Do you believe that the 
companies that will invest $14 billion to build a new facility 
without forecasting potential natural gas increases, that it 
would be much less than $8?
    Mr. Schryver. From APGA's perspective, we are not sure 
ultimately how much natural gas is going to be exported, and 
every study we have seen has shown that the more natural gas 
that is exported, the greater the price impact will be.
    Mr. Green. Well, even in Texas we have five crackers that 
cost a billion dollars each, and these companies relied on NERA 
study, and they will invest that billion dollars without 
forecasting. Do you believe they would invest that billion 
dollars per cracker without forecasting potential price 
increases?
    Mr. Schryver. I am sure they forecasted potential price 
increases.
    Mr. Green. Mr. Ditzel, how is natural gas priced in 
different parts of the world? Again, we are used to our U.S. 
pricing system, but it is priced in different ways. For 
example, Henry Hub, National Balancing Point, Japanese 
Clearing, S-Curve Oil Index, when signing contracts, how many 
years constitute a long term LNG contract? Could you tell us if 
there is a predominant natural gas pricing in the world, or is 
it really based on geography?
    Mr. Ditzel. It is absolutely based on geography in the U.S. 
We have a very liquid market, with several trading hubs, 
primarily the Henry Hub. Europe is becoming much more liquid, 
with the National Balancing Point and the TTF facility. But in 
Asia, we see that a lot of the pricing is around oil because--
--
    Mr. Green. Yes.
    Mr. Ditzel [continuing]. In Japan and Korea, they do not 
have domestic production capabilities, so they have to look at 
the closest substitute to natural gas, and that is oil. And 
that is why you see the gas indexed to oil, because of the 
substitution effect.
    Mr. Green. OK. And these contracts that have been signed 
already for these plants that are exporting, whether it would 
be Cheniere and Sabine, or, you know, Chesapeake Bay, or the 
one just announced in Oregon, or other ones along the Texas/
Louisiana coast, aren't the average LNG contracts 16 to 20 
years?
    Mr. Ditzel. Many of the contracts are 20 years, and many of 
them are take or pay contracts, which means that you are going 
to take until you think it is no longer economic, and want to 
pay the towing charge, instead of taking the gas. So they are 
going to continue to take as long as prices are economic to 
them.
    Mr. Green. Well, I am real familiar in Texas with take or 
pay, because we had some issues back in the '70s and '80s where 
utility companies had to make those commitments. And, by the 
way, most of these contracts, where is their jurisdiction if 
there is a legal decision? Do they have Federal courts in the 
United States, New York Federal Court, or is it an 
international court?
    Mr. Ditzel. I am sorry, I am not an expert in that area, so 
I can't answer.
    Mr. Green. OK. Because I know oftentimes if it is an 
international contract, and it is not in a U.S. court, again, 
having practiced law, sometimes you can get home-towned in a 
country that might not be as beneficial for our exporting 
partners. Does your analysis include any shifting in 
contracting from Asia, for example?
    Mr. Gardner. Gentleman from Texas, I have given you an 
extra 45 seconds here.
    Mr. Green. OK. Thank you.
    Mr. Gardner. Time is expiring.
    Mr. Green. Just some movement of contracting once we get 
into the export market in the United States?
    Mr. Ditzel. In the analyses that I have looked at thus far, 
I have assumed, based on unconstrained exports from the U.S., 
that we would remain at about 80 percent of the Brent price, 
which is where prices have trended over the last few years, and 
there is a number of drivers to support that trend going 
forward, mainly because Japan is likely going to take a slow 
re-start to its nuclear facilities, Germany is abandoning its 
nuclear facilities, and as the BG Group forecasts, a major 
player in the LNG market, that the market in general will be 
tight through the end of the decade.
    Mr. Green. Thank you, Mr. Chairman, for your patience.
    Mr. Gardner. Gentleman's time has expired. The gentleman 
from Virginia, Mr. Griffith, recognized for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. Let me start off by 
responding to some of the comments I heard earlier today about, 
you know, we can't do any good immediately because it will take 
a while to build. And I am reminded that they believe that 
there is a lot of natural gas, maybe some oil, off the coast of 
Virginia, and that in 2004, when I was a member of the Virginia 
House of Delegates, we begged, let us start on the research, 
let us get going, and the criticism then was it would take 6 to 
7 years, it is not going to do any good. We are still waiting. 
