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


                                                        S. Hrg. 113-414

 
        THE ECONOMIC IMPACT OF INCREASED NATURAL GAS PRODUCTION

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


                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 24, 2014

                               __________

          Printed for the use of the Joint Economic Committee





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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Kevin Brady, Texas, Chairman         Amy Klobuchar, Minnesota, Vice 
John Campbell, California                Chair
Sean P. Duffy, Wisconsin             Robert P. Casey, Jr., Pennsylvania
Justin Amash, Michigan               Bernard Sanders, Vermont
Erik Paulsen, Minnesota              Christopher Murphy, Connecticut
Richard L. Hanna, New York           Martin Heinrich, New Mexico
Carolyn B. Maloney, New York         Mark L. Pryor, Arkansas
Loretta Sanchez, California          Dan Coats, Indiana
Elijah E. Cummings, Maryland         Mike Lee, Utah
John Delaney, Maryland               Roger F. Wicker, Mississippi
                                     Pat Toomey, Pennsylvania

                 Robert P. O'Quinn, Executive Director
                 Niles Godes, Democratic Staff Director


                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota....     1
Hon. Kevin Brady, Chairman, a U.S. Representative from Texas.....     3

                               Witnesses

Dr. Daniel Yergin, Vice Chairman, IHS, Washington, DC............     5
Mr. Jim Bruce, Senior Vice President of Corporate Affairs, United 
  Parcel Service, Washington, DC.................................     7
Ms. Diana Furchtgott-Roth, Senior Fellow and Director, Economics, 
  Manhattan Institute for Policy Research, Washington, DC........     9
Mr. Elgie Holstein, Senior Director for Strategic Planning, 
  Environmental Defense Fund, Washington, DC.....................    11
Mr. Charles Meloy, Executive Vice President, U.S. Onshore 
  Exploration and Production for Anadarko Petroleum Company......    13

                       Submissions for the Record

Prepared statement of Hon. Kevin Brady...........................    28
Prepared statement of Dr. Daniel Yergin..........................    30
Prepared statement of Mr. Jim Bruce..............................    41
Prepared statement of Ms. Diana Furchtgott-Roth..................    48
Prepared statement of Mr. Elgie Holstein.........................    58
    Article published December 19, 2013, in Science Magazine 
      titled ``What Role for Short-Lived Climate Pollutants in 
      Mitigation Policy?''.......................................    65
Prepared statement of Charles A. Meloy...........................    67
Questions for the Record submitted by Senator Robert P. Casey, 
  Jr., and responses from Dr. Daniel Yergin......................    68


        THE ECONOMIC IMPACT OF INCREASED NATURAL GAS PRODUCTION

                              ----------                              


                         TUESDAY, JUNE 24, 2014

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:17 a.m. in Room 
216 of the Hart Senate Office Building, the Honorable Amy 
Klobuchar, Vice Chair, presiding.
    Representatives present: Brady, Paulsen, Carolyn B. 
Maloney, and Delaney.
    Senators Present: Klobuchar, Casey, Murphy, and Lee.
    Staff present: Ted Boll, Hank Butler, Conor Carroll, Gail 
Cohen, Sarah Elkins, Connie Foster, Niles Godes, Colleen Healy, 
and Robert O'Quinn.

  OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE CHAIR, A U.S. 
                     SENATOR FROM MINNESOTA

    Vice Chair Klobuchar. Thank you, everyone. We are calling 
the hearing to order. I know that Chairman Brady is on his way, 
and I apologize that we are getting started a little later. 
There are a lot of hearings going on, and I so appreciate you 
all coming in, and also many of you we have had to reschedule 
this hearing several times and I really appreciate your 
patience with that. This is a very important topic.
    We have a distinguished panel of witnesses today who have a 
wealth of expertise and insight in this area.
    First of all, we have Dr. Daniel Yergin, who is the Vice 
Chairman of IHS, a leading source of information, insight, and 
analysis. Dr. Yergin is a Pulitzer Prize winning author and 
leading authority on energy, international politics, and 
economics.
    Mr. Jim Bruce is the Vice President of Corporate Public 
Affairs for the United Parcel Service. He previously served as 
senior counsel on the Senate Energy and Natural Resources 
Committee.
    And then we have Ms. Diana Furchtgott-Roth, who is the 
Director of Economics21, and Senior Fellow at the Manhattan 
Institute for Policy Research. She was a chief economist of the 
Department of Labor, and chief of staff at the Council of 
Economic Advisers in the George W. Bush Administration.
    Mr. Elgie Holstein is the Senior Director for Strategic 
Planning with the Environmental Defense Fund. Mr. Holstein was 
previously a senior advisor to the Obama Presidential Campaign 
on Energy and Environmental Policy matters, and co-director of 
the Department of Energy Presidential Transition Team.
    Mr. Charles Meloy is the Executive Vice President, U.S. 
Onshore Exploration and Production for Anadarko Petroleum 
Company. Mr. Meloy has over 30 years of experience in the oil 
and natural gas industry.
    So I am going to start by talking about some recent 
developments in natural gas production. I know a little bit 
about it, being from the State that is the neighbor to our 
friends in North Dakota, and having gone to Williston and some 
of the surrounding areas with Senator Hoeven and seen the 
amazing development going on there.
    The U.S. already produces about 20 percent of the world's 
natural gas, and there is potential for making that number even 
higher.
    In its most recent annual Energy Outlook, the Energy 
Information Administration forecasted that natural gas 
production will grow more than 50 percent by 2040. Much of this 
projected increase is due to continued exploration and 
development of shale gas resources.
    According to the Energy Information Administration, by 2040 
half of the natural gas production in the U.S. will come from 
shale gas. Net imports of natural gas are now at the lowest 
level since 1990, and it is predicted that we will be producing 
more natural gas than we consume domestically by 2018.
    Because of this expanded production and the expectation of 
continued growth, it is expected that natural gas prices will 
remain low for the foreseeable future. U.S. natural gas prices 
are less than half of what they are in Europe and Asia. You can 
see that this gives us a competitive edge.
    IHS estimates that without the expanded production from 
shale and other unconventional sources, Gross Domestic Product 
would have fallen by an additional .09 percentage points, and 
an additional 900,000 jobs would have been lost during the 
Recession.
    Unconventional oil and natural gas activity has also been 
estimated to have increased U.S. disposable income by an 
average of $1,200 per U.S. household in 2012.
    In addition to benefitting from lower energy costs, 
businesses are using natural gas to move product inexpensively 
throughout our country. UPS, as we will hear from shortly, now 
uses over 2,000 alternative fuel delivery trucks in the U.S., 
about half of which run on natural gas. And by the end of the 
year, UPS will have natural gas fueling operations in 10 
states.
    This spring, the St. Cloud, Minnesota, area became my 
State's first transit system to convert its bus fleet to 
compressed natural gas buses, reducing emissions and saving the 
region about $300,000 every year. I would also add, one of the 
coolest parts about this project, Mr. Chairman, was that they 
made the buses in St. Cloud, as well, with New Flyer buses. We 
are pretty proud of that project.
    We have Anderson Windows, which is on the Wisconsin border, 
that is actually building its own fueling stations so that it 
can transport its windows in a safer and in a cheaper way.
    Of course business's use of natural gas extends beyond 
transportation fuel. Lower natural gas prices are boosting 
domestic manufacturing in natural gas-intensive industries such 
as fertilizers, chemical manufacturing, and steel production.
    Some manufacturers have started moving production 
facilities back to the U.S. to take advantage of lower natural 
gas prices.
    Despite increased production of natural gas and its 
byproducts like propane, there have still been problems in some 
areas. I am well aware of this because there were propane 
shortages in Minnesota that were very severe. Exports of 
propane and related products are ten times larger than they 
were ten years ago. We need to make sure that our export policy 
is not contributing to the problems like the one we experienced 
this winter in the Midwest when propane prices spiked and 
remained at extremely high levels for many weeks.
    That price spike has far-reaching and had dangerous effects 
in rural Minnesota where more than 200,000 households rely on 
propane to heat their homes. It also hurt livestock and poultry 
producers who need propane to heat their barns and keep their 
animals warm.
    We took emergency action. Senator Hoeven, Senator Franken, 
Senator Baldwin, and Senator Johnson and I worked on a bill, 
and then Senator Thune and I just passed a bill that the House 
just passed yesterday, last night, that's going to be signed 
into law. That helps with some of the shipment of propane, but 
we are continuing to look into the next year and we will be 
working with everyone in the industry to make sure this does 
not happen again.
    One last concern of course is the environment. As natural 
gas production continues to grow, we also need to balance the 
economic needs of businesses and consumers with protecting our 
environment and preserving our natural resources for decades to 
come.
    Natural gas is cleaner than coal because it is less carbon-
intensive and emits less sulfur dioxide. Switching to natural 
gas for electricity production and transportation should be 
part of our energy policy. Recent studies do show that methane 
leaks may be diminishing some of the environmental benefits of 
natural gas, and I believe that the best practices that the 
industry and regulators can develop are necessary to make sure 
that production is done in an environmentally sensitive way.
    As we continue to work in this area, we should be mindful 
that Americans expect and deserve a common-sense approach to 
regulation, one that protects consumers and the public interest 
without stifling innovation and economic growth.
    Thank you very much for being here today. There is much we 
are going to be talking about, and I am glad that we have been 
joined. I know that Chairman Brady had a lot going on today, 
and I am so glad he made it over here to the Senate side, which 
is a little bit of a walk, to join us. We also were joined 
earlier by Congressman Paulsen, and Senator Murphy is here as 
well.
    Chairman Brady.

