[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
LIQUEFIED NATURAL GAS AND U.S. GEOPOLITICS
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
Tuesday, February 27, 2018
__________
Serial No. 115-38
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Printed for the use of the Committee on Natural Resources
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
or
Committee address: http://naturalresources.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
28-794 PDF WASHINGTON : 2018
COMMITTEE ON NATURAL RESOURCES
ROB BISHOP, UT, Chairman
RAUL M. GRIJALVA, AZ, Ranking Democratic Member
Don Young, AK Grace F. Napolitano, CA
Chairman Emeritus Madeleine Z. Bordallo, GU
Louie Gohmert, TX Jim Costa, CA
Vice Chairman Gregorio Kilili Camacho Sablan,
Doug Lamborn, CO CNMI
Robert J. Wittman, VA Niki Tsongas, MA
Tom McClintock, CA Jared Huffman, CA
Stevan Pearce, NM Vice Ranking Member
Glenn Thompson, PA Alan S. Lowenthal, CA
Paul A. Gosar, AZ Donald S. Beyer, Jr., VA
Raul R. Labrador, ID Norma J. Torres, CA
Scott R. Tipton, CO Ruben Gallego, AZ
Doug LaMalfa, CA Colleen Hanabusa, HI
Jeff Denham, CA Nanette Diaz Barragan, CA
Paul Cook, CA Darren Soto, FL
Bruce Westerman, AR A. Donald McEachin, VA
Garret Graves, LA Anthony G. Brown, MD
Jody B. Hice, GA Wm. Lacy Clay, MO
Aumua Amata Coleman Radewagen, AS Jimmy Gomez, CA
Daniel Webster, FL
Jack Bergman, MI
Liz Cheney, WY
Mike Johnson, LA
Jenniffer Gonzalez-Colon, PR
Greg Gianforte, MT
John R. Curtis, UT
Cody Stewart, Chief of Staff
Lisa Pittman, Chief Counsel
David Watkins, Democratic Staff Director
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
PAUL A. GOSAR, AZ, Chairman
ALAN S. LOWENTHAL, CA, Ranking Democratic Member
Louie Gohmert, TX Anthony G. Brown, MD
Doug Lamborn, CO Jim Costa, CA
Robert J. Wittman, VA Niki Tsongas, MA
Stevan Pearce, NM Jared Huffman, CA
Glenn Thompson, PA Donald S. Beyer, Jr., VA
Scott R. Tipton, CO Darren Soto, FL
Paul Cook, CA Nanette Diaz Barragan, CA
Vice Chairman Vacancy
Garret Graves, LA Vacancy
Jody B. Hice, GA Raul M. Grijalva, AZ, ex officio
Jack Bergman, MI
Liz Cheney, WY
John R. Curtis, UT
Rob Bishop, UT, ex officio
------
CONTENTS
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Page
Hearing held on Tuesday, February 27, 2018....................... 1
Statement of Members:
Gosar, Hon. Paul A., a Representative in Congress from the
State of Arizona........................................... 1
Prepared statement of.................................... 3
Lowenthal, Hon. Alan S., a Representative in Congress from
the State of California.................................... 25
Prepared statement of.................................... 26
Statement of Witnesses:
Doran, Peter B., President and CEO, Center for European
Policy Analysis, Washington, DC............................ 8
Prepared statement of.................................... 10
Gentle, Meg, President and CEO, Tellurian, Inc., Houston,
Texas...................................................... 19
Prepared statement of.................................... 21
Questions submitted for the record....................... 24
Livingston, David, Deputy Director for Climate and Advanced
Energy, Atlantic Council, Washington, DC................... 13
Prepared statement of.................................... 15
Smith, Christopher, Senior Vice President, Policy,
Government, and Public Affairs, Cheniere Energy, Inc.,
Houston, Texas............................................. 4
Prepared statement of.................................... 6
Questions submitted for the record....................... 8
Additional Materials Submitted for the Record:
List of documents submitted for the record retained in the
Committee's official files................................. 48
OVERSIGHT HEARING ON LIQUEFIED NATURAL GAS AND U.S. GEOPOLITICS
----------
Tuesday, February 27, 2018
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Washington, DC
----------
The Subcommittee met, pursuant to call, at 2:14 p.m., in
room 1324, Longworth House Office Building, Hon. Paul A. Gosar
[Chairman of the Subcommittee] presiding.
Present: Representatives Gosar, Lamborn, Tipton, Graves,
Hice, Cheney, Bishop (ex officio), Lowenthal, Costa, Beyer, and
Soto.
Dr. Gosar. The Subcommittee on Energy and Mineral Resources
will come to order.
The Subcommittee is meeting today to hear testimony on
liquefied natural gas and U.S. geopolitics.
Under Committee Rule 4(f), any oral opening statements at
the hearing are limited to the Chairman, the Ranking Minority
Member, and the Vice Chair. This will allow us to hear from our
witnesses sooner and help Members keep to their schedules.
Therefore, I ask unanimous consent that all other Members'
opening statements be made part of the hearing record if they
are submitted to the Subcommittee Clerk by 5:00 p.m. today.
Without objection, so ordered.
STATEMENT OF THE HON. PAUL A. GOSAR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARIZONA
Dr. Gosar. The advent of the Shale Revolution in America
has revolutionized the way we extract valuable hydrocarbons,
leading to lower energy prices and an infusion into the
American economy with billions in revenues. The combination of
horizontal drilling and hydraulic fracking technologies has
also allowed the United States to transition from a position of
energy insecurity to energy dominance.
In recent years, the production of natural gas has allowed
the United States to become an undeniable force within the
global energy market. Indeed, the United States has become the
world's largest producer of natural gas since 2009. And this
production must continue if we are to provide our allies with
reliable energy, while maintaining jobs and increasing revenues
from production here at home.
Further driving our Nation's energy security is the
production of liquefied natural gas, or LNG. LNG is produced by
shipping natural gas to a liquefication facility, where the gas
is cooled until it is compressed 600 times, becoming liquid.
The LNG is then ready to be shipped anywhere in the world.
Global demand for natural gas has tripled in the last two
decades, and the advent of new market opportunities indicates
that this trend will no doubt continue and increase America's
role in energy security for our allies.
Just last year, the United States became a net exporter of
natural gas for the first time since the 1950s. The production,
liquefication, and shipping of LNG has risen to meet the
incredible global demand for the product, implicating
geopolitics across the globe.