If we had started in 2004, like we had requested, and we sent 
the request to the Governor to ask for the ability for him to 
ask for the President to give us that authority, we would 
already be getting natural gas, and hopefully some oil off the 
Virginia coast. So when I heard that argument I am reminded, 
you know, well, it will never happen if you don't start at some 
point.
    Also, in response to recent questioning, although I think 
you answered it earlier, Dr. Orban, you said that the time is 
now because not only do you need to get started if you are 
going to do these kinds of things, but the contracts are coming 
up in a few years, and if they see that a competitor is on the 
way, that that will affect the negotiations, and the 
discussions, and whether or not natural gas is used by a weapon 
by the Russians. Am I correct in my assessment of your previous 
testimony? OK. And let me let you all know that I represent an 
area that produces coal and natural gas.
    So, Mr. Ditzel, let me ask you this. For a vibrant 
manufacturing sector, wouldn't we also be well advised to not 
strangle our coal industry by regulations? Wouldn't you agree 
with that as well? I assume you are pro-coal, as well as pro-
natural gas usage?
    Mr. Ditzel. I am not pro-coal or pro-gas. I just want to 
say specifically, to address your point, that for the coal 
industry, it is going to be hamstrung by the EPA, by MATS. We 
are going to see a number of retirements, and the EPA has a 
number of proposals ready to affect the coal industry even 
further on carbon pollution. And coal is a backstop for natural 
gas, so if there are not a lot of options, the gas prices will 
rise as a result, because there is no backstop to relieve the 
gas. And specifically in the electricity market, it is nuclear 
and wind, and those are expensive options.
    Mr. Griffith. Well, even in manufacturing of certain 
products, certain plastics and so forth, you could use oil, 
natural gas, or coal, and so we are negatively impacting the 
market that way. And would you also advocate that we not export 
coal for that same reason, so we have a greater supply in the 
United States?
    Mr. Ditzel. Well, to address your point about coal, and the 
use of coal for chemical processes, we have seen that in China, 
and China has put our technology in the U.S. to good use. And 
their chemical industry is built primarily on U.S. technology 
using coal, but we can't do that here in the U.S. because of a 
lot of the regulations associated with using coal in industry.
    Mr. Griffith. And I appreciate that, and we certainly don't 
want to hurt our manufacturing sector if we can help it, but 
clearly it is under assault from a number of different 
directions.
    Dr. Montgomery, if I could ask you, previously, in some of 
your testimony back in April of 2013, you indicated that it 
looked like prices, if we exported, might rise 25, 50 cents, 
somewhere in that range. I think you said today it looks like 
it might be a dollar. Is that accurate, somewhere in that 
range, if we export?
    Mr. Montgomery. Yes. If we export, across most of the 
scenarios that we looked at, we either had no price increase, 
because it didn't turn out to be economic to export. Certainly 
if we had $8 gas in the United States, nobody would want to buy 
it overseas. That actually is the EIA low oil and gas resource 
case. So doesn't much matter what we do about exports in that 
case, nobody is going to want to buy it, and the manufacturing 
industry is going to be killed off, probably by our excessive 
regulation of natural gas. So, got to look at the scenario, but 
the only cases in which we found that we have high levels of 
exports of natural gas are ones where it is so cheap to produce 
that the price of gas stays lower than----
    Mr. Griffith. All right, and I am running out of time, so 
let me ask you this, because my gas folks tell me back home 
that we have so much natural gas in this country that we 
haven't even tapped into yet, that if the price remains above 
$4, in the $5 range, that there will be more production, which 
then offsets any price increase. Is that what you are basically 
saying, is that the production capabilities in this country are 
so great that there won't be an increase of any significant 
amount in the price because they will produce more, because 
they can still make a profit at four----
    Mr. Montgomery. Yes.
    Mr. Griffith [continuing]. $5, $6?
    Mr. Montgomery. That is exactly what I am saying, that we 
will see that most of the exports are satisfied by increased 
production. There won't be much of a price increase, and 
whatever price increase there is is going to be far less than 
the cost advantage manufacturing already has over those poor 
rivals who have to import the gas, and pay as much to move it 
to their countries, as it costs us to buy it here.
    Mr. Griffith. I appreciate that. And, Mr. Chairman, I yield 
back. I do have additional questions to submit into the record, 
and I assume that we will do that at the end of the hearing.