    OPENING STATEMENT OF HON. KEVIN BRADY, CHAIRMAN, A U.S. 
                   REPRESENTATIVE FROM TEXAS

    Chairman Brady. Well thank you, Vice Chair Klobuchar, 
Members, and distinguished witnesses:
    Free market capitalism and science are revolutionary forces 
that can change the world for the better. George Mitchell, the 
founder of my hometown, The Woodlands, Texas, and a noted 
philanthropist and environmentalist, first combined hydraulic 
fracturing, which uses pressurized liquid to break rocks and 
release the natural gas and oil trapped within, and horizontal 
drilling.
    This combination has turned the world of hydrocarbons 
upside down. In the winter of 1977-78, President Carter warned 
that the United States could exhaust its supply of natural gas 
in two generations. In response, Congress passed legislation to 
limit the use of natural gas in industry and electricity 
generation.
    Even as recently as 2012, President Obama incorrectly 
warned that ``with only 2 percent of the world's oil reserves, 
we can't just drill our way to lower gas prices, not when we 
consume 20 percent of the world's oil.'' Yet, as he was making 
those dated remarks in his weekly radio address, America was 
experiencing an energy revolution.
    In recent years, fracking and horizontal drilling have 
greatly increased the potential supply of natural gas and oil 
in the United States. Consequently, America does not need to 
import liquefied natural gas and is reducing its dependence on 
foreign oil outside of sources among our friendly neighbors, 
Canada and Mexico.
    In April's ``Annual Energy Outlook 2014,'' the Energy 
Information Administration projected that domestic crude oil 
production will increase from 6.5 million barrels per day last 
year to 9.6 million barrels per day in 2020, a production level 
not seen since 1970.
    Moreover, the import share of U.S. petroleum and other 
liquid fuels will fall to about 25 percent during the last half 
of this decade. Indeed, the U.S. can become a major exporter of 
LNG (Liquified Natural Gas).
    Fracking and other improvements in production technology 
have opened vast stores of domestic oil and natural gas and 
have lowered production costs. In light of recent developments 
in Ukraine and Iraq, increased U.S. production of both oil and 
natural gas will make our economy far less dependent on costly 
and unreliable oil imports and will mitigate the prices of both 
oil and natural gas, if this White House does not interfere or 
attempt to slow down domestic production.
    America's energy revolution has also created tens of 
thousands of well-paying jobs during a disappointing economic 
recovery. These jobs cover the entire spectrum from the 
unskilled to the highly skilled and are a new source of 
employment for minority workers across the country. And as the 
energy workforce ages out, even more opportunities will occur 
for workers of all skills.
    Of course more American-made energy means more American-
made tax revenues for communities, states, and the Federal 
Government. With the exception of individual tax receipts, the 
energy industry is now America's second largest taxpayer. So 
more natural gas production in America helps to balance the 
budget and fund necessary services to families who need 
assistance.
    Despite the natural gas and oil revolution, some people 
prefer renewable, zero-emission energy sources such as wind, 
solar, and geothermal power. Renewable fuels should be 
encouraged, but none of these green energy technologies has yet 
to demonstrate sufficient economies of scale to compete with 
fossil fuels as a major energy source without dependence on 
significant taxpayer subsidies, regulatory mandates, and tax 
preferences. While future technological breakthroughs are 
possible, as of today green energy cannot compete affordably 
with traditional energy in the free market.
    Developing countries have rejected the siren song of green 
energy, and many developed countries that had embraced it, such 
as Germany and Japan, are backing away from their earlier 
commitments.
    Some environmentalists continue to press for their 
preferred sources of energy even though natural gas can reduce 
greenhouse gas emissions more quickly and at less cost. 
Artificially supporting current green energy technology takes 
money away from development of new green technologies that 
could be competitive with fossil fuels on their own merits.
    The U.S. legal and regulatory regime for international 
trade in oil and natural gas as well as a continuing mindset in 
some quarters are stuck in a time of import dependency. But the 
United States now is in a position to export natural gas, 
petroleum products, and even high quality ``light'' crude oil.
    We must adapt our mindset and our rules accordingly. We 
must do so for the sake of the domestic economy, the stability 
of world oil and gas prices, and geo-political stability.
    The Administration has been slowrolling drilling permits, 
licenses for LNG export terminals, and approvals for deliveries 
to countries that do not have a free trade agreement with the 
United States, meaning all but 20 countries, none of which is 
in Europe.
    The fracking revolution has both profound economic and geo-
political implications. Fracking has the potential to increase 
alternative sources of supply in North America and reduce the 
world's dependence on supply from North Africa and the Middle 
East. Exports of domestically produced LNG and refined 
petroleum products can also alleviate Europe's dependence on 
Russia.
    The fracking revolution is a win for everyone involved. 
Domestic natural gas and oil production is igniting an 
industrial renaissance in the United States, especially in the 
industries that are energy intensive or use natural gas and oil 
as feedstock; and it is creating tens of thousands of high-
paying jobs for middle-class American workers.
    With that, Madam Vice Chair, I look forward to the 
testimony of today's distinguished witnesses.
    [The prepared statement of Chairman Brady appears in the 
Submissions for the Record on page 28.]
    Vice Chair Klobuchar. Thank you very much.
    Why don't we get started with Dr. Yergin.

STATEMENT OF DR. DANIEL YERGIN, VICE CHAIRMAN, IHS, WASHINGTON, 
                               DC

    Dr. Yergin. Thank you, Vice Chair Klobuchar, and Chair 
Brady, Members of the Committee:
    It is really an honor to be here today to speak about how 
America's energy position has changed by what has happened in 
energy, and specifically natural gas, and what it means for 
employment, and what it means for economic growth.
    One is cautious about using the word ``revolution.'' It is 
an over-used word, but I think given the scale and the speed of 
what has happened, it is appropriate to talk about an 
unconventional revolution in oil and gas in the United States.
    Natural gas production is up 27 percent between 2007 and 
2013. Estimates of recoverable natural gas resources have 
literally doubled since 2005. Shale gas, which was just 2 
percent of our natural gas a little more than a decade ago, is 
now 44 percent. And certainly the mentality around energy, as 
the opening statements have indicated, has changed.
    The same has happened with oil. Our oil production is up 
3.3 million barrels a day since 2008. That is a 66 percent 
increase. But what really makes it interesting is just the 
increase is greater than the total output of 11 out of the 12 
OPEC countries. So it tells you something really big has 
happened, as you described, Vice Chair Klobuchar, in North 
Dakota.
    Also as you pointed out, we at IHS have engaged in several 
studies since 2009 trying to understand what the economic 
impacts are. We see it in terms of employment: 2.1 million jobs 
supported by this unconventional revolution in 2012. About 60 
percent of those jobs were natural gas. We expect that 2.1 to 
reach 3.3 million jobs by 2020.
    In 2012, this unconventional revolution added $74 billion 
to federal and state government revenues, a number that we 
think will rise to about $125 billion by 2020. It is 
stimulating a manufacturing renaissance, and it has been a very 
important contributor to the economic recovery.
    A few months ago, former Federal Reserve Chairman Ben 
Bernanke described the unconventional revolution as one of the 
most beneficial developments, if not the most beneficial 
development, since 2008 in the economy.
    This unconventional revolution came along at the right 
time. Just consider what our economy would look like today 
without it: much higher energy bills, higher unemployment, 
lower growth.
    Strikingly, these economic impacts are not limited just to 
states that produce unconventional oil and gas. Because of the 
nature of the supply chains across the economy, we see great 
impact on states that do not have significant shale gas or 
tight oil activity.
    In fact, a quarter of the jobs that I described are in 
nonproducing states. The State of Minnesota--19,000 jobs in the 
State in 2012, going to 35,000 jobs by 2020. And $260 million 
in State and local taxes as a result of it.
    If we look at Illinois, 38,000 jobs and $450 million in 
State and local taxes. New York, 44,000 jobs and $1 billion in 
State and local taxes. California, 100,000 jobs and $1.6 
billion in State and local taxes. And this is because of the 
supply chains that run all across our economy, how 
interconnected it is.
    It has already been remarked,--we are having a 
manufacturing renaissance in the United States. There are many 
reasons for it, but right at the top of it is because of what 
is happening in terms of affordable and abundant natural gas.
    Companies are now planning investments that are very large 
as a result. In his 2014 State of the Union Address, President 
Obama remarked upon the large number of dollars that are going 
into investment because of the availability of gas.
    The latest census that we have seen has that figure at $117 
billion going into our economy as a result of this. Obviously, 
industries like the chemical industry are a big part of that. 
Dow Chemical has announced $4 billion of new investment in the 
United States, but what is really striking is that 62 percent 
of this investment that is going into this economy, 62 percent 
of this $117 billion is foreign direct investment. It is coming 
from other countries, other companies abroad coming to the 
United States because of this advantage we have in terms of low 
priced gas.
    And it is not just chemicals. It is iron, and steel 
fabrication; it is many other industries that take advantage of 
this.
    Senator Klobuchar has remarked about what it has meant also 
in terms of household incomes. In 2012, it added $1,200 a 
number that will grow to $2,700--the benefits to each 
household.
    In all of this, however, I do feel--and before this 
Committee which concerns itself with the state of the U.S. 
economy--it is important to have one word of caution.
    I mentioned the 3.3 million barrels a day increase in U.S. 
oil production since 2008. That is just about the same number 
of barrels that have been removed from the world market by 
disruption and by sanctions on Iran.
    Over the last two weeks a major new crisis has emerged in 
Iraq. So far the impact on the global market has been minor. 
The conflict is several hundred miles away from where the major 
sources of Iraqi production is. But should production in the 
southern part of Iraq be disrupted, the world oil market could 
well enter into a crisis of supply with prices spiking much 
higher than they are today.
    Iraq is one of the key sources for new oil. This would be a 
major setback for the U.S. and the world economy, and I think 
it is important to be prepared for what could be an imminent 
risk, and particularly appropriate for this Committee to 
consider, given its focus on the overall U.S. economy.
    To sum up what I have said, altogether this unconventional 
natural gas and oil revolution has already had a major impact 
in multiple dimensions on the U.S. economy, whether you're 
talking about U.S. energy supply, energy costs, government 
revenues, manufacturing, household spending, and the wider 
economy. Its significance will continue to grow as this 
unconventional revolution continues to unfold. These hearings 
provide a very timely opportunity for assessing the impact and 
significance, and I am pleased in due course to respond to the 
Committee's questions. Thank you.
    [The prepared statement of Dr. Daniel Yergin appears in the 
Submissions for the Record on page 30.]
    Vice Chair Klobuchar. Thank you very much, Dr. Yergin. Mr. 
Bruce?