For instance, Russia has long monopolized the gas supply to
Europe. According to Deputy Secretary of State John McCarrick,
11 European countries relied on Russian gas to meet 75 percent
of their heating and electrical generation needs. The continent
is therefore quite exposed to supply disruptions, either
intentionally imposed or not.
Russia's Nord Stream pipeline, which supplies westbound gas
from Russia to Germany across the Baltic Sea, is approaching
its full transmission capacity of 55 billion cubic meters.
Germany supports the construction of an identical pipeline,
Nord Stream 2, which effectively doubles capacity. If
constructed, the highly controversial pipeline will allow
Russia to supply 75 percent of Europe's natural gas demand.
In 2017, Cheniere delivered the first shipment of American-
produced LNG from its Sabine Pass export terminal in Louisiana
to the Baltic nation of Lithuania. Lithuania, like many of its
Eastern European neighbors, relied exclusively on Russia to
meet its energy demand for decades. This monumental shipment of
LNG indicates that the European nations are looking to
diversify and to break the stranglehold of Russian energy
control.
Outside of Europe, demand for natural gas is skyrocketing
in Asia. Last year alone, demand grew 20 percent in China,
South Korea, and Japan as these nations continue to grow their
economies while limiting greenhouse gas emissions. China is on
track to more than double its natural gas from 38.1 million
metric tons today to 82 million metric tons by 2030.
Meanwhile, India, which currently operates four LNG import
and regasification facilities, is planning to expand its import
capacity by 11 terminals.
American companies, such as Cheniere Energy, Incorporated,
represented by Mr. Christopher Smith today, have signed some of
the largest long-term supply agreements. Just this month,
Cheniere signed the first ever long-term LNG supply contract
with the Chinese National Petroleum Corporation.
With the rise in demand, Australia has stepped up in the
Asian markets, supplying over 80 percent of China's demand for
LNG. As such, the United States is now competing for market
share with strong local suppliers, and, therefore, it is
essential that we support production, LNG export facility
permitting, and pipeline capacity here on the American shores.
Today, we will discuss the implications of being a major
player in the expanding global energy market.
[The prepared statement of Dr. Gosar follows:]
Prepared Statement of the Hon. Paul A. Gosar, Chairman, Subcommittee on
Energy and Mineral Resources
The advent of the ``Shale Revolution'' in America has
revolutionized the way we extract valuable hydrocarbons--leading to
lower energy prices and an infusion in the American economy with
billions in revenues. The combination of horizontal drilling and
hydraulic fracturing technologies has also allowed the United States to
transition from a position of energy insecurity to energy dominance.
In recent years, the production of natural gas has allowed the
United States to become an undeniable force within the global energy
market. Indeed, the United States has been the world's largest producer
of natural gas since 2009, and this production must continue if we are
to provide our allies with reliable energy, while maintaining jobs and
increasing revenues from production here at home.
Further driving our Nation's energy security is the production of
Liquefied Natural Gas (LNG). LNG is produced by shipping natural gas to
a liquefaction facility, where the gas is cooled until it is compressed
600 times becoming liquid. The LNG is then ready to be shipped anywhere
in the world. Global demand for natural gas has tripled in the last two
decades, and the advent of new market opportunities indicates that this
trend will no doubt continue--and increase America's role in energy
security for our allies.
Just last year, the United States became a net exporter of natural
gas for the first time since the 1950s. The production, liquefaction,
and shipping of LNG has risen to meet the incredible global demand for
the product, implicating geopolitics across the globe.
For instance, Russia has long monopolized gas supply to Europe.
According to Deputy Secretary of State John McCarrick, 11 European
countries relied on Russian gas to meet 75 percent of their heating and
electrical generation needs. The continent is therefore quite exposed
to supply disruptions, be they intentionally imposed or not. Russia's
Nord Stream pipeline, which supplies westbound gas from Russia to
Germany across the Baltic Sea, is approaching its full transmission
capacity of 55 billion cubic meters. Germany supports the construction
of an identical pipeline, Nord Stream 2, which effectively doubles
capacity. If constructed, the highly controversial pipeline would allow
Russia to supply 75 percent of Europe's natural gas demand. In 2017,
Cheniere delivered the first shipment of American produced LNG from its
Sabine Pass export terminal in Louisiana to the Baltic nation of
Lithuania. Lithuania, like many of its Eastern European neighbors,
relied exclusively on Russia to meet its energy demands for decades.
This monumental shipment of LNG indicates that European nations are
looking to diversify and break the stranglehold of Russian energy
control.
Outside of Europe, demand for natural gas is skyrocketing in Asia.
Last year alone, demand grew 20 percent in China, South Korea, and
Japan, as these nations continue to grow their economies while limiting
greenhouse gas emissions. China is on track to more than double its
natural gas from 38.1 million metric tons today to 82 million metric
tons by 2030. Meanwhile, India, which currently operates four LNG
import and regasification facilities, is planning to expand its import
capacity by 11 terminals. American companies, such as Cheniere Energy,
Inc., represented by Mr. Christopher Smith today, have signed some of
the largest long-term supply agreements. Just this month, Cheniere
signed the first ever long-term LNG supply contract with the Chinese
National Petroleum Corporation.
With the rise in demand, Australia has stepped up in the Asian
markets, supplying over 80 percent of China's demand for LNG. As such,
the United States is now competing for market share with strong local
suppliers, and therefore, it is essential that we support production,
LNG export facility permitting, and pipeline capacity here on American
shores. Today, we will discuss the implications of being a major player
in an expanding global energy market.
______
Dr. Gosar. I now recognize the Ranking Member.
Do you have a statement?
Mr. Beyer. Mr. Chair, I would yield to the actual Ranking
Member when he comes later, if that is possible. If not, we
will put it in the record.
Dr. Gosar. That sounds good. We are going to go right to
our witnesses then.
First, we have Mr. Christopher Smith, Senior Vice President
of Policy, Government, and Public Affairs, Cheniere Energy,
Incorporated; Mr. Peter Doran, President and CEO of the Center
for European Policy Analysis; Mr. David Livingston, Deputy
Director for Climate and Advanced Energy at the Atlantic
Council; and Ms. Meg Gentle, President and CEO of Tellurian,
Incorporated.
Let me remind the witnesses that, under our Committee
Rules, they must limit their oral statements to 5 minutes, but
their entire statement will appear in the record as detailed.
Our microphones are not automatic. For the first 4 minutes,
you will see the green. Then it will turn to yellow for 1
minute. When you see it red, summarize and get done.
I will now recognize Mr. Smith for your 5 minutes.