    Mr. Gardner. Absolutely will, thank you. And the gentleman 
from New York is recognized for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair. Mr. Ditzel, in your 
summary you state that the concerns you have raised about 
finding the right level of natural gas exports were submitted 
to DOE, but the DOE public interest determination process, and 
I quote, ``continues in a manner that is opaque for both sides 
of the issue.'' Please elaborate on that statement. What would 
make the public interest determination more transparent?
    Mr. Ditzel. Sure. I think you saw the answer by Dr. Gant 
earlier that it was opaque, that you couldn't get a straight 
answer, and it is one of the complaints on both sides. There is 
a lot of uncertainty around the process, and businesses would 
like to make decisions. What would make it more transparent 
would be to look at the NERA study and first do a peer review. 
I have peer reviewed it, I have given my comments, and 
mentioned many of my concerns. I think a serious peer review 
needs to be given again. Also, in determining the public 
interest, it is not just simply the economic interest. It is 
also the environmental interest, and it is also national 
security interest, and there are no criteria that are set forth 
that you can gauge or measure, and publicly see and understand, 
in any of part of the DOE process.
    Mr. Tonko. Thank you. And your testimony states that you 
believe the NERA analysis used flawed assumptions, and the 
wrong modeling approach. It is my understanding that NERA 
relied on information and procedures used by the Energy 
Information Agency, or the EIA. The EIA's projections, 
especially projections of prices of natural gas, have often 
been wrong. In March 2012 EIA released a retrospective study 
they did of their projections from '94 through 2011, a period 
of 17 years. An energy policy form article summarized some of 
those findings of that analysis. The findings do not give me 
confidence that DOE's conclusion about the net economic 
benefits, let alone the broader public interest, is very 
robust.
    During that 17-year period, EIA overestimated crude oil 
production 62 percent of the time. They overestimated natural 
gas production 70.8 percent of the time, and natural gas 
consumption 69.6 percent of the time. I would also point out 
that in 2003, just 11 years ago, EIA's analysis of the LNG 
market was anticipating we would be importing natural gas, and 
there were plans for a number of LNG import facilities. If DOE 
allows too much export, we may be creating a situation like the 
one we now face with propane, where, in spite of the abundant 
domestic production, our consumers and our domestic 
manufacturers are paying very high prices, and seeing no 
benefit from the increased domestic production.
    DOE is granting export allowances for 20 years. That is a 
long time in a business cycle. Do we need a more flexible 
approach that would allow us to pull back if we have granted 
too much export authority, or if conditions here in our country 
change?
    Mr. Ditzel. Well, first I want to address the EIA comments 
that you made in the reference case, and how consistently wrong 
it has been. Dr. Montgomery made a good point earlier that 
there are scenarios around the reference case. The problem is 
that you have to pick a reference case, and not just blindly 
choose it. You have to step back and say, is it the right 
reference case? The biggest issue with the EIA analysis is that 
they rely on a domestic supply and demand curve. So if you take 
the supply curve from EIA, and you layer on LNG exports, I 
agree you would get the prices that EIA projects.
    But the problem is we leave the domestic demand and supply 
curve when we enter into the global market. We enter the global 
LNG supply and demand curve, and that is where you get netback 
pricing. EIA does not have a global gas trade model. They have 
admitted it. I have heard them say that, so their approach is 
invalid when you are looking at LNG exports. And on the second 
question, do you mind repeating it, Representative?
    Mr. Tonko. Well, the second thing is if we have granted too 
much export authority, or if conditions in the U.S. change, 
should we have a more flexible approach?
    Mr. Ditzel. Well, I think it would be challenging to pull 
back on multibillion dollar investments, and leave things 
stranded. But if, in a transparent process, if LNG exports are 
determined to be beneficial to the economy, and not opportunity 
costs to other parts of the economy, I think you have to put in 
a certain amount of consumer protections, and those would be 
using the gas as leverage to negotiate free trade agreements, 
also considering reducing taxes for those who would be affected 
most. Also investing in technologies, for example, advanced 
catalytic technologies, that would reduce our need for natural 
gas, and improve our efficiency. And, fourth, I think we need 
to reconsider some of the efforts by EPA, because we do not 
have the backstop in place for coal to come through and 
substitute for natural gas.
    Mr. Tonko. Thank you very much. Mr. Chair, I have exhausted 
my time, so----
    Mr. Gardner. Gentleman yields back. The gentleman from West 
Virginia, Mr. McKinley, is recognized for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman. I have been curious 
a little bit about the issue of if, when we export natural gas, 
we are going to see an increased price. And I am not an 
economist, I am an engineer, but I would probably like to see a 
little bit more statistics about that, why that would occur, 
because, as you know, we have been exporting 15 percent of the 
coal production, and we haven't seen coal prices increase as a 
result of that. So I am interested in the disconnect, why coal 
prices aren't going up, but gas prices will under the scenario.