STATEMENT OF MR. JIM BRUCE, SENIOR VICE PRESIDENT OF CORPORATE 
         AFFAIRS, UNITED PARCEL SERVICE, WASHINGTON, DC

    Mr. Bruce. Vice Chair Klobuchar, Chairman Brady, and 
Members of the Committee:
    Thank you for the opportunity to testify on the economic 
impact of increased natural gas production as seen from UPS's 
vantage point.
    To put it simply, natural gas is revolutionizing UPS's 
trucking, particularly heavy trucking. You have my prepared 
testimony. In my oral statement I would really like to make 
just three points:
    First, UPS spent the first three quarters of a century of 
its existence becoming more and more dependent on petroleum. In 
the last 30 years, we have tried to gradually move away from 
petroleum. And natural gas is the key to that shift.
    Second, although UPS has tested almost every conceivable 
form of alternative fuel or advanced technology for vehicles, 
natural gas is the only one that meets the performance 
requirements that we have for heavy trucks. And heavy trucks 
are the key, the best candidate for alternative fuels.
    The third point is that how fast UPS and other companies 
shift from petroleum is dependent not only on what we invest, 
but on what financial incentives we receive from the States. 
And, frankly, whether the Federal Government removes its 
Federal disincentives to alternative fuels.
    So let me go back to my first point. UPS began in 1907, not 
dependent on petroleum but on foot, on bicycles. We were 
carrying messages, not packages. It took six years before we 
bought our first truck, a Model-T Ford.
    Over the next three-quarters of a century, UPS amassed a 
fleet of 100,000 trucks, a fleet of aircraft, and we obviously 
became more reliant on petroleum.
    Beginning in the 1980s, UPS began testing compressed 
natural gas delivery trucks. However, the price jolt in the 
years 2005-2006 on natural gas hurt our confidence in natural 
gas, and in fact it hurt the confidence of a lot of natural gas 
vehicle users.
    Fortunately, the recent surge in reserves has given us 
confidence that we can rely on relatively stable prices for 
natural gas in the future.
    Now to that second point. While we have tested almost every 
kind of alternative fuels, natural gas is the only alternative 
fuel that works for us in the heavy truck. We have tested in 
the last 30 years many advanced technologies and alternative 
fuels, and we test them in service in what we call our 
``rolling laboratory.''
    And in my prepared testimony you will see a chart dated 
April 16th, 2014, which is a snapshot of our fleet. It shows 
over 2,300 vehicles domestically that are alternative fuels, 
and over 3,400 worldwide. Natural gas is revolutionizing 
trucking at UPS because that snapshot from April 16th is 
already out of date. Yesterday I saw a new internal snapshot 
dated June 16th. Our total alternative fleet had grown to 3,606 
trucks, another 169 trucks, all heavy LNG trucks, and that was 
in two months.
    Looking ahead, we have plans and have committed to deploy 
almost 5,500 alternative fuel vehicles, and that means, based 
on current plans, alternative fuel vehicles will be 5 percent 
of our entire fleet worldwide.
    So why are heavy trucks the best candidate for alternative 
fuels? Simply because they use the most fuel per vehicle. A 
tractor trailer can average 450 miles a day and burn 100 
gallons of diesel fuel; whereas, the little brown package 
delivery truck you're familiar with might use a tenth of that 
per day. The more diesel fuel you displace per vehicle using 
alternative fuels, the more you can afford to pay for a more 
costly alternative fuel vehicle up front. So you have to focus 
on heavy trucks.
    But for those big rigs, the tractor trailers, we found no 
alternative other than natural gas that would give us the power 
and the torque and the range that we need, to go from hub to 
hub and back. However, around the year 2000, dual-fuel LNG 
diesel engines became available that ran on LNG and a small 
amount of diesel. And in 2002 we began testing 11 of these LNG/
diesel engines, and the fleet of LNG trucks has grown ever 
since. In fact, our LNG tractors are now racking up 2 million 
miles a week on the road, displacing over 300,000 gallons of 
diesel. And then the third point is----
    Vice Chair Klobuchar. Mr. Bruce, we have votes at 11:00 so 
just try to--you have great stories to tell here, but maybe 
just another 10 seconds here.
    Mr. Bruce. We are investing from 2010 to 2014, we have 
committed over $400 million to our alternative fuel fleet and 
fueling infrastructure in the U.S. and Canada. We will buy 
1,000 heavy LNG trucks this year. I think the key point to make 
is that we have been seeking state financial incentives, but 
what is really important is to address the federal 
disincentives, and those are that the federal tax on heavy 
trucks applies to the total cost. So we are paying a 12 percent 
tax on the premium cost of an alternative fuel vehicle. And the 
other is the fact that LNG is taxed at a rate that is 
substantially more than diesel fuel, and we are trying to get 
Congress to fix those disincentives.
    [The prepared statement of Mr. Jim Bruce appears in the 
Submissions for the Record on page 41.]
    Vice Chair Klobuchar. Thank you. Okay, thank you.
    Ms. Furchtgott-Roth.

STATEMENT OF MS. DIANA FURCHTGOTT-ROTH, DIRECTOR, ECONOMICS 21, 
  AND SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH, 
                         WASHINGTON, DC

    Ms. Furchtgott-Roth. Thank you very much, Chairman Brady, 
Vice Chair Klobuchar, thank you so much for inviting me to 
testify today.
    We have heard a lot about the benefits of natural gas. We 
have heard a lot about the revolution, the energy revolution, 
and that is in my testimony, but I certainly do not want to 
repeat what these eminent witnesses have already said.
    What I would like to do is make the case for exporting 
natural gas and increasing our exports of LNG. The world is a 
very volatile place. Europe and Ukraine depend on natural gas 
from Russia, which is far more expensive than our natural gas. 
And we should be in a position to export it to them, to export 
our natural gas.
    And, Honorable Members, you could immediately assist 
Ukraine and other countries by amending the Natural Gas Act to 
ensure that the Energy Department approves LNG export 
applications within a short period of time.
    Now I have a table here that your staff can put up showing 
liquid natural gas applications under U.S. Department of Energy 
review. There are about two dozen, over two dozen, of these 
applications. Many of them have been there since 2012 and 2011. 
And we should be speeding up this process.
    You could also pass legislation allowing LNG to be exported 
to all World Trade Organization members, irrespective of 
whether they have Free Trade Agreements with the United States. 
And you could go still further and you could cease to require 
approval for all LNG exports.
    Steve Jobs of Apple started making iPhones, and he did not 
just keep these iPhones here in the United States. They were 
exported all over the world. That made more jobs for Americans, 
and more important it increased the innovation of the iPhone 
because more people purchased it. And so Steve Jobs could 
innovate and sell more types of iPhones.
    The same with natural gas. If we exported more technology 
to improve LNG and fracking would be faster, companies would 
have an incentive to put in place more infrastructure that 
would benefit us as well as benefitting other countries to whom 
we could export because of the substantial price differential.
    Last fall in a forum on Capitol Hill, Ambassador 
Pavilionis, the Lithuanian Ambassador to the United States and 
Mexico, said, ``An ability to import natural gas from the U.S., 
even very small amounts by U.S. standards, would make a huge 
impact on the Lithuanian gas market and allow the nation to 
develop a reliable alternative to Russian gas.''
    And in the same forum, Jaroslav Zajicek, the Czech 
Republic's Deputy Chief of Mission, said, ``We have already 
seen examples where the Russian negotiating position during 
contract-renewal talks was weakened thanks to decreasing prices 
on the markets in Western Europe.''
    There are four major reasons for not exporting natural gas, 
and I would like to just briefly address them.
    Myth one: exporting natural gas will increase prices. I 
have a chart here that your staff can put up for you showing 
that as natural gas exports increased, prices actually went 
down. Drilling efficiency has substantially increased and 
productivity of oil and natural gas wells is increasing, and we 
can expect this trend to continue.
    Myth two: Actions today will not increase exports until it 
is too late. We have been saying this for years and years, 
saying there is no point in exporting natural gas because we do 
not have the infrastructure in place. To export natural gas, we 
need more pipelines, more terminals, and this is not going to 
have an effect for another five years until we get all this in 
place. But this disregards the role of expectations. Look at 
what has just happened in Iraq. Without one fewer drop of oil 
on the markets, oil prices went up.
    In the same way, when there is the expectation that the 
United States is going to do something, futures' prices adjust. 
And that also affects current prices.
    Myth three is that exporting natural gas will increase 
production and emissions. Environmentalists who do not want the 
use of natural gas say that this will increase production and 
emissions, the opposite of what some other people say. But if 
natural gas substitutes for coal power, we can find that global 
emissions will decline.
    The final myth is that America is incapable of using its 
economic power to promote our strategic national interest. This 
is the most dangerous myth of all, that we are incapable of 
helping our allies through economic means.
    I understand we do not want to put boots on the ground, but 
we have resources here that by exporting we can create jobs 
here in the United States and we can also help our allies and 
friends abroad.
    It is in your hands, and I hope that you manage to act by 
just repealing these regulations. Thank you so much for 
allowing me to testify today.
    [The prepared statement of Ms. Diana Furchtgott-Roth 
appears in the Submissions for the Record on page 48.]
    Vice Chair Klobuchar. Thank you.
    Mr. Holstein.

STATEMENT OF MR. ELGIE HOLSTEIN, SENIOR DIRECTOR FOR STRATEGIC 
      PLANNING, ENVIRONMENTAL DEFENSE FUND, WASHINGTON, DC

    Mr. Holstein. Vice Chair Klobuchar, and Chairman Brady, 
thank you for the opportunity to be with you today and the 
other Members of the Committee, to discuss these important 
natural gas issues.
    There is no question that unconventional gas development is 
lowering energy costs, creating new jobs, supporting more 
domestic manufacturing, and even delivering some measurable 
environmental benefits. But it is also imposing localized 
public health and environmental risks, and it is accelerating 
global climate change.
    Because of intensive shale gas development, the small town 
of Pinedale, Wyoming, along with many communities in the Upper 
Green River Basin, have experienced smog concentrations 
comparable to those of Los Angeles. And in Pennsylvania, 
wastewater production from drilling operations has posed major 
challenges to municipal water treatment plants.
    Clearly, public concerns are growing and they are posing a 
rising threat to the industry's social license to operate. For 
example, last fall in a national poll the Pew Research Center 
found that 49 percent of those surveyed opposed the increased 
use of hydraulic fracturing.
    In Colorado, four cities in the heart of the Denver/
Julesberg shale gas region, have voted either for a moratorium 
on shale gas development or to prohibit it entirely. And of 
course in New York, one of the four states under which the 
Marcellus Shale lies, there has been a moratorium on shale gas 
development since 2010.
    Let me describe specifically the problem with methane. 
Natural gas is mostly methane, and when that methane leaks and 
is vented from well sites and from natural gas infrastructure, 
it is 84 times more potent than carbon dioxide as a greenhouse 
gas in the first 20 years after it is released.
    Although natural gas does burn more cleanly than coal, 
these leaking and venting methane emissions are threatening to 
cancel out the climate benefits that come from gas combustion.
    Across our economy, the oil and gas sector represents 37 
percent of U.S. methane emissions, the largest of all 
industrial sources.
    There is much research underway, including by us, but while 
this research goes forward we already know that action to limit 
methane reductions is needed now. We know that methane released 
into the atmosphere does serious damage. We also know that 
those emissions can be reduced dramatically and at low cost in 
the oil and gas sector.
    Let me put a number on that. A recent cost analysis 
performed by experts at ICF International--based on real data 
directly from the industry--found a striking opportunity for 
achieving dramatic reductions in methane emissions from the 
onshore oil and gas sector.
    The study revealed that a 40 percent reduction in methane 
emissions from that sector could be achieved over the next five 
years at a cost of less than one penny per thousand cubic feet 
of gas produced. Low-cost reductions of this magnitude would go 
a long way toward ensuring that the expansion of natural gas 
production will not be a net loss for the environment.
    That opportunity for a 40 percent reduction in emissions 
from this sector translates into the equivalent of 54 LNG 
tankers per year.
    Moveover, according to ICF, methane emission reductions at 
this scale can be achieved using current technology. That is, 
most if not all of the equipment and operational improvements 
needed to provide meaningful emissions reductions can already 
be found on the market.
    So we believe that state and federal action to require 
methane emission reductions is needed now. A few states are 
beginning to respond. Earlier this year, Colorado put in place 
the Nation's first and most ambitious set of rules designed 
directly to reduce all hydrocarbon emissions, methane as well 
as volatile organic compounds. Altogether, the new rules will 
annually remove 100,000 tons of methane, 90,000 tons of smog-
forming VOCs, equal to the emissions of all the cars and trucks 
in the State of Colorado today.
    EDF, Environmental Defense Fund, worked hard in support of 
the new Colorado rules, but we were not alone. Anadarko 
Petroleum, Encana, and Noble Energy--among the largest 
companies at the forefront of new oil and gas extraction in the 
Rocky Mountain West--supported the new rules as well.
    The Colorado model provides a powerful example that can be 
drawn upon at the federal level to ensure that states and 
communities across the country receive a similar level of 
protection from volatile organic compounds, threats to water 
supplies, and especially the climate-related harm from methane 
emissions.
    Doing so will deliver multiple benefits to society while 
ensuring that America's new bounty of natural gas can not only 
advance our Nation's energy and economic interests but our 
environmental and public health interests as well.
    [The prepared statement of Mr. Elgie Holstein appears in 
the Submissions for the Record on page 58.]
    Vice Chair Klobuchar. Thank you very much, Mr. Holstein. 
Mr. Meloy.