STATEMENT OF CHRISTOPHER SMITH, SENIOR VICE PRESIDENT, POLICY,
GOVERNMENT, AND PUBLIC AFFAIRS, CHENIERE ENERGY, INC., HOUSTON,
TEXAS
Mr. Smith. Thank you very much. Chairman Gosar, Ranking
Member Lowenthal, and members of the Subcommittee, it is an
honor to appear before you on behalf of Cheniere Energy,
Incorporated. I would also like to recognize Representative
Graves and Gohmert from Louisiana and Texas, where Cheniere
lives and works.
Cheniere Energy is a Houston-based energy company that
provides clean, secure, and affordable U.S. natural gas to the
world. Over 280 cargos of U.S. LNG from Sabine Pass have been
delivered to 25 countries and regions since start-up in
February of 2016.
Cheniere is a full-service liquefied natural gas company,
which makes us unique in the U.S. LNG industry. We procure
North American natural gas, transport that gas through our own
pipelines or existing pipeline networks, build and operate
large-scale liquefaction facilities, and offer U.S. LNG to our
customers either at our facility or delivered to import
facilities around the world.
Cheniere's operations create jobs at home and project
American influence abroad. Cheniere is the first company to
export LNG from the contiguous United States and is the largest
U.S. LNG exporting company. Cheniere is investing approximately
$30 billion in American energy infrastructure and has created
thousands of direct jobs and tens of thousands of indirect jobs
across America.
When all our production capacity that is currently under
construction is on line in 2020, we will be a top-five global
LNG supplier.
Cheniere's investment is having a positive impact on global
energy markets, providing affordable and reliable natural gas
to countries around the world to meet their energy needs. U.S.
natural gas is an attractive alternative for many customers,
particularly those who are captive to a handful of suppliers,
making them vulnerable to supply disruptions and, at times,
geopolitical dynamics.
Due to the commercial nature of our domestic energy
industry, U.S. natural gas did not come with a political
requirement or pressures, helping to depoliticize the
commodity. As a result, it is making natural gas a more
economic and more secure fuel for buyers around the world.
Many countries--developed and developing, traditional LNG
importers and emerging markets--are also choosing natural gas
as part of a global shift toward a lower-carbon energy mix that
favors natural gas over coal and liquid fuels, reducing air
pollution and carbon emissions. Just as the Shale Revolution
has allowed the United States to reduce carbon emissions, the
export of liquefied natural gas makes similar advances possible
worldwide.
Cheniere is the largest physical consumer of natural gas in
the United States, sourcing gas from Texas, Louisiana,
Arkansas, Pennsylvania, Ohio, West Virginia, Oklahoma,
Illinois, and Kentucky.
We have a role in promoting environmental standards that
will maintain the sustainability of the LNG that we sell. We
are committed to working with our suppliers to maintain high
and consistent environmental standards, including working to
reduce methane leakage.
Cheniere and the U.S. LNG industry are well-positioned to
compete in the increasingly competitive global natural gas
market. Indeed, earlier this month, we executed two long-term
agreements with the China National Petroleum Corporation. Our
success in China to date is due to our ability to execute, and
a value proposition that will be difficult for others to match.
These are the first direct, long-term LNG supply contracts
between a Chinese company and a U.S. LNG exporter, a historic
milestone in energy cooperation between the United States and
China and a constructive way to address trade imbalances. We
expect these agreements to support our growth plans and are
focused on the remaining steps necessary to achieve a final
investment decision at Train 3 at Corpus Christi in the next
several months. This will be the first new large-scale LNG
capacity to progress to construction in the United States since
2015.
And we are just getting started. Cheniere plans to lead the
next wave of American LNG by continuing to make investments in
American jobs and infrastructure. It is important to note that
Cheniere's existing LNG platform, over $30 billion, has
followed a transparent public regulatory process both by the
Department of Energy and the FERC, where it has considered both
environmental and economic issues.
And while we always like to see these processes move along
faster, our business model does not benefit from cutting
corners. It is important that these processes are robust enough
to withstand public scrutiny. If we want to continue to project
American influence abroad through U.S. LNG exports, we need to
ensure regulatory certainty for domestic infrastructure and
that domestic production is safe and environmentally
sustainable.
The future growth of U.S. LNG exports will be determined by
whether projects are able to provide the most attractive
commercial terms in a fiercely competitive global LNG market.
In that, Cheniere plans to continue leading the U.S. LNG export
industry.
Thank you, and I look forward to answering your questions
during the question session.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of Christopher Smith, Senior Vice President,
Cheniere Energy, Inc.
Chairman Gosar, Ranking Member Lowenthal, and members of the
Subcommittee, it is an honor to appear before you on behalf of Cheniere
Energy, Inc. We appreciate the opportunity to discuss the global
economic, energy security, and environmental benefits of exporting U.S.
natural gas. I'd also like to recognize Representatives Graves and
Gohmert from Louisiana and Texas, where we live and work.
Cheniere Energy is a Houston-based energy company that provides
clean, secure, and affordable U.S. natural gas to the world. Cheniere
is a full-service liquefied natural gas (``LNG'') company, which makes
us unique in the U.S. LNG industry: we procure natural gas from the
robust North American natural gas market, construct and operate
pipelines and contract capacity on multiple existing pipelines to
transport that gas to our facilities, build and operate large-scale
liquefaction facilities, and offer U.S. LNG to our customers either at
our facility or delivered to import facilities around the world.
Cheniere owns and operates the Sabine Pass LNG Terminal in Cameron
Parish, Louisiana and is constructing additional liquefaction and
export facilities at the Sabine Pass LNG Terminal and near Corpus
Christi, Texas. Cheniere has a global presence with offices in Houston,
Washington, London, Santiago, Singapore, Tokyo, and Beijing.
Cheniere's operations create jobs at home, and project American
influence abroad. Cheniere is the first company to commercially export
LNG from the contiguous United States. Cheniere is constructing or
operating around half of the approximately 10 Bcf per day of LNG export
capacity under construction in the United States, making Cheniere the
largest U.S. LNG exporting company.
Cheniere expects to make an approximately $30 billion investment in
American energy infrastructure. Cheniere has directly created thousands
of jobs and, from local services to increased domestic energy
production, tens of thousands of indirect jobs across America.
Cheniere, with our engineering, procurement and construction (``EPC'')
contractor Bechtel, sources materials for our facilities from nearly
1,600 different manufacturers across 46 states. Supporting U.S. energy
exports and free trade supports U.S. jobs and American manufacturing.
Cheniere's investment is having an impact on global energy markets.