    But more importantly, the other question I have is that, 
under Article I, Section 9, Paragraph 5 of the Constitution, 
there is the prohibition about putting duties and tariffs on 
exports. And that has been clarified, if I might, in 1996, in 
the IBM Decision, in which it went on to say something to the 
effect that that same protection extends to services and 
activities closely related to the export process, so my 
question has to do with the permitting process.
    If it takes 3 years to get a permit for natural gas, I know 
coal has been longer than 3 years trying to get the permit 
approved over in the State of Washington, in Bellingham, to put 
a coal terminal there, trying to prevent exporting by use of 
Government authority. What is the difference between imposing a 
tariff, but yet imposing a slow walk permitting process to 
prevent something from happening in an expeditious way? How can 
that be justified? How is that constitutional, I should say, 
what they are doing?
    Mr. Montgomery. I would like to get Mr. Bacchus to answer 
this, but he is a lawyer, and I notice that he is being 
reticent. And I am an amateur reader of law journals, but I 
think I am pretty----
    Mr. Bacchus. I am just waiting to be asked a question.
    Mr. Montgomery. I am sorry. Then I will recede.
    Mr. Bacchus. Congressman, you raise a very good point. As 
we have all learned in this country in the past few years, 
sometimes it is hard to tell a tax from a fee, or a tax from 
something else that may have the effect of a tax. And it may be 
that, under the U.S. Constitution, there might be some issues 
raised by the lengthy delays in this permitting process.
    As I advised the chairman at the outset, I am here today 
not to advise on policy, but on law, and specifically 
international law. And from a legal perspective, I am 
fascinated by this debate, because, as a matter of 
international law, we have long since made this decision that 
we are talking about today, when we signed the WTO treaty. We 
concluded then that it was presumably in our public interest, 
in agreeing to this treaty, that we would impose restrictions 
on exports only in some very limited exceptional circumstances 
permitted by that treaty. And I have heard no circumstances 
discussed today that fit those exceptions in that treaty.
    As a matter of international law, right now, with no action 
whatsoever by this Congress, we have a legal obligation to 
export natural gas unrestricted to her country, and other 
countries in Central and Eastern Europe that are members of the 
WTO, period. The only reason that we are not doing so at this 
point is because they are friends of ours, and they haven't 
bothered to sue us in the WTO. But somebody could do so. At the 
same time, as I mentioned, our valiant trade negotiators and 
trade lawyers in the administration are, at this very moment, 
arguing in the WTO in not one, but two cases against China that 
they cannot do what these laws we are discussing, that we have 
in place today do. And they are winning those cases, as they 
rightly should.
    Meantime, more than \1/3\ of WTO members, under the threats 
of the current financial situation, are imposing more and more 
export restrictions. This is a form of economic nationalism and 
protectionism that is illegal as a matter of international law, 
and the United States, on a bipartisan basis, has been leading 
the charge against this in the WTO, and should.
    Mr. McKinley. Thank you. Maybe you can stop. I would like 
to carry on this conversation regarding the constitutionality 
of that. The third question I have is, do you think that this 
Supreme Court Decision yesterday about the Spruce Mine, 
allowing the EPA to retroactively withdraw a permit that they 
have given, could that have an impact on our LNG exports? If 
someone can build the facility, which could be a billion 
dollars or more, and the EPA withdraw that permit 2 or 3 years 
later, is that an appropriate gesture, or what has happened in 
the law that allowed that to happen?
    Mr. Bacchus. I haven't read the opinion, Congressman, so I 
couldn't advise you on that at this time. I will be happy to--
--
    Mr. McKinley. But you are aware of the Spruce Mine, 4 years 
after it had been granted, 4 years afterwards, did the EPA pull 
the permit that they had been granted by the Corps of 
Engineers? That is a chilling effect for anyone in any 
business, not just coal, steel. Anyone that has a water permit, 
they have that permit pulled, I am concerned about what it is 
going to have on LNG. Thank you. Yield back my time.