STATEMENT OF MR. CHARLES MELOY, EXECUTIVE VICE PRESIDENT, U.S. 
   ONSHORE EXPLORATION AND PRODUCTION FOR ANADARKO PETROLEUM 
                            COMPANY

    Mr. Meloy. Good morning, and thank you, Chairman Brady and 
Vice Chair Klobuchar, for the pleasure of speaking with the 
Joint Economic Committee this morning about the economic 
impacts of the natural gas revolution.
    We are indeed in the midst of an energy re-boot in America 
unlike any I have seen in my 30-year career, and driven by the 
innovation and technology of the many dedicated men and women 
of the oil and gas industry.
    In terms of technology, the confluence of the time-tested, 
proven techniques of horizontal drilling and hydraulic 
fracturing served as the game-changer in opening access to 
shales and other tight-rock formations.
    America's new-found abundance of cleaner natural gas is 
only possible through the combination of these technologies. In 
other words, without fracking and without horizontal drilling, 
there is no new age of energy self-sufficiency in America--
which is very important for the geo-political reasons spoken to 
earlier; there is no material carbon reductions from greater 
utilization of natural gas that have resulted in the U.S. 
lowering its total carbon emissions to levels not seen since 
1994; there are no lower consumer costs that benefit every 
American, amounting to $1,200 per household as was mentioned 
earlier; and there are no substantial taxes, royalties, and 
leases paid by industry to the tune of $85 million per day, 
which helps governments pay for important public services, 
including the education of our children.
    In addition, if you think back to 2005 when Hurricanes Rita 
and Katrina hit the Gulf of Mexico, natural gas prices spiked 
to $14 per million Btu, demonstrating how dependent the U.S. 
was on natural gas from the Gulf of Mexico. Shales, gas shales, 
have provided a geographical diversity in the United States 
that has stabilized and increased supply and significantly 
dampened the price volatility.
    Production of natural gas in the U.S. has increased 30 
percent since that time and, whereas the EIA back in 2009 
predicted natural gas prices of $35 per million Btus in 2035, 
they are now predicting $6 per million Btus.
    This is outstanding news for consumers, manufacturers, 
electrical providers, and others; and it is the economic engine 
that I believe can bolster the U.S. economy for decades.
    The company I work for, Anadarko Petroleum, is currently 
the third-largest natural gas producer in the United States. We 
are the largest natural gas producer in Senator Mike Lee's home 
State of Utah, and we have invested more than $4 billion 
developing natural gas from the Marcellus Shale in Senators 
Tommey's and Casey's home State of Pennsylvania.
    I am proud that we have achieved a 40 percent reduction in 
the amount of surface space needed to develop oil and gas in 
Colorado's Wattenberg Field. By expanding gathering and 
pipeline infrastructure, we have eliminated more than 10 
million truck miles in the Wattenberg Field, significantly 
reducing the traffic and associated emissions. We continue to 
invest in technology to reduce emissions, detect methane leaks, 
and also source, transport, and recycle water.
    The key going forward for industry is for our elected 
leaders to keep working together toward solutions, refusing to 
perpetuate a climate of obstruction and the demonization of an 
industry that is fundamental to modern life. It means 
recognizing that a vibrant oil and gas industry makes other 
industries more productive--fueling the economy that creates 
opportunity.
    We recognize the need for comprehensive and consistent 
state-based regulations. They provide legitimacy for our 
activities and help build public trust. This is why many states 
continue to benefit from the shale expansion and tight-sands 
development. Yet these activities are relatively stagnant on 
federal lands due to the costly and uncertain federal 
regulatory environment.
    Enabling infrastructure and pipeline expansions will help 
ensure that we stay ahead of other parts of the world that have 
shale resources but no infrastructure to move it to market.
    Creatively partnering with industry to expand compressed 
natural gas fueling stations can help put more natural gas in 
the gas tanks of the American fleet vehicles, meaning cleaner 
cars, cleaner fleets, cheaper fuel, and less reliance on 
foreign oil.
    We do not have to choose between a future with fossil fuel 
development or a future with a cleaner environment. We can 
choose both. It is solely dependent upon our ability to 
continue to collaborate, rely upon sound science, streamline 
access, and not just identify problems but do what our industry 
has been doing for decades: use human ingenuity to find 
solutions.
    Thank you.
    [The prepared statement of Mr. Charles Meloy appears in the 
Submissions for the Record on page 67.]
    Vice Chair Klobuchar. Thank you very much.
    We are going to start with questions. I guess I will start 
with you, Dr. Yergin, about this idea of exports. There is a 
lot of discussion among Senators about how far we should go 
with exports.
    Obviously they are allowed for countries with which we have 
a Trade Agreement, I believe, and there are some pending 
applications. Obviously we have a situation where the lower 
prices--and I know Ms. Furchtgott-Roth would dispute some of 
this--but the concern is that some of the prices will go up; 
that one of the reasons we are in this situation with bringing 
manufacturing back is because of the lower prices. And I just 
wanted to get some more expanded thoughts from you on the 
exports and how this would affect U.S. consumers if we had 
unrestricted exports.
    Dr. Yergin. Thank you for the question.
    I think the first thing to observe is how dramatic the 
change in the supply base is. Our view is that the market is 
really constrained by demand, not by supply, which is different 
from what we have had for many decades. And production could 
certainly continue to increase. We have more demand for LNG, 
but the biggest source of new demand is going to be electric 
power, and also vehicles as has been mentioned.
    We should not just look at this in the U.S. context. I just 
came back from East Africa. They are gearing up to do major LNG 
exports. And when we look at the number of projects that are 
out there, they are far larger than actually the global market 
can absorb.
    Vice Chair Klobuchar. I see.
    Dr. Yergin. So the global market is actually going to be 
constrained. British Columbia is going to be exporting. Of the 
number that we see of projects, only a fraction of those will 
end up being built.
    Vice Chair Klobuchar. Did you look at what happened with 
that propane crisis? It was a combination of things.
    Dr. Yergin. Yes.
    Vice Chair Klobuchar. Some of it was a--I think people 
under-estimated how much we would need in the Midwest, the 
winter was so cold, when we were colder than Mars.
    Dr. Yergin. Yes, it's very interesting about the propane 
and very important, obviously, to your State and others. It was 
partly, as you say, the polar vortex. It was a confluence of 
things. There was a very large corn crop, and a very rainy 
season, the need for extra propane for drying.
    Then on top of that, there were exports. There were also 
pipelines that were down for maintenance.
    Vice Chair Klobuchar. Yes.
    Dr. Yergin. And then you had people who are on ``will 
call'' as opposed to people who ``keep full.'' And so all of 
those things came together in those few weeks.
    Vice Chair Klobuchar. Okay----
    Dr. Yergin. Exports was just one element of it.
    Vice Chair Klobuchar. One element. I agree. All right, very 
good.
    Why don't we talk just a minute about methane, Mr. 
Holstein. According to the study you guys commissioned, the oil 
and gas industry could achieve a 40 percent reduction in 
methane pollution within five years for a very low cost.
    By addressing this, as you know, the industry could address 
one of the major reasons that people are opposed to this. Do 
you think industry is moving to do this? And I guess I will ask 
Mr. Meloy--I know he touched on this--the same question. Mr. 
Holstein?
    Mr. Holstein. We certainly think that some of the 
progressive members of the industry are. But they are to some 
extent constrained by competitors who may not be so anxious to 
move in the same direction.
    And one of the things that has been happening in the 
headlong rush to develop these new gas resources is that all of 
the focus of the investment has been in obtaining leases, 
building the infrastructure, and creating the, if you will, the 
foundation for this new natural gas boom. And environmental 
considerations have been somewhat of a second thought on the 
part of some members of the industry, but not all.
    Vice Chair Klobuchar. Um-hmm.
    Mr. Holstein. The industry, finally, I would say, was 
absolutely essential in helping us move forward collaboratively 
in the State of Colorado with some of the most comprehensive 
methane and other pollutant-control measures adopted anywhere 
in the United States.
    Vice Chair Klobuchar. Very good.
    Mr. Meloy.
    Mr. Meloy. Yes. I do not think it is a coincidence that 
since 1994 our emissions--we are back to the emission levels of 
1994, while gas production has increased by 30 percent. I think 
that is clear evidence that this is an opportunity to improve 
the climate of the planet.
    And I think if you take a look at natural gas and the way 
that we can manage the program, it is in our best interests to 
put every molecule in the pipeline, and that is what we are 
working hard to do.
    We have worked with EDF and many others to make sure that 
is the standard by which the operators operate, and we are in 
favor of it.
    Vice Chair Klobuchar. Thank you very much. And one last 
question, Mr. Bruce. You got cut off a little and I know I only 
have a minute left here, but did you want to expand on your--
some of the proposals you have of what would be getting in the 
way of you converting these trucks to this more efficient fuel 
that is better for the environment?
    Mr. Bruce. I mentioned the Federal disincentives, which is 
the fact that liquid natural gas is taxed on a volumetric basis 
as opposed to an energy equivalent basis to diesel. So it is 
bearing a 70 percent higher tax.
    We would love to see Congress address that.
    So, and the other thing is the Excise Tax on heavy trucks 
is on the entire cost of the truck. So I mean we will pay 
sometimes $65,000--it used to be $100,000--premium on the 
truck. So we are paying tax on that, as well. So we are being 
taxed for doing the right thing.
    Vice Chair Klobuchar. Okay. Very good--that doesn't sound 
good. But I think many of us up here would like to see 
comprehensive tax reform, including Chairman Brady who knows 
also a little bit about producing energy in his State and his 
District.
    Chairman Brady.
    Chairman Brady. Vice Chairman, thank you very much. And 
thank you all, to the witnesses. It is hugely helpful 
testimony.
    Dr. Yergin, thank you for making the point that, as 
impressive as the economic impact from this new technology in 
natural gas is, it is not just occurring in the Gulf States, or 
in new giants like North Dakota, Utah, or Pennsylvania, but 
creating 100,000 new jobs in California, which is experiencing, 
like much of the country, a disappointing economic recovery. 
Thanks for making that point.
    I do not know if your numbers reflect the growing need for 
pipelines. The continued studies in that area, the last study I 
saw showed that to be able to deliver this product to the 
market and back up to the refineries and back to the market, we 
will need the equivalent of 2 to 3 Keystone XL pipelines every 
year for the next 20 years--huge economic growth from that 
standpoint.
    Both you and Ms. Furchtgott-Roth made the point that there 
are a lot of benefits from exports, both from an economic 
standpoint for the U.S., from a global price stability 
standpoint, but also from the geo-political standpoint.
    The Middle East has long used its influence through its 
energy development to shape foreign relations. Russia is doing 
that in Ukraine and Europe today. Today Sunni rebels captured 
the largest oil refinery in Iraq, creating a devastating blow 
to the government's ability to stabilize there.
    The thought that our children would never have to grow up 
wondering if the Middle East will turn the spigot on or off for 
the United States is kind of exciting. To both of you, can 
smart exports from the U.S. give us a stronger footing in 
foreign affairs?
    Dr. Yergin. I think the word you used was ``influence'' and 
there is no question that U.S. exports of oil and natural gas 
will give a new dimension to American influence in the world.
    It will be a message that will be read around the world. 
Frankly, I also think it will provide an answer to some 
countries where there is a view that there is a zero sum 
struggle with the U.S. over energy. If they are importing from 
us it will show that we have very common interests. And so I 
think it is something that is not going to be a miracle 
solution, but it will certainly bolster the American position 
and will affect psychology around the world.
    Chairman Brady. Thank you.
    Ms. Furchtgott-Roth.
    Ms. Furchtgott-Roth. Yes, I would like to agree with Dr. 
Yergin and also say that if we export that means less revenue 
for Russia, and that is very important, too. And it lowers the 
price of the natural gas that Russia can export.
    Russia is very dependent on its natural gas revenues. We 
can be cutting into those revenues by exporting because the 
price will adjust.
    Dr. Yergin. Can I add one thing? It is not only 
theoretical, it is happening, the sanctions against Iran would 
not have worked had it not been for the increase in U.S. oil 
production. Simply, the world market would have been too tight.
    So this impact is already there from what is happening in 