When all of our production capacity currently under construction is on
line, which is expected to be by 2020, we are projected to be a top-5
global LNG supplier alongside longtime industry participants such as
Shell and Qatar Petroleum.
Cheniere Energy is uniquely committed to U.S. success on both
energy production and environmental stewardship, as it is that
combination that supports the long-term growth of U.S. natural gas
exports. An important part of our business model is the fact that we're
selling an affordable, reliable, cleaner fuel that customers around the
world want. Cheniere sells into a global market, and every Cheniere
customer resides in a country that has committed to reducing emissions
under the Paris Agreement. LNG is contributing to a global shift toward
a lower-carbon energy mix that favors natural gas over coal and liquid
fuels--reducing air pollution and carbon emissions. Many countries--
developed and developing, traditional LNG importers and emerging
markets--are choosing natural gas as a lower-carbon, affordable and
reliable option for their energy portfolio.
Cheniere is already the largest physical consumer of natural gas in
the United States. We are currently consuming approximately 3.2 Bcf/d
of gas per day, and once our seven trains that are either operating or
are under construction are in operation, we will be consuming
approximately 5-6 percent of total U.S. gas production at a level just
under 6 Bcf/d. This gas consumption, which supplies our export
facilities, is responsible for many jobs associated with the upstream
domestic production and transportation of natural gas across the
country. Cheniere sources gas produced across the country, including
Texas, Louisiana, Arkansas, Pennsylvania, Ohio, West Virginia,
Oklahoma, Illinois, and Kentucky. We have also purchased gas produced
in the Montney basin in Canada.
Our market position domestically and internationally provides us
with a unique responsibility to promote standards that support the
value of the LNG that we sell. Methane leakage rates are a critical
variable in the Greenhouse Gas lifecycle of LNG. We are committed to
working with our suppliers to maintain high and consistent
environmental standards, including working to reduce methane leakage as
well as promoting water conservation and recycling.
Since the start-up of operations in February 2016, over 280 cargoes
of U.S. LNG from Sabine Pass have been delivered to 25 countries and
regions. In 2017, cargoes from Sabine Pass were landed all over the
world, with Mexico, South Korea and China as the top three
destinations. This is in line with recent trends in the global market,
reflecting Asia as the most dominant source of LNG demand growth. About
45 percent of the cargoes from Sabine Pass were delivered to Asian
markets, 30 percent to Latin America, 15 percent to Europe, and about
10 percent to Middle East and North Africa. The worldwide distribution
of destinations from the Sabine Pass LNG Terminal is a result of
Cheniere's business model and destination free contracts.
Cheniere's liquefaction facilities currently under construction or
in operation across our two facilities are underpinned by long-term
contracts with 13 third party customers which represent approximately
80 percent of their expected aggregate LNG production capacity. Our
long-term foundation customers--a mix of International Oil Companies
(``IOC''), National Oil Companies (``NOC''), Trading Houses and end-
users (such as utilities)--purchase LNG at our facilities at a price
linked to Henry Hub, and can pick it up to deliver to their end market
or almost anywhere in the world. To date, Cheniere has initiated our
long-term contracts with Shell/BG of the UK and Holland, Gas Natural
Fenosa of Spain, and Korea Gas Corporation (``KOGAS'') according to
their date of first commercial delivery (``DFCD'') under their
contracts, and will shortly begin long-term supply to GAIL Limited of
India in March. Cheniere's long-term foundation customers determine the
final destination of U.S. LNG in accordance with U.S. law and
regulation, and the multitude of destinations for U.S. LNG highlights
its importance to the development of an open, transparent and free
market for global LNG. Cheniere also manages a portfolio of our
liquefaction capacity, chartering a fleet--currently over 20--of LNG
carriers to deliver LNG directly to our customers at import facilities
around the world, directing cargoes based on market prices.
The same exports that grow our economy strengthen the global energy
market, providing affordable and reliable natural gas to countries
around the world to meet their energy needs. U.S. natural gas is an
attractive alternative for many consumers, particularly those who are
captive to a handful of suppliers, making them vulnerable to supply
disruptions and, at times, geopolitical dynamics. Due to the commercial
nature of the domestic energy industry, U.S. natural gas does not come
with political requirements or pressures, helping to depoliticize the
commodity. U.S. natural gas priced at a linkage to Henry Hub in the
Gulf Coast--the most transparent and liquid gas price index in the
world--provides price and supply source diversity to customers, who
have traditionally purchased LNG based on a price linked to oil,
helping strengthen competition in natural gas markets and the global
energy market. U.S. LNG is making the global natural gas trade more
competitive, more responsive to customer needs and more resilient. As a
result it is making natural gas a more economic and more secure fuel
for buyers around the world.
Cheniere and the U.S. LNG industry are well-positioned to compete
in the increasingly competitive global natural gas market. Destination
flexible contracts, affordable prices linked to Henry Hub, and
diversified supply from the robust U.S. natural gas market are key
factors that will drive the expansion of U.S. export capacity.
Cheniere's on time and on budget engineering and construction record,
growing reputation as a reliable operator and ability to leverage first
mover advantages leading to the most attractive commercial terms are
key differentiators that will help us continue to lead the U.S. LNG
industry.
Indeed, Cheniere recently announced three new long-term Sales and
Purchase Agreements (``SPA''). In January we executed a long-term SPA
with Trafigura, and earlier this month we executed two long-term SPAs
with a subsidiary of China National Petroleum Corporation. These CNPC
transactions in particular demonstrate Cheniere's strategic
positioning, our ability to execute, and a value proposition that is
difficult for many to match. We are honored to be involved in this
historic deal--the first direct, long-term LNG supply contract between
a Chinese company and a U.S. LNG exporter--a significant milestone in
energy cooperation between the United States and China. We expect these
long-term SPAs to support our growth plans and we are focused on the
remaining steps necessary to make a final investment decision Train 3
at Corpus Christi in the next several months, which would be the first
new large-scale LNG capacity to progress to construction in the United
States since 2015.
The United States is still adjusting from an age of scarcity to an
age of abundance with respect to energy, and U.S. LNG is showing the
benefits of that abundance. The export of natural gas from the United
States as LNG is driving beneficial changes in the global natural gas
trade--changes that help make the fuel mix of many existing trade
partners more sustainable, more economic and more secure. It also has
and is expected to open new trade routes and relationships--extending
the sphere of U.S. trade influence. To support U.S. LNG exports and
domestic energy production, it is important for the United States to
continue to advocate free and open markets, the rule of law and
contract sanctity, and the importance of low-carbon energy sources.