    Mr. Gardner. Gentleman yields back, and we will go a couple 
more questions. Both Mr. Rush and I have just a few follow-up 
questions for you. Mr. McKinley, you are welcome to stay, if 
you would like, for that. But the question I have is, following 
up on this last question and conversation, how often has the 
U.S. pursued cases before the WTO regarding trade disputes with 
other countries? How often have we pursued trade disputes 
before the WTO with other countries?
    Mr. Bacchus. Very often. It is the appropriate way for 
resolving inevitable trade disputes with our trading partners.
    Mr. Gardner. Even if Russia is a WTO, nothing in this 
legislation requires trade with Russia?
    Mr. Bacchus. We have the option, if you so desire, in your 
proposed legislation, to carve out an exception for Russia. 
Russia a member of the WTO, but one of the limited exceptions I 
mentioned to WTO rules is for national security. If national 
security interests, essential national security interests, are 
at stake in a time of emergency in international relations, we 
can impose a trade restriction. So you could----
    Mr. Gardner. Mr. Bacchus, if you could cut it short real 
quick? Mr. Rush has one final question for Dr. Orban real 
quickly. Thank you.
    Mr. Bacchus. Of course, sir.
    Mr. Rush. Thank you. I panicked, because I saw you 
gathering your stuff, but I have one question. So far, DOE has 
ran seven export applications, and my understanding is that the 
export terminals--export this LNG have already signed long term 
contracts to supply LNG to China, Japan, Korea, and India, 
where natural gas prices are higher than in Europe. And the 
question is, is there any reason to believe that LNG exported 
from the U.S. will go to Europe, rather than to Asia?
    Ms. Orban. Thank you, Ranking Member Rush. Yes, there is. 
Of course, the more gas on the market is the better for us. It 
has already indirect impact. But the Asian market's absorption 
capacity is also limited, obviously, and as soon as it reaches 
its limit in terms of price difference, the European market 
comes next. And don't forget that our countries are ready to 
pay a surplus for energy security, which is above, of course, 
market price. So we have every reason to believe that if either 
the expediting process is expedited, the process is expedited, 
or we have the law, then we would have a contract to supply the 
European market with U.S. energy.
    Mr. Gardner. Thank you, Dr. Orban. I know you have an 
important meeting, as reported in the newspapers this morning, 
to attend, so please. Mr. Bacchus, if you would like to finish 
where we left off? I apologize for interrupting, but I know Dr. 
Orban had a meeting. Thank you.
    Mr. Bacchus. Of course. Good job.
    Mr. Gardner. I cut you off. I don't know if you would like 
to continue that, and then we will be----
    Mr. Bacchus. That is all right, and I appreciate it, Mr. 
Chairman. As I said earlier, I think it is important that the 
committee consider WTO obligations before enacting legislation, 
rather than learn about them afterwards. And I commend you for 
doing just that. Conceivably, the United States, and other 
members of the WTO, could impose trade restrictions, and indeed 
a trade embargo, on Russia, even though Russia is a member of 
the WTO. This need not be limited to natural gas or other 
energy products. It could include other products.
    This would be ordinarily in violation of WTO obligations. 
It could be challenged by Russia and WTO dispute settlement. 
But if the Russians did challenge it, we would then have a 
defense. The defense would be under Article 21 of the GAT, 
which deals with national security, and is a general exception 
to general obligations, such as the one on not imposing 
restrictions on exports. This general defense has never been 
the subject of much jurist prudence in the WTO. One of my great 
accomplishments as a Judge there was that I was able to get out 
of Geneva alive without having to say what it meant.
    But, presumably, we would have this defense. It clearly is 
in the GAT, and I can't imagine that a Judge using the WTO 
would question any country's assertion of its national security 
interest, nor can I imagine that they would not see a national 
security concern here, especially if we did not proceed alone, 
but proceeded along with a number of our trading partners.
    Mr. Gardner. Thank you, Mr. Bacchus. And to the panelists, 
thank you very much for your time here today. That concludes 
today's hearing. Members are reminded that they will have 10 
business days to submit questions for the record and other 
material. Anything else?
    Mr. Rush. Mr. Chairman?
    Mr. Gardner. Yes?
    Mr. Rush. Mr. Chairman, I ask unanimous consent to place in 
the record a letter from the Industrial Energy Consumers of 
America, strongly opposing H.R. 6.
    Mr. Gardner. Without objection.
    Mr. Rush. Thank you, Mr. Chairman.
    
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    Mr. Gardner. That concludes today's hearing. Thank you for 
your participation.
    [Whereupon, at 4:34 p.m., the subcommittee was adjourned.]
    
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