this country.
    Chairman Brady. Great point. Thank you. I do have 
legislation that removes the need for energy permits on natural 
gas, except to state-sponsored terrorist nations, and it seems 
to me the number of projects--and they are hugely expensive, 
the exporting projects--that the market itself will take care 
of the need for these projects.
    And, Ms. Furchtgott-Roth, you made the point, too, 
economically, if we restrict energy exports, just as if we were 
to restrict cars being exported, computers being exported, Dow 
chemicals being exported, the price will not go down; they will 
simply manufacture less of it. And that will happen in the 
United States as well.
    Mr. Meloy, I want to thank you for being here. Anadarko is 
really our major iconic corporate citizen in The Woodlands 
where I live. You are a treasured company for us. I saw a 
picture of one of your projects I think in Utah, Senator Lee's 
State, that both while it was occurring and afterwards it was 
nearly invisible to the human eye. And after it was gone, it 
was invisible.
    You have made tremendous progress in reducing your 
environmental footprint. Advice to us? Do you think the Federal 
Government can do more to facilitate the expansion of domestic 
natural gas and oil production? And, conversely, what should we 
not be doing?
    Mr. Meloy. Thank you. I appreciate the comments with regard 
to our position within The Woodlands, and we certainly 
appreciate your support in Washington.
    Our company has been very active on every element of our 
environmental footprint, including reduction of the viewshed 
issues, emissions, and the overall activity that we have to get 
any one job done. We have made significant investments in 
infrastructure.
    And you have talked about the need for that in the future, 
and I think it cannot be overstated. Investments in pipelines 
and infrastructure to move this product, confined inside a pipe 
so we do not have to deal with multiple transfers of the 
product, is very important and very economically energizing for 
our economy because it creates a tremendous amount of jobs and 
activity.
    With regard to the Federal Government, I think access is 
key. The lands that we hold on the BLM lands have not seen the 
same sort of revolution that other areas, other states like 
Colorado, Pennsylvania, and Texas have seen. I think that 
opportunity exists.
    We just have to be--we have to work harder to get the 
opportunity to drill on those lands so that they can be 
developed in a similar fashion with a similar remit, and a 
similar footprint that we are seeing in other states.
    I strongly encourage state-based regulation so that they 
can see. They are closer to the action and provide a broader, 
more definitive set of eyes and regulation toward our 
activities.
    Chairman Brady. Great. Thank you, sir. Yield back.
    Vice Chair Klobuchar. Very good. Thank you very much. 
Congressman Delaney--or, Senator Casey, I think, because a vote 
was just called. Thank you.
    Senator Casey. I will be--I will just, so the Congressman 
can get his time--I will just ask one question because I know 
we are pressed for time.
    Dr. Yergin, I want to ask you about manufacturing. One of 
the great benefits of natural gas extraction and the impact it 
is having on the economy of my home State of Pennsylvania, as 
well as the Nation, is the benefit it provides to our 
manufacturing sector.
    As we make decisions about it, I just want to make sure 
that we are going down the right path. I just wanted to ask you 
about that benefit and how--what advice would you have, or what 
perspective would you have on this, taking the right steps to 
manage what I think so far has been a very positive benefit to 
our manufacturing sector. Can you speak to that?
    Dr. Yergin. Sure. I think that the impact we have seen is 
this turnaround in psychology in terms of companies who thought 
they would never be investing again in the United States. Your 
State clearly is a beneficiary, and it extends to many 
industries. Chair Brady referred to pipes, manufacturing steel. 
So as you know, areas that seemed to be in terminal decline 
have really rebounded with a relocation of manufacturing.
    And one of the things that really drives it home is if you 
look at a country like Germany, which depends for 50 percent of 
its economy on exports, and manufacturing prowess,--the 
Minister of the Economy is talking about a ``dramatic 
deindustrialization'' because they see their manufacturing 
companies leaving Germany and investing in the United States.
    So it is, as you point out, a very beneficial trend that 
goes across the economy.
    Senator Casey. I will submit a couple of other questions 
for the record and yield back 3 minutes and 13 seconds.
    [Questions for the Record from Senator Robert P. Casey, Jr. 
appear in the Submissions for the Record on page 68.]
    Vice Chair Klobuchar. That is so impressive, Senator Casey.
    [Laughter.]
    Okay, Senator Lee.
    Senator Lee. Thank you, Madam Chair. And thanks to all of 
you for joining us.
    Mr. Meloy, first of all thank you in particular for all you 
do in my State, and for acknowledging what Utah has to offer in 
terms of our country's energy potential.
    As you and I both know, operating in a state like Utah that 
has a lot of federal land can be challenging. The Federal 
Government owns about 30 percent of the land mass in the United 
States, and about two-thirds of the land in my own state. And 
as you and I are both painfully aware, energy development has 
not occurred at the same pace in recent years on federal land, 
particularly onshore development has not occurred at the same 
pace. In fact, it has been really slow. It has slowed.
    So even though we have seen a big increase in recent years 
in natural gas production, we have not seen that on federal 
land.
    Now whether this drop, whether this slowing has occurred as 
a result of permitting delays, uncertainty caused by the 
regulatory environment, or the regulatory difficulty of 
building a pipeline, the results are clear, which is that there 
has been a drop in production on federal land.
    Can you explain for us in what ways have federal policies 
adversely impacted the ability of states like Utah with high 
concentrations of federal land to fully enjoy economic growth 
and jobs that have been precipitated by this boom?
    Mr. Meloy. Thank you, Senator Lee. I would offer two ideas 
that we are actually actively working on with the government.
    The first of which is modernizing the permitting process, 
using technology such as GIS, that would significantly reduce 
the boots-on-the-ground type requirements, and the cost of 
actually doing the permitting process not only for the operator 
but for the Federal Government.
    The second would be--and you are very aware of this--is the 
process, modernizing the process, or streamlining the process 
to achieve EIS on critical projects like what you and I did for 
the Natural Buttes in Utah. I think this is an opportunity 
where we can utilize parallel processes, good, modern project 
management practices, to actually do these things on parallel 
paths and close the timeline that has been continuing to extend 
now in excess of 10 years.
    This process should take 3 or 4 years, tops. And I think 
that would incentivize people to move and invest in federal 
lands at a greater pace.
    Senator Lee. Thank you. Thank you, that's helpful.
    Ms. Furchtgott-Roth, I also wanted to ask you a question. 
So a lot of people, including a lot of people within the 
current Administration, have become fond of saying that they 
promote an ``all of the above'' energy strategy, and they are 
saying that at the same time that they are encouraging more use 
of natural gas domestically, and at the same time that some are 
advocating that we also open up natural gas to export.
    Is this really an all-of-the-above energy strategy when we 
complicate the process of developing our natural gas resources 
through permitting delays, regulatory uncertainty, and making 
it really difficult to build a pipeline?
    Isn't that sort of in tension with an all-of-the-above 
energy strategy?
    Ms. Furchtgott-Roth. That's right. It's not all-of-the-
above if we are not allowing permitting on federal lands. We 
could be getting immense amounts of tax revenue, royalty 
revenue from such permitting. We also need a vast new 
infrastructure of pipelines, not just Keystone XL. Oil and 
natural gas that is being produced in the Bakken Region has 
lower prices because we just cannot get it out.
    Lower prices for that oil means less tax revenue for North 
Dakota and other States. So the oil that is trapped is selling 
at a discount to Brent Crude. That means less tax revenue for 
the states where it is taking place.
    And the State Department has just come out with a report 
saying how if oil is transported by rail rather than pipeline, 
there will be more fatalities and more injuries. I think it is 
clear that we need to have a bigger--all-of-the-above should 
mean more pipelines.
    When we talk about ``all of the above,'' we should also be 
careful not to impose on ordinary Americans' high utility costs 
caused by the high price of solar and wind, and force them to 
buy it, because it costs twice the amount to produce 
electricity through wind and solar as it does through natural 
gas and coal.
    Senator Lee. So part of your concept of all-of-the-above 
would mean everybody competes, everybody competes on a 
relatively level playing field----
    Ms. Furchtgott-Roth. Exactly, yes, and there are many 
people concerned about inequality, and the bottom fifth of the 
income distribution. People in that group spend about 25 
percent of their income on energy--that's gasoline and 
electricity. And we need to be mindful of their welfare and not 
force them to buy more expensive fuel.
    Senator Lee. So this hurts the poor more than anyone else.
    Ms. Furchtgott-Roth. Exactly, yes, because the top quintile 
has spent 4 percent of their income on energy, on average, as 
opposed to 25 for the bottom quintile. Requiring them to buy 
electricity produced by wind and solar adds to inequality.
    Senator Lee. It sounds very regressive.
    Ms. Furchtgott-Roth. Exactly.
    Senator Lee. I see my time has expired. Thank you, very 
much. Thank you, Madam Chair.
    Vice Chair Klobuchar. Thank you. I think Congressman 
Delaney is next, and I am going to the vote now, and so I want 
to thank the witnesses very much for being here. It was a good 
hearing. Thank you.
    Ms. Furchtgott-Roth. Thank you, very much.
    Representative Delaney. Thank you, Vice Chair Klobuchar, 
and I want to also thank the witnesses for their testimony here 
today.
    When confronted with these questions about kind of 
significant energy decisions, I have developed my own kind of 
three-part test, which is:
    The first part is: Is it in the economic interest of the 
United States?
    The second part of the question is: Is it consistent with 
our national energy policy as it continues to evolve?
    And the third part is: Is it consistent with our view of 
the environment?
    And when I look at the decision as it relates to exporting 
natural gas, to me I get a resounding ``yes'' on all three of 
those tests. I do think it is very consistent with the economic 
policy of the United States. This is a U.S. asset. There is a 
very big business opportunity associated with producing this.
    I understand there are potentially some negatives 
associated with energy costs related to the manufacturing 
sector. I tend to think they will work through that over time. 
But I think it clearly tips in favor of this being a very 
significant economic opportunity for the U.S.
    I think it is consistent with our future energy policy. 
Natural gas has to be a bridge to the kind of energy future 
that at least I envision for this country.
    And then thirdly, I think it is very consistent with our 
environmental policy if done in a safe and accountable way, 
including vesting a certain amount of local control on these 
decisions to local communities. Again, I think it is very 
consistent with our future environmental policies.
    So to me, I think we should approve all these export 
facilities. I think it would be very good for the economy. I am 
not sure how many of them will be successful. I tend to think 
they will find natural gas all over the world. The technologies 
and things that we are using here are going to be there, I am 
sure they're using like crazy all over the world and probably 
half of them will go out of business but I'm all for approving 
them all.
    When I apply the same test, for example, though, to 
Keystone, I get a ``no.'' I don't think it is consistent with 
our economic policy because it is largely not our asset and it 
will be sold to the world market. It will create some jobs in 
the short term, but in the long term it does not really do 
anything.
    I do not think it fits with our long-term energy strategy. 
And it certainly does not fit with our long-term environmental 
strategy, if you actually care about climate change, which I do 
quite strongly, which I actually think does have to be factored 
into the cost.
    When we talk about a level playing field, you cannot not 
include the cost of climate change in that calculus. But my 
question for the witnesses is:
    If there were to be an increase, which I think would be 
temporary, related to natural gas prices associated with 
increasing our exports, do you think that would actually help 
the renewable business in this country? And in a way, is it in 
fact somewhat of a pro-environmental policy? Because if you 
believe in markets, which I do, which is one of the reasons I 
think we should export because we are America, I do believe in 
free markets and we shouldn't be hoarding this stuff, but if 
you believe in markets, you have to assume that if we increase 
exports the price of natural gas will go up. Do you think that 
will help the renewable business?
    I will start with you, Dr. Yergin.
    Dr. Yergin. Well I think the renewable business, two things 