This will help ensure the continued growth of U.S. natural gas exports,
creating jobs and economic benefits to the United States.
______
Questions Submitted for the Record by Rep. Hice to Christopher Smith,
SVP, Cheniere Energy
Question 1. As our export capacity grows, we will increasingly be
able to compete with Russian companies--such as Gazprom--to supply
Europe with energy sources. Do you feel that our ability to export LNG
to the continent reduces Russian leverage in Europe and could improve
the national security of our European allies?
Answer. U.S. natural gas is an attractive alternative for many
consumers, particularly those who are captive to a handful of
suppliers, making them vulnerable to supply disruptions and, at times,
geopolitical dynamics. Due to the commercial nature of the domestic
energy industry, U.S. natural gas does not come with political
requirements or pressures, helping to depoliticize the commodity.
In addition, Europe, like many places around the world, is looking
for supply diversity, with the understanding that it is a competitive
price environment. Diversifying energy supplies is one of the primary
means for ensuring energy security. The flexibility conferred by the
nature of Cheniere's contracts, global presence, and charted fleet of
LNG carriers ensure that we have the capacity to supply U.S. natural
gas to markets looking to diversify their supplies.
______
Dr. Gosar. Thank you, Mr. Smith.
We are going to go a little out of sequence, go down the
row and then back to the Ranking Member.
So, Mr. Doran, you are now recognized for 5 minutes.
STATEMENT OF PETER B. DORAN, PRESIDENT AND CEO, CENTER FOR
EUROPEAN POLICY ANALYSIS, WASHINGTON, DC
Mr. Doran. Good afternoon, Mr. Chairman, Ranking Member,
and members of the Committee. I am Peter B. Doran, President
and CEO of CEPA, the Center for European Policy Analysis. I
want to thank you for the opportunity to speak with you today.
It is an honor to give this testimony.
I would like to submit my written testimony for the record
and offer a few brief thoughts on my summary of liquid natural
gas and U.S. geopolitics.
Mr. Chairman, my organization is a U.S.-based non-profit
policy institute dedicated to the study of Central Europe. At
CEPA, we have developed an ongoing effort to inject new
insight, analysis, and ideas into the current considerations
over the role of LNG exports and to support America's allies
and partners overseas.
Our goal is to make sure that the world has a chance for
safe, secure, rules-based energy relationships. This is
especially important in countries like central Europe. The
timing and scope of this hearing could not be more relevant.
When we look at the question of LNG and geopolitics, we
invariably uncover the persistent question of competition from
Russia. Russia's advocates like to say that Kremlin gas is
cheaper than American LNG. Based on our research and reporting
at CEPA, my main message to the Committee is this--there is no
such thing as cheap Russian gas. More than the cost of a BTU,
energy relations with Russia impose high political and
geopolitical costs on countries, customers, and the idea of
fair play in a marketplace.
When we survey the horizon, we can be sure that increased
demand for American LNG is good for domestic production, good
for our economy, and great for customers who need it. The
problem is that LNG exporters like the United States face stiff
competition in Europe from monopolistic suppliers like Russia.
The Russian government derives immense benefits from placing
its hidden costs on its consumers, most especially when these
hidden costs allow the Kremlin to use energy as a weapon or,
most recently, as a wedge issue between America and Europe.
More than any other commodity, energy relations bind
countries together. Russian leaders understand this dynamic.
They want America's allies to be dependent on Russia's state-
owned companies to fuel their economies and keep their citizens
warm in winter.
If ever there was a time for robust American leadership in
Europe and to increase our own ties that bind us closer to
allies in partner countries, this is it.
The problem is that, right now, Russia is ahead of us. I am
speaking, of course, of Russia's Nord Stream pipeline to
Germany. A sizable addition to this pipeline, Nord Stream 2, is
proposed, and if it is ever completed, the unwanted costs that
Russia imposes on its European customers, our allies, will be
substantial.
This Committee should have no doubt, Russia's Nord Stream 2
pipeline is not a straightforward commercial venture to link
Germany to Russian gas fields. Instead, Nord Stream 2 has
larger strategic purposes: to undercut the EU's energy supply
security, to close large parts of Europe to gas-on-gas
competition, and to isolate and damage America's strategic
partner Ukraine. We should take this challenge very seriously.
Mr. Chairman, I would suggest to the Committee that the
solution to this geopolitical challenge has three parts, and
America plays an essential role in each. First, American and
other LNG exporters are helping to protect vulnerable consumers
against monopolistic business practices by the Kremlin. Second,
energy connectivity is happening, linking our upstream in
America with downstream consumers. This is a process, and the
job is not yet done.
A third part of this solution is in the policy realm. Give
Congress a round of applause for the work it has done in
actually providing the Administration the tools that it needs
to help support the allies we have in Europe. I would
especially note the provisions in existing legislation to
encourage the State Department to work closely with Ukraine.
Ukraine could suffer tremendously if Nord Stream 2 is
constructed.
Looking ahead, my final message to the Committee is this:
the contest over the future of Nord Stream 2 is likely to
intensify in 2018, and its consequences could reverberate for
years to come. I have included a menu of recommendations for
the Committee to consider in my written testimony, and I am
happy to take questions from Members.
But I would highlight this message to you: U.S. leadership
is crucial in helping to protect our allies and partner
countries from monopolistic business practices by the Kremlin.
Its geopolitical interests are at odds with ours. Let's not let
Vladimir Putin win. Let's disappoint him.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Doran follows:]
Prepared Statement of Peter B. Doran, President and CEO, Center for
European Policy Analysis
Good afternoon, Mr. Chairman, Ranking Member, and members of the
Committee. I am Peter B. Doran, President and CEO at the Center for
European Policy Analysis (CEPA). I want to thank you for inviting me
here today. It is an honor and a privilege to give this testimony. I
would like to submit my written testimony for the record and offer a
summary of my thoughts on ``Liquefied Natural Gas and U.S.
Geopolitics.''
Mr. Chairman, my organization is a U.S.-based non-profit policy
institute dedicated to the study of Central Europe. At CEPA, we have
developed an ongoing effort to inject new insight, analysis, and ideas
into current considerations over the role U.S. energy exports (such as
LNG), and to support the efforts of America's allies and partner
countries to establish an energy future that is safe, secure and based
on the rules of the market. The timing and scope of this hearing could
not be more relevant.