are helping the renewable business. One, costs are coming down. 
Solar costs have come down a lot, one significant reason is 
over-capacity in Chinese manufacturing. Wind costs have also 
come down.
    Natural gas is a kind of natural partner of renewables 
because of the intermittency. So even if you have a strong 
renewable strategy or mandates, as we have, as has already been 
pointed out, you are going to need more natural gas capacity to 
balance it out.
    Representative Delaney. So my question is, though, on the 
price. Does the price--Ms. Roth, maybe you could comment on 
this--does the price increase in natural gas, which will 
probably happen if we increase exports for at least the time 
being, I know your data suggests otherwise, I'd love to see 
what is behind some of that data, but if we were to assume for 
a second, which you may not agree with, that the price might go 
up, will that actually help the competitiveness of renewables? 
And to some extent steer the country towards this greener 
future that at least I want, and many share that view.
    Ms. Furchtgott-Roth. The price of natural gas, if it goes 
up, will still be far below the costs of producing electricity 
with solar and wind, which those are heavily dependent, by the 
way, on the tax credit. So that is also going to be a favor, if 
Congress keeps the tax credits in----
    Representative Delaney. But it narrows the gap, it sounds 
like.
    Ms. Furchtgott-Roth. It does narrow the gap, but it doesn't 
make it a winner.
    Representative Delaney. But if we continue to see the kind 
of cost improvements associated with renewables that Dr. Yergin 
mentioned, you could actually see how this could take you down 
the path towards a more competitive renewable portfolio.
    Ms. Furchtgott-Roth. I would say the cost of natural gas, 
electricity produced by natural gas, is always, for the 
foreseeable future, going to be less than the cost for 
electricity produced by solar and wind.
    And by the way, the reason to have Keystone also is because 
we have refining facilities in Louisiana and Texas that benefit 
from the heavy crude being exported from Canada. We want the 
job of refining that heavy crude. We don't want that to be 
going elsewhere and be refined elsewhere. We want those jobs.
    Representative Delaney. I'm going to switch to Mr. 
Holstein, but it is interesting you mentioned how the Keystone, 
because the Keystone tar sands are trapped up there, it is 
actually allowing it to be sold at cheaper prices to the 
Midwest. So to some extent Midwesterners are getting the 
benefit of lower energy because we do not have the pipeline, 
which is interesting.
    Ms. Furchtgott-Roth. Yes, but Canada has just approved its 
Northern Gateway pipeline that is going to take its oil out to 
the East and to the West and to Asia.
    Representative Delaney. Well it's their oil. They can do 
what they want with it, I guess.
    Mr. Holstein.
    Mr. Holstein. I think the answer to your question is, it 
all depends. But the fact is that natural gas actually pairs 
quite well with renewable energy, because it helps compensate 
for the intermittency of renewables.
    So as we continue to make strides in advancing the 
complexity and functionality of the Nation's grid, the 
opportunity for natural gas to dramatically expand the 
penetration of renewables goes up, even if natural gas prices 
go up somewhat.
    Representative Delaney. Right.
    Mr. Holstein. It is very difficult to predict just where 
international natural gas prices would settle, because that 
depends, as you suggested, on new sources around the world, the 
level of demand, and very heavily on the rather high 
transportation costs from the United States to foreign markets.
    Representative Delaney. Right. Mr. Meloy, I don't know if 
you have a view on this?
    Mr. Meloy. I think Mr. Holstein made some great comments. I 
would add that I sense that it has a very similar lifecycle to 
what natural gas has seen, where the new technologies that are 
being employed today and deployed in the oil fields and gas 
fields of America have delivered a lower cost, and even safer 
condition.
    So I foresee that renewables will follow that trend and, 
because of its pairing with natural gas and renewables, that 
that is a very complementary and virtuous cycle.
    Representative Delaney. I see my time is up. Thank you.
    Chairman Brady [presiding]. Thank you, Mr. Delaney.
    Former Chairman of the Joint Economic Committee, Mrs. 
Maloney is recognized.
    Representative Maloney. I thank all the panelists, and the 
Chairman, and the Ranking Member, for holding this truly 
important meeting.
    I want to really raise an issue that Mr. Holstein raised 
with methane. In many studies after studies, researchers have 
found that Americans living near these sites are more likely to 
develop respiratory illnesses, birth defects, and other 
possible health problems.
    And I very much appreciated Mr. Holstein's testimony which 
focused on the real costs of increased methane emissions, and 
his point that we need to make sure that it is not leaking, 
that the methane is not leaking. And it is a huge greenhouse 
gas, and we need to control that.
    But my question to you, Mr. Holstein: Before we further 
increase natural gas production, we need to evaluate this, the 
methane and how that is being controlled, and other issues to 
determine that all necessary safeguards are in place to protect 
the water and air. And are we doing that? Your comments and 
words on that?
    Mr. Holstein. Thank you, Congresswoman Maloney. I strongly 
agree with the sentiment that the race to develop America's 
bounty of new natural gas is one that needs to be accompanied 
by an equally fervent effort to ensure that the new 
infrastructure that is built to produce and transport and use 
that natural gas, including in transportation, be as tight as 
it can be.
    And the good news there is that the technology exists, as I 
indicated in my testimony, to tighten up the system and also to 
ensure that new infrastructure is very tight, as well. The fact 
that natural gas is 84 times more powerful in the near term 
than CO-2 as a bad actor on climate merely exacerbates globally 
the local conditions you just referred to in terms of air 
quality and public health.
    Representative Maloney. I think that is important, and I 
think a broader issue is how do we accomplish what you are 
saying? If the technology exists, why are we not using it? Of 
course it is very expensive. And most of the fracking and other 
activities are exempt from important federal protections that 
Congress passed, such as the Clean Water Act.
    So we cannot go in and enforce Clean Water protections that 
we have in other areas because this is specifically exempt. So 
I would like to ask all the panelists, yes or no, do you think 
it is a good idea to exempt from important federal protections 
that Congress passed, such as the Clean Water Act, these 
harmful--in some cases, they are, like the methane emissions 
that Mr. Holstein mentioned. Yes or no, do you think it is a 
good idea to exempt fracking from the Clean Water Act?
    Mr. Yergin, yes or no? Yes, or no, because I have a lot of 
questions.
    Dr. Yergin. I will just say that I think this is a highly 
regulated activity. Much of it is regulated by the states. 
And----
    Representative Maloney. Okay, so yes, or no. Do you think 
it is a good idea for it to be exempt from the Federal Clean 
Water Act?
    Dr. Yergin. I think as long as it is heavily regulated 
appropriately by the states.
    Representative Maloney. Okay. All right. Mr. Bruce?
    Mr. Bruce. Yeah, I mean as far as we're concerned, we pay 
for the gas and we have safety concerns to worry about, so what 
you're describing is upstream of us. I mean, we would----
    Representative Maloney. Yes or no? I mean, you can talk all 
day on this.
    Mr. Bruce. I would agree with Dr. Yergin, that we would 
presume that----
    Representative Maloney. Yes, okay. Ms. Roth?
    Ms. Furchtgott-Roth. Yes, it should be up to the states. We 
should roll back all that legislation and leave it----
    Representative Maloney. Mr. Holstein----
    Ms. Furchtgott-Roth [continuing]. To the states.
    Mr. Holstein. In general, I don't think it's a good idea 
and I do think that we need to have more comprehensive federal 
and state regulation to be sure----
    Representative Maloney. But do you think it should be 
exempt from the Clean Water Act?
    Mr. Holstein. No.
    Representative Maloney. No? Okay.
    Mr. Malay.
    Mr. Meloy. Meloy.
    Representative Maloney. Meloy, I'm sorry.
    Mr. Meloy. No. I think it's a heavily regulated industry 
and the states are best suited to regulate us.
    Representative Maloney. Okay. So it should be exempt from 
the Clean Water Act, according to you. Right.
    Okay, also do you think it should be exempt from the Clean 
Air Act? Because it is already now, even though fracking 
involves dangerous, harmful chemicals.
    Mr. Yagan, yes, or no?
    Dr. Yergin. ``Yer-gin.'' Yergin.
    Representative Maloney. Yergin, I'm sorry, that pertains to 
your testimony. Yes, or no.
    Dr. Yergin. I'm going to defer to Mr. Holstein who will 
have----
    Representative Maloney. Mr. Bruce?
    Mr. Bruce. I'm not aware of the implications of that.
    Representative Maloney. So you're not taking a position?
    Mr. Bruce. No.
    Representative Maloney. Okay, Ms. Roth?
    Ms. Furchtgott-Roth. Yes, the states should be regulating 
their own affairs, not the Federal Government.
    Representative Maloney. Okay.
    Mr. Holstein.
    Mr. Holstein. Exemption from the Clean Air Act? Absolutely 
not. I think the Administration has the authority and should 
use it to ensure that these localized emissions that you 
referred to are addressed.
    Representative Maloney. No, you don't have it if you're 
exempt from it. Okay, Mr. Meloy?
    Mr. Meloy. Thank you. I actually think the state regulators 
are doing a fine job in this arena and they have provided, as 
has Colorado, with a very sound basis on which to regulate this 
activity.
    Representative Maloney. But we know that states have 
different standards, and some states have higher standards than 
others. So how should policymakers specify and document the 
health costs to communities that could come from fracking to 
clean water that's been documented in others?
    And also, Dr. Yergin, you recently released a report, an 
IHS report, that supports the economic benefits of developing 
America's natural gas resources. But I was concerned that the 
report did not account for the negative impact of poorly 
executed extractions.
    We know that there are many positive benefits, but how do 
we make sure that the technology is there, that the problems 
aren't there? And do your reports assess whether a lack of 
health and environmental protections could hurt the public? 
Just on your report, Dr. Bergin, and also in a broader sense I 
would like to go to Mr. Holstein first and then others on how 
do we document the environmental and health costs? We are 
documenting the benefits, the money you make, but not what 
happens to our environment and the health of individuals.
    First, Dr. Yergin, and thank you for your research.
    Dr. Yergin. Thank you, Representative Maloney. I served on 
the Commission that President Obama had set up on the 
environmental aspects and concerns around fracking and around 
shale gas. And I think that report pointed to four areas to 
focus on, and said that these are issues that need to be 
managed. And I think the takeaway was that they are largely 
being managed.
    I think the issue of methane that has been surfaced, and 
EDF has played a particularly important role in trying to 
actually get a handle on measuring it, to know what are the 
volumes of methane that are being emitted or not being emitted, 
and they have been very constructive in that.
    Representative Maloney. Okay--and may we have time for Mr. 
Holstein to respond?
    Chairman Brady. Yes, why don't we have him wrap up.
    Representative Maloney. Thank you.
    Mr. Holstein. Thank you, Mr. Chairman.
    Representative Maloney. And anyone else who wants to 
testify.
    Chairman Brady. I didn't say that.
    Mr. Holstein. Environmental Defense Fund, together with 
roughly a hundred university, academic, scientific, and 
industry partners, are in fact doing many of these measurement 
studies to which you allude.
    But there also exists the technology necessary to monitor 
the air in many of these regions, and for these reasons the 
State of Wyoming has adopted stronger rules with respect to 
volatile organic compounds. Because as I said in my testimony, 
they have so much natural gas development going on there that 
they have ended up with air quality in much of the Upper Green 
River Basin equivalent to downtown Los Angeles. So the 
technology already exists at the state and local levels to 
monitor air quality.
    We in particular are looking at methane emissions.
    Ms. Furchtgott-Roth. This is a very complicated issue, and 
states make their own tradeoffs. For example, if New York were 
to have fracking at the same rate as Pennsylvania, New York 
State would have another $8 billion over the next four years, 
but it has made that tradeoff not to do so.
    Individual states make their tradeoffs with respect to 
fracking and jobs and employment and what they need. And we 
need to leave it like that because there are many advantages to 
Washington D.C., but we cannot decide on the combination of oil 
exploration and jobs and income for all of the 50 states, not 
to mention all of the counties.
    Chairman Brady. Thank you very much.
    I want to thank Vice Chair Klobuchar who hosted this 
hearing today. This is a timely subject. There is a lot to it 
that matters. The witnesses have been tremendously insightful 
and I want to thank you all for being here today.
    With that, the hearing is adjourned.
    (Whereupon, at 11:32 a.m., Tuesday, June 24, 2014, the 
hearing in the above-entitled matter was adjourned.)
                       SUBMISSIONS FOR THE RECORD

   Prepared Statement of Hon. Kevin Brady, Chairman, Joint Economic 
                               Committee
    Vice Chair Klobuchar, Members, and distinguished witnesses:
    Free market capitalism and science are revolutionary forces that 
can change the world for the better. George Mitchell, the founder of my 
hometown, The Woodlands, Texas and a noted philanthropist and 
environmentalist, first combined hydraulic fracturing, which uses 
pressurized liquid to break rocks and release the natural gas and oil 
trapped within, and horizontal drilling.
    This combination has turned the world of hydrocarbons upside down. 
In the winter of 1977-78, President Carter warned that the United 
States could exhaust its supply of natural gas in two generations. In 
response, Congress passed legislation to limit the use of natural gas 
in industry and electricity generation.
    Even as recently as 2012, President Obama incorrectly warned that 
``with only 2 percent of the world's oil reserves, we can't just drill 
our way to lower gas prices, not when we consume 20 percent of the 
world's oil.'' Yet, as he was making those dated remarks in his weekly 
radio address, America was experiencing an energy renaissance.
    In recent years, fracking and horizontal drilling have greatly 
increased the potential supply of natural gas and oil in the United 
States. Consequently, the United States does not need to import 
liquefied natural gas (LNG) and is reducing its dependence on foreign 
oil outside of sources among our friendly neighbors, Canada and Mexico.
    In April's Annual Energy Outlook 2014, the Energy Information 
Administration projected that domestic crude oil production will 
increase from 6.5 million barrels per day in 2012 to 9.6 million 
barrels per day in 2020, a production level not seen since 1970. 
Moreover, the import share of U.S. petroleum and other liquid fuels 
will fall to about 25 percent during the last half of this decade. 
Indeed, the United States can become a major exporter of LNG.
    Fracking and other improvements in production technology have 
opened vast stores of domestic oil and natural gas and have lowered 
production costs. In light of recent developments in Ukraine and Iraq, 
increased U.S. production of both oil and natural gas will make our 
economy far less dependent on costly and unreliable oil imports and 
will mitigate the prices of both oil and natural gas, if this White 
House does not interfere or attempt to slow down domestic production.
    America's energy revolution has also created tens of thousands of 
well-paying jobs during a disappointing economic recovery. These jobs 
cover the entire spectrum from the unskilled to the highly skilled, and 
are a new source of employment for minority workers across the country. 
As the energy workforce ages out, even more opportunities will occur 
for workers of all skills.
    Of course, more American-made energy means more American-made tax 
revenues for communities, states and the federal government. With the 
exception of individual tax receipts, the energy industry is now 
America's second largest taxpayer. So more natural gas production in 
America helps to balance the budget and fund necessary services to 
families who need assistance.
    Despite the natural gas and oil revolution, some people prefer 
renewable, zero-emission energy sources such as wind, solar and 
geothermal power. Renewable fuels should be encouraged, but none of 
these ``green'' energy technologies has yet to demonstrate sufficient 
economies of scale to compete with fossil fuels as a major energy 
source without dependence on significant taxpayer subsidies, regulatory 
mandates, and tax preferences. While future technological breakthroughs 
are possible, as of today ``green'' energy cannot compete affordably 
with traditional energy in the free market.
    Developing countries have rejected the siren song of ``green'' 
energy, and many developed countries that had embraced it, such as 
Germany and Japan, are backing away from their earlier commitments.
    Some environmentalists continue to press for their preferred 
sources of energy even though natural gas can reduce greenhouse gas 
emissions more quickly and at less cost. Artificially supporting 
current ``green'' energy technology takes money away from development 
of new ``green'' technologies that could be competitive with fossil 
fuels on their own merits.
    The U.S. legal and regulatory regime for international trade in oil 
and natural gas as well as a continuing mindset in some quarters are 
stuck in a time of import dependency. But the United States now is in a 
position to export natural gas, petroleum products, and even high 
quality ``light'' crude oil. We must adapt our mindset and our rules 
accordingly. We must do so for the sake of the domestic economy, the 
stability of world oil and gas prices, and geopolitical stability. The 
Administration has been slowrolling drilling permits, licenses for LNG 
export terminals, and approvals for deliveries to countries that do not 
have a free trade agreement with the United States, meaning all but 20 
countries, none of which is in Europe.
    The fracking revolution has both profound economic and geopolitical 
implications. Fracking has the potential to increase alternative 
sources of supply in North America and reduce the world's dependence on 
supply from North Africa and the Middle East. Exports of domestically 
produced LNG and refined petroleum products can also alleviate Europe's 
dependence on Russia.
    The fracking revolution is a win for everyone involved. Domestic 
natural gas and oil production is igniting an industrial renaissance in 
the United States, especially in industries that are energy intensive 
or use natural gas and oil as feedstock; and it is creating tens of 
thousands of high-paying jobs for middle-class American workers.