Based on our research and reporting at CEPA, my main message to the
Committee is this:
There is no such thing as ``cheap'' Russian gas. More than the cost
of a Btu (British thermal unit), energy relations with Russia impose
high political and geopolitical costs on countries, customers, and the
idea of fair play in a marketplace. The Russian government derives
immense benefit from placing these hidden costs on its customers, most
especially when they allow the Kremlin to use energy as a weapon--or
most recently--as a wedge issue between America and Europe.
More than practically any other commodity, energy relations bind
countries together. Russian leaders understand this dynamic. They want
America's allies to be dependent on Russia's state-owned energy
companies to fuel their economies and keep their citizens warm in
winter. In order to do so, Russia seeks to limit--where possible--
outside energy competition in Europe. This is Russia's aim--and we
should not let the Kremlin win.
If ever there was a time for robust American leadership in Europe--
and to increase our own ties that bind us closer to allies and partner
countries--this is it. The problem is that, for now, Russia is ahead of
us.
For the first time since the 2008 Russia-Ukraine Gas Crisis,
America's allies in Europe face a return to the dangers of widespread,
long-term energy dependence on Russia. During the previous crisis in
2008, the Russian government demonstrated its `winner-take-all'
approach to energy deals when it abruptly halted winter natural gas
shipments to tens of millions of consumers extending from the Ukrainian
border all the way to the Eastern Balkans. The Kremlin had turned
energy into a political weapon.
What followed in the wake of this crisis was a groundbreaking
response from the EU to construct a new network of regulatory and legal
fortifications against monopolistic energy suppliers. This effort was
historic in nature and broad in scope, and in many ways important.
Only, these steps were just a set-back for monopolistic energy
suppliers--not a knock-out. In Russia's case, the Kremlin's state-owned
energy sector has now offered a response: the Nord Stream 2 (NS2)
pipeline.
This Committee should have no doubt: Russia's NS2 project is not a
straight-forward commercial venture to link Germany with Russian gas
fields.
Instead, NS2 has a larger strategic purpose: to undercut the EU's
energy supply security, to close large parts of Europe to gas-on-gas
competition, and to isolate and damage America's strategic partner:
Ukraine. These outcomes present a mid- to long-term danger to American
interests, yes. But they are a far more existential challenge to the
immediate national interests of our allies and partner countries in
Europe. We should take this challenge very seriously.
Mr. Chairman, I would suggest to the Committee that the solution to
this geopolitical challenge has three parts--and America plays an
essential role in each.
First, we should view America's capacity to export LNG to the world
as more than just an economic boon at home. This capacity offers
profound strategic benefits to America. As members of the Committee are
aware, over the last two decades the North American shale revolution
has positioned the United States to bring ever-increasing levels of LNG
(and crude oil) onto the global energy market. It is exceptionally
beneficial to our allies and partner countries in Asia, Europe and
elsewhere. In some cases, our energy shipments are helping to diversify
allies away from sole-source dependence on Russia. This has been a
long-standing aim of U.S. foreign policy. And we are only now beginning
to achieve it. Together with supplies from the Middle East and other
regions, Americans can take pride in the fact that we are helping to
protect vulnerable consumers beyond our shores; and to increase their
leverage in energy negotiations with Moscow. These are great outcomes.
Second, energy interconnectivity is happening. There was a time
when individual markets in Europe were cut off from America, isolated
from their neighbors, and largely dependent on a single pipe(s) from
Russia. That's changing. Today we are seeing how new infrastructure is
beginning to redraw the energy map of Europe. This change is beginning
to give consumers options. On the U.S. side, facilities like the Sabine
Pass LNG terminal (and others) give our companies the ability to reach
new export markets abroad. Meanwhile in the Central-East European (CEE)
region--a region that previously enjoyed few alternatives to Russia--we
have seen the construction of coastal LNG terminals in Swinousjscie
(Poland) and Klaipeda (Lithuania); as well as well as the realization
of necessary interconnectors across borders. The overall result is
positive. These interconnectors represent a major step toward achieving
the goal of encouraging market forces to match supply with demand in
the CEE natural gas sector, but the job is far from done.
Interconnectivity is a crucial precondition. The main question of
getting non-Russian gas to vulnerable consumers is still unresolved for
some land-locked countries. Major infrastructure development is still
an unfinished business.
A third part of the solution exists in the policy realm. Congress
should be commended for doing its part. I would highlight for the
Committee the importance of the ``Countering Russian Influence in
Europe and Eurasia Act of 2017,'' and applaud the provisions directing
the Department of State to work with the government of Ukraine to
increase that country's energy security. The Administration deserves
equal recognition. When Sec. Rex Tillerson declared America's
opposition to NS2 in Warsaw last month, his statement was welcomed by
many allies from the Baltic to the Black Seas. For years, Europeans
asked America to lead from the front. Now we are--and we are not alone.
We have allies in Europe who support us. Sec. Tillerson was correct
when he stressed in Warsaw how America's opposition to NS2 was based on
our mutual strategic interests with Europe. NS2 is a threat to
everyone. And thanks to Congress, the executive branch has an arsenal
of new tools to counter the spread of the Kremlin's malign influence in
the energy space. If deployed carefully, judiciously, and in the right
sequence then the Administration's expanded armory of policy tools--
including sanctions--may have a beneficial effect in halting the spread
of Russia's malign influence across Europe. It is a robust toolkit
that, as a citizen, I would like to see fully employed in support of
our allies and partner countries.
Now, if this assessment seems positive--and indeed there is a lot
of good news here--I would add a note of caution for the Committee: be
wary of the next phase in the fight over NS2.
This is my second message to the Committee: The contest over the
future of NS2 is likely to intensify in 2018; and its consequences
could reverberate for many years to come.
As stated earlier, the NS2 pipeline is not a purely commercial
venture. This project serves the Kremlin's geopolitical aims. These are
in direct conflict with our own.
Ultimately, NS2 is intended to shut down gas-on-gas competition in
Europe--and to isolate America's strategic partner: Ukraine. NS2 is a
direct challenge to America's win-win approach to our relations with
European allies. By contrast, Russia sees its interests in NS2 in terms
of win-lose--and the Kremlin wants us to lose. Let's disappoint
Vladimir Putin.
In the commercial realm, we want Europe to enjoy the benefits of
gas-on-gas competition, where supply and demand determine prices--not
international politics. As a threat to gas-on-gas competition, Russia's
NS2 will be bad for European consumers. Moreover, the pipeline will
make entire countries and regions inside the EU more vulnerable to the
use of energy as a weapon. In the past, Russia has repeatedly used
energy as a weapon against its neighbors. There is good reason to
believe that it could do so in the future. It is why the establishment
of enduring, market-based alternatives to Russia are firmly in line
with U.S. national interests; and the interests of everyday Europeans.
A second area where our energy interests conflict with Russia is
over the future of Ukraine. Here too, Russia's NS2 pipeline serves a
geopolitical purpose--one that runs counter to our own. By completing
NS2, Russia will be able to deny Ukraine between $2-3 billion a year in
gas transit revenue. Moscow seeks to isolate Ukraine in the energy
space and pressure it financially. The Russian government does not want
Ukraine's Western-orientated policies and reforms to succeed. Once
again, we want the opposite.
Ukrainians have already showed the world that they seek a Western
future for their country. The United States wants Ukraine's success to
be a resounding refutation of Vladimir Putin's authoritarian model. And
unlike Putin, America has a very clear and compelling interest to see
that Ukraine succeeds.
If Russia's NS2 gambit is ever going to be completed, then its
owners will need to pull off a series of financial, regulatory, and
legal victories. In terms of finance, it appears that the pipeline's
backers will not be able to bear the full cost of NS2 out of Russia's
coffers. The pipeline will therefore need outside lenders to assist
with financing. On the regulatory front, NS2 must receive a series of
approvals at the national and European levels in order to proceed. A
final `green light' from Germany--for example--would almost certainly
pit Berlin against other European capitals who feel they would be
negatively impacted by NS2. Diplomatic cooperation and multilateral
communication between the United States and European allies will be
essential on this front, particularly if disagreement over the pipeline
between EU Member States sets up a third battle in the EU court system.
Even if Russia loses its NS2 gambit in the political or legal realm, it
will gain by creating ruptures between its presumed competitors in the
West. This makes energy deliberations in Europe a national security
priority for the United States.
Mr. Chairman, these questions are front and center for my
organization, CEPA, and like you, we will be watching such developments
closely.
Looking ahead into 2018, the potential challenges may seem great--
but so are the opportunities. We should never doubt that America's new
energy abundance grants us a tremendous economic benefit at home and a
strategic advantage abroad. When we consider risks on the horizon,
Europe should be at the forefront of our attention. If members of this
Committee, leaders in the Administration, the private sector, and the
expert community are going to defeat Russia's attack on long-term
energy security in Europe (via NS2), then allies on both sides of the
Atlantic will need to apply the right combination of commercial,
diplomatic, and legal mechanisms to stop NS2. The stakes for Europe are
tremendously high--and the clock is ticking.
For the recommendations that follow, CEPA has developed a package
of ideas to address different dimensions of the energy and geopolitical
problem--set in Europe--and how America might play a beneficial role.
I present them to the Committee for consideration.
Recommendations
When it comes to NS2, European law is on our side--let's encourage
Member States to use it. Congress and the Administration should
encourage EU Member States to mobilize their clear and vocal support in
Brussels for the full and uniform implementation of the EU's 2009 Gas
Directive. They should make it abundantly clear: EU law applies to
everyone uniformly--Russia does not get its own special exemptions.
Full and uniform implementation of the 2009 Gas Directive could halt
NS2 in its tracks.
Leverage our soft power to the hilt. The Administration can ramp up
its diplomatic engagement in countries like Croatia, where Russia wants
to prevent a new LNG facility from being constructed on Krk Island.
Croatia needs to know: it does not stand alone, but with the United
States. Its LNG project serves a strategic purpose in Europe. When
completed, Krk Island would open up non-Russian gas alternatives to
consumers across Southeast and Central Europe.
Make energy security part of Ukraine's success story. Fair
competition and market liberalization are just as important for
Ukraine's energy sector as they are for the EU. Ukraine stands to gain
as much--and more--from a diversification of its energy imports.
Finding ways to prioritize U.S. exports of energy to Ukraine will
benefit our own economy and strengthen our foreign policy position east
of NATO.
Energy is a front in Russia's information war against the West--
let's defend that front. CEPA research has shown how outlets of Russian
propaganda are conducting a comprehensive disinformation campaign to
manipulate the energy vulnerabilities of allies like the Baltic states.
Its narratives are calibrated to divide U.S. allies against each other,
while spreading the false impression that the EU does not support
energy independence from Russia in the Baltics. When crafting America's
all-of-government approach to counter-propaganda, addressing energy
disinfo should be a priority.
______
Dr. Gosar. Thank you, Mr. Doran.
Mr. Livingston, you are now up for 5 minutes.
STATEMENT OF DAVID LIVINGSTON, DEPUTY DIRECTOR FOR CLIMATE AND
ADVANCED ENERGY, ATLANTIC COUNCIL, WASHINGTON, DC
Mr. Livingston. Chairman Gosar, Ranking Member Lowenthal,
and distinguished members of the Subcommittee, thank you for
the opportunity to appear before you and to present additional
perspectives on the matters being discussed today.
My name is David Livingston, and I serve as Deputy Director
for Climate and Advanced Energy in the Global Energy Center of
the Atlantic Council. The Atlantic Council is a non-partisan,
non-profit organization headquartered in Washington, DC.
My remarks and written testimony were prepared in
accordance with the Atlantic Council policy on intellectual
independence. These remarks are my own, and the Atlantic
Council and its donors do not determine, nor do they
necessarily endorse or advocate for, any of my views.
Given that the topic of LNG's role in U.S. geopolitics has
been well-covered and will continue to be well-covered by the
other witnesses, I plan to address the role of climate
leadership and advanced energy technologies in further
advancing global gas markets and U.S. national security.
To begin with, the United States should embrace rather than
retreat from the broader trend shaping the global energy market
in an increasingly climate-conscious world. A number of
countries, including China, specifically identify natural gas
as a greenhouse gas emissions reduction strategy to meet their
Paris climate commitments. And many others, from Latin America
to Southeast Asia, clearly have a compelling need for LNG to
meet their decarbonization goals.
When the unambiguous clean air benefits of natural gas over
coal are taken into account, its appeal for countries grappling
with harmful smog and air pollution is all the more clear.
How might the United States, then, best capitalize on these
opportunities? I would suggest that the United States should
embrace an international climate change framework that is
flexible, fair, and that grows markets for gas, renewables, and
other advanced energy technologies in which the United States
has natural advantages.
This framework exists. It is the Paris Agreement,
formalized in 2015 but many years in the making by American
diplomats.
Indeed, I would note the recent words of George David
Banks, a climate and energy adviser who served in both the
George W. Bush and, more recently, the Trump administration,
``The Paris agreement is a good Republican agreement. It's
everything the Bush administration wanted. . . . It's a climate
policy based on U.S. national interest that the Bush team
started and the Obama team kept.. . . The climate agenda is not
going to go away anytime soon, and if you're not engaged
aggressively, actively, there are going to be policies that are
detrimental to the United States.''