    With that, I look forward to the testimony of today's witnesses.

    [GRAPHIC] [TIFF OMITTED] 

Prepared Statement of Charles A. Meloy, Executive Vice President, U.S. 
   Onshore Exploration and Production, Anadarko Petroleum Corporation
    Good morning, and thank you Chairman Brady and Vice Chair Klobucher 
for the pleasure of speaking with the Joint Economic Committee this 
morning about ``The Economic Impacts of the Natural Gas Revolution.''
    We are indeed in the midst of an energy re-boot in America, unlike 
any I've seen in my career--a re-boot that is driven by innovation and 
technology, and the nearly 10 million dedicated men and women in the 
oil and natural gas industry.
    In terms of technology, the confluence of two time-tested, proven 
techniques, horizontal drilling and hydraulic fracturing (fracking), 
served as a game-changer in opening access to shale and other tight-
rock formations.
    America's new-found abundance of cleaner natural gas is only 
possible through the combination of these technologies. In other words, 
without fracking and horizontal drilling there is no 1) new age of 
energy self-sufficiency in America, which is very important given the 
current geo-political instability in places like Russia, Iraq, Syria 
and others; 2) material carbon reductions from greater utilization of 
natural gas that have resulted in the U.S. lowering its total carbon 
emissions to levels not seen since 1994; 3) lower consumer costs for 
the benefit of each and every American, amounting to $1,200 per 
household per year; and 4) substantial taxes, royalties, and leases 
paid by the industry to the tune of $85 million each day, which help 
governments pay for important public services including education.
    It wasn't that long ago, America was contemplating LNG import 
terminals to meet natural gas demand. How times have changed, as today, 
we're expanding our ability to export natural gas, enhancing our 
nation's global influence and balance of trade. Every barrel of oil or 
molecule of gas we produce here is one less we have to import.
    I'm proud to say the natural gas revolution has also spawned a U.S. 
manufacturing renaissance and tremendous growth in the chemicals 
industry, because of the cheaper natural gas feedstock.
    In addition, if you think back to 2005 when Hurricanes Rita and 
Katrina hit the Gulf, natural gas prices spiked to more than $14 per 
MMBTU (million British thermal units), demonstrating how dependent the 
U.S. was on natural gas from the Gulf of Mexico. Shales have provided a 
geographic diversity that has stabilized supply and significantly 
dampened price volatility.
    Production of natural gas in the U.S. has increased by 30 percent 
since that time, and whereas the EIA, back in 2009, projected natural 
gas prices to be near $13 per MMBTU by 2035, the newest projections 
show prices will more likely be around $6 per MMBTU. This is 
outstanding news for consumers, manufacturers, electricity providers 
and others and is an economic engine that can bolster the US economy 
for decades.
    Thanks to the natural gas revolution, the American economic 
recession has been muted in many sectors of the economy. Our industry 
is adding jobs. Plus, for every oil and natural gas job that's created, 
an additional three jobs are created in other sectors of the economy.
    The company I work for, Anadarko, is currently the third-largest 
natural gas producer in the U.S. We are the largest natural gas 
producer in Senator Mike Lee's home state of Utah, and we've invested 
more than $4 billion developing natural gas from the Marcellus Shale in 
Senators Toomey's and Casey's home state of Pennsylvania.
    Among the achievements I'm most proud of, is that as we perfect the 
technologies we're also optimizing how we deploy people, equipment and 
best practices to drive efficiency gains in every aspect of our 
business. This translates into fewer days on location drilling and 
completing a well. Our innovations in Utah's Greater Natural Buttes 
field have resulted in six Utah Earth Day Awards.
    We've achieved 40-percent reductions in the amount of surface space 
needed to develop oil and natural gas in Colorado's Wattenberg field. 
By expanding gathering and pipeline infrastructure, we've eliminated 
more than 10 million truck miles and avoided more than 450,000 
truckloads in the Wattenberg field, significantly reducing traffic and 
associated emissions. We continue to invest in technology to reduce 
emissions, detect methane leaks and source, transport and recycle 
water.
    We're also working collaboratively with all stakeholders. This 
includes Anadarko's work with the Clean Air, Clean Jobs Act in Colorado 
in 2010, which was a state-based solution to federal air quality 
requirements. It also includes our work with Colorado Governor John 
Hickenlooper, industry partners and the Environmental Defense Fund 
(EDF) resulting in new air-quality regulations in Colorado, and our 
efforts with federal and state regulators, tribal leaders and the 
Southern Utah Wilderness Alliance on the 2012 Greater Natural Buttes 
yielding a Record of Decision and project approval to develop the 
extensive resources of Utah.
    The key going forward for our industry is for our elected leaders 
to keep working together toward solutions, refusing to perpetuate a 
climate of obstruction and the demonization of an industry that is 
fundamental to modern life. It means recognizing that a vibrant oil and 
natural gas industry makes other industries more productive--fueling 
the economy that creates opportunity.
    We recognize the need for comprehensive and consistent state-based 
regulations. They provide legitimacy for our activities and help build 
public trust. This is why Arkansas, Colorado, Louisiana, New Mexico, 
North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, 
and Wyoming continue to benefit from shale and tight-sands development. 
Yet, these activities are relatively stagnant on federal lands due to 
the costly and uncertain federal regulatory environment.
    Our industry can do so much more with reasonable access to federal 
lands. Consider the oil and natural gas industry more than pays for the 
cost of all leasing, permitting, monitoring, and inspecting activities 
by returning almost $89 for every dollar BLM spends administering the 
onshore program.
    Enabling infrastructure and pipeline expansions will help ensure we 
stay ahead of other parts of the world that have shale resources but no 
infrastructure to move it to market. Creatively partnering with 
industry to expand compressed natural gas (CNG) fueling stations can 
help put more natural gas in the gas tanks of America's fleet vehicles, 
meaning cleaner cars, cheaper fuel and even less reliance on foreign 
oil.
    We don't have to choose between a future with fossil fuel 
development or a future with a cleaner environment. We can choose to 
have both. It is solely dependent upon our ability to continue to 
collaborate, rely upon sound science, streamline access, and not just 
identify problems, but do what our industry has been doing for 
decades--use human ingenuity to find solutions. Thank you.
                               __________
Questions for the Record submitted by Senator Robert P. Casey, Jr., and 
                    responses from Dr. Daniel Yergin

    Senator Casey:

    We have our own major shale play in Pennsylvania that is now making 
meaningful contributions to our Nation's natural gas supply, as the 
Marcellus is now responsible for as much of 20 percent of America's 
natural gas supply. You have watched shale plays develop around the 
U.S. and the jobs generated from direct investments from shale 
operators. However, we now have domestic natural gas selling for half 
of what it sold in 2008.

    Question #1

    How do you see this dynamic benefitting the manufacturing sector? 
Could we begin to see a significant ramp up in manufacturing jobs being 
generated due to affordable and abundant supplies of natural gas in 
Pennsylvania?

    Dr. Yergin's Response:

    The Marcellus is an extraordinary engine of economic growth and 
development - one with great impact both on Pennsylvania's economy and 
on the nation's. Overall, in the IHS study America's New Energy Future 
(2012-2013), we examined the impact of the unconventional energy on US 
manufacturing and concluded that manufacturing will benefit from the 
new discoveries and the resulting lower natural gas prices. The 
benefits will be concentrated in drilling activity, the supply chain 
sectors (those that provide goods and services to support capital 
expenditures for drilling and completion of new wells and for the 
construction of related facilities, such as pipelines, and for on-going 
support of the activities), industries that use natural gas as a 
feedstock (primarily petrochemicals), and those that benefit through 
lower energy input (gas or electric power) cost.
    Energy intensive sectors like energy-related chemicals, petroleum 
refining, aluminum, glass, cement and the food industry are investing 
and expanding their US operations in response to declining domestic 
prices for their energy inputs. Over $100 billion of new investment has 
been announced just for the petrochemical sector in the United States, 
and the eventual total manufacturing investment as the result of this 
unconventional revolution will be measured in many multiples of that 
hundred billion. This will translate into economic growth and 
substantial job creation, directly and indirectly.
    Pennsylvania manufacturing does have growth potential due to the 
development of the Marcellus and the state's skilled workforce in 
manufacturing and related sectors, as well as its proximity to major 
population centers and numerous transportation nodes. However, a 
significant ramp up in Pennsylvania manufacturing jobs does not 
necessarily follow. As drilling activity continues, the supply chain 
sectors operating within the state will continue to support the oil and 
gas industry in its drilling and related efforts, and this sustains and 
creates jobs. There is also the prospect of petrochemical industry 
expansion within the state. The degree to which manufacturing does ramp 
up will be affected by the overall business climate both for the 
upstream gas industry and manufacturing and by state policies on 
taxation and regulation.
    A recent IHS study on `Manufacturing Growth Strategies for 
Philadelphia MSA' (2013) identified competitive strengths of the 
manufacturing sectors in, among others, chemicals and refining. 
However, the study showed that the region is not achieving the maximum 
benefit from Marcellus development. These industries use natural gas 
liquids as a feedstock, and access has been limited by insufficient 
natural gas liquids pipeline capacity, among other things.

    Senator Casey:

    I understand that some industries that rely on natural gas as a 
feedstock or energy uses are concerned that new demand for natural gas 
by the transportation sector, or an aggressive move to export natural 
gas, might dramatically increase demand, and as a consequence drive up 
prices.

    Question #2

    What is the long-term outlook on the supply and price of natural 
gas?

    Dr. Yergin's Response:

    We estimate that technically recoverable natural gas resources in 
the US are approximately 3,000 trillion cubic feet (Tcf), enough to 
supply current levels of consumption (26 Tcf in 2013) for well over 100 
years, and enough to accommodate significant growth in consumption for 
decades, even without additional discoveries or technology developments 
that would increase the recoverability of gas resources. Over the next 
20 years we project US natural gas consumption will total 692 Tcf 
(cumulatively), leaving some 2,300 Tcf of resource for future 
consumption. And given the industry's track record for increasing 
recoverability and reducing unit costs, we would expect the resource 
base to continue to grow in coming years. We consider our estimate to 
be conservative.
    The technologies that have been developed for recovering gas from 
impermeable formations--so-called ``unconventional'' gas--yield 
significant scale economies, with individual wells producing far more 
gas than was true in the recent past using more conventional drilling 
and completion techniques. Because the costs of drilling and completing 
today's wells now can be spread over a higher volume of production, the 
unit cost of gas production is today much lower than it had been before 
the unconventional gas revolution.
    IHS Energy estimates that a large volume of gas from unconventional 
dry gas plays can be produced economically at a Henry Hub price at 
moderate prices. There is the potential for cost inflation to affect 
this likely price range. If the costs of key inputs such as steel pipe, 
fracking sand, labor, or other inputs increases faster than general 
inflation, the likely price band will shift upward accordingly.

    Question #3

    Given the supply, how viable is natural gas as a transportation 
fuel, and are there specific segments of the motor vehicle market where 
it is particularly applicable?

    Dr. Yergin's Response:

    Natural gas--either as LNG or as CNG--can be economically 
competitive in the high-mileage parts of the transport sector. Fleet 
operators whose vehicles return to base every night--trash trucks and 
buses, for example--are showing the highest rate of adoption, but 
represent a relatively small portion of US fuel demand. The trade-off 
between incremental up-front costs (it costs more to buy a natural gas 
engine) and fuel savings (natural gas is cheaper than diesel) means 
that the more the vehicle consumes, the more competitive natural gas 
is. In the longer-term, the highest natural gas fuel usage can be 
expected in marine bunkering, heavy-duty trucking, and possibly even 
rail. Long-distance heavy-duty trucks are considered one of the prime 
potential markets. There are, however, two notable constraints on the 
penetration of natural gas in trucking. One is infrastructure--the lack 
of a widespread refueling system. The other is competitive--the fact 
that the fuel economy of diesel trucks is improving. Passenger 
vehicles, the majority of fuel demand, however, currently show less 
promise because of the low miles traveled, on average, but could still 
prove competitive in some circumstances.
    Over the past several years, Congress has encouraged the use of 
alternative fuels by providing tax credits. We have heard that many 
alternative fuels are not economically viable in the marketplace 
without long-term government support.

    Question #4

    What are the economics of natural gas as a transportation fuel 
versus conventional fuels? And, if the economics are positive, what 
would providing tax credits achieve?

    Dr. Yergin's Response:

    The economics of switching to natural gas can be positive, with the 
balance being determined by the incremental costs (higher capital cost) 
and fuel savings (lower operating expense). LNG costs are about $1.50-
$1.75 per diesel gallon equivalent (dge) cheaper than diesel pump 
prices, and the CNG discount is near $2 per dge or more. With oil and 
gas prices in North America fundamentally disconnected, these discounts 
could change.
    While LNG truck engines cost $40,000-$75,000 more than their diesel 
counterparts, incremental CNG engine costs are considerably lower. The 
economics are highly sensitive to these two factors, and in particular 
how much fuel is consumed by each vehicle. The more fuel consumed, the 
more positive the economics.
    Whether tax credits should be used is a matter for policy 
discussion, in terms of overall objectives and long-term effects. One 
question is whether the tax credits would be applied to capital costs 
of new vehicles or to fuel prices. It would also be useful to compare 
current levels of taxation on an energy basis.
  

                                  
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