I agree with this assessment and will briefly outline a few
ways in which the lack of U.S. climate leadership might be
detrimental to U.S. economic and national security interests.
Given that if it were to leave the Paris Agreement the
United States would be the only country in the world outside of
it, this would leave significant scope for future evolutions of
the international climate governance architecture, over which
the United States would have no say but by which it would
inevitably be impacted.
In the 1960s, the United States accounted for 40 percent of
global GDP. Today, it accounts for just over 20 percent. In
other words, the United States, as an isolated climate policy
island, is not insulated from the rising tide of agreements and
economic architectures forged by the rest of the world.
For example, some foreign officials and politicians have
floated the idea of tariffs or even sanctions being applied to
the United States should it unilaterally withdraw from the
Paris Agreement.
With the opening of China's national carbon market this
year, a growing share of the global economy is under a formal
carbon price, increasing the dangers of tariffs or other
measures being levied against jurisdictions without formal
carbon pricing.
The most punitive of these prospects would likely never
occur. Others are distant but plausible. But some are already
evident. The European Union is now refusing to complete a new
trade agreement with any partner that has not only joined but
also officially ratified the Paris Agreement. To take another
angle, imagine if countries were to halt LNG imports from
countries that have not ratified the Paris Agreement, just as
today the United States provides preferential LNG export
approval to countries which have a free trade agreement with
the United States.
Equally, if not more, critical to the long-term
geopolitical interests of the United States is that this
country does not abandon its superlative strengths in
innovation and advanced energy technologies. Global renewables
deployment has gone from less than $20 billion per year a
decade ago to now enjoying the eighth consecutive year in which
investment has been between $250 billion and $350 billion.
But, today, as the United States mulls dramatic budget cuts
to its leading energy innovation programs, other actors such as
China are stepping in to fill the gap. China recognizes not
only the domestic benefits of advanced energy, from clean air
to reduced energy imports, but also the geopolitical
opportunities. In emerging sectors, such as batteries and
electric vehicles, it seeks to shape markets early on, setting
key standards, locking in certain technology pathways, and
locking out innovations from smaller countries with its
economies of scale.
In conclusion, the opportunities afforded by growing LNG
exports, while plentiful, should not distract from other
critical priorities, including shaping global climate action
and ensuring that innovation drives America's energy edge well
into the future.
Thank you for the opportunity to provide my thoughts on
U.S. energy and geopolitics, and I look forward to taking your
questions.
[The prepared statement of Mr. Livingston follows:]
Prepared Statement of David Livingston, Deputy Director for Climate &
Advanced Energy, Atlantic Council
Chairman Gosar, Ranking Member Lowenthal, and distinguished members
of the Subcommittee, thank you for the opportunity to appear before you
and to present additional perspectives on the matters being discussed
today.
My name is David Livingston and I serve as deputy director for
climate and advanced energy in the Global Energy Center of the Atlantic
Council. The Atlantic Council is a non-partisan, non-profit
organization headquartered in Washington, DC. My remarks and written
testimony represent my views, and do not necessarily represent the
views of my colleagues or institution.
liquefied natural gas and u.s. geopolitics
U.S. natural gas production has been booming for nearly a decade,
while recently U.S. liquefied natural gas (LNG) exports have been
increasing, as well. There are a number of benefits that accrue to the
United States from exports of liquefied natural gas and the expansion
of domestic natural gas production needed to support them. Increased
LNG exports can help to narrow the U.S. current account deficit, expand
economic activity and employment in the natural gas extraction,
processing, and related industries, and aid broader American foreign
policy goals insofar as they contribute to a diverse, sustainable, and
affordable energy mix in recipient markets. As such, increased LNG
exports would indeed appear to strengthen the U.S. position in global
geopolitics.
Three commonly raised caveats to the aforementioned view are that
(1) U.S. economic and energy security interests may be better-served by
keeping most, or all, of this gas at home as inputs into domestic
activities, (2) local environmental risks could rise alongside
increasing U.S. production needed to feed exports, particularly U.S.
shale production, and (3) natural gas may not offer climate benefits,
either due to high rates of methane leakage associated with its
production and processing, or due to it ``crowding out'' opportunities
for lower-carbon sources of energy such as renewables.
I will briefly address each of these caveats.
On the first, that the U.S. economy would be better-served by
curbing exports, there is significant ex-ante analysis, before U.S. LNG
export growth, and additional empirical evidence, now that LNG export
growth is underway, that the economic benefits from exporting LNG
outweigh the gains to energy-intensive manufacturing that might accrue
if exports were to be curbed.\1\
---------------------------------------------------------------------------
\1\ Michael Levi, A Strategy for U.S. Natural Gas Exports, The
Hamilton Project, Brookings, June 2012.
---------------------------------------------------------------------------
On the second concern, environmental risks, it looks increasingly
likely that local environmental risks are real and possible, but are
not inevitable and can be avoided through responsible gas production,
transport, processing, and utilization. However, this is unlikely to
happen on its own in a uniform manner, and thus responsible regulation
is both necessary and also serves to reward the most responsible,
efficient U.S. operators with a competitive advantage.
On the third concern, interactions with decarbonization, the story
is more complicated. Switching from coal to natural gas has been a
major driver of recent greenhouse gas (GHG) emissions reductions in the
United States. While the pace of coal-to-gas switching can be expected
to slow in coming years, it will likely continue to be a positive story
for the United States in providing energy not only with lower GHG
emissions, but also delivering cleaner air, as well.
However, more can be done to ensure that gas maintains a clear edge
over more carbon-intensive resources. The GHG emissions of natural gas,
as a general rule of thumb, have traditionally been considered to be 40
percent lower than those of coal and 20 percent lower than those of oil
on a per-unit of energy basis. However, as a recent report from the
International Energy Agency has pointed out, the climate profile of gas
depends upon responsible extraction, transportation, and utilization of
the gas so as to avoid methane leakage. Methane is a potent greenhouse
gas (GHG), with a short term radiative forcing (global warming)
potential that is between 28-36 times more powerful than that of carbon
dioxide over a 100-year time frame, and around 85 times more powerful
over a 20-year time frame.
At current estimated average rates of methane leakage of gas
production globally (a leakage rate of 1.7 percent of gas produced),
the total climate impact of natural gas is still less than that of
coal. However, the variance in methane leakage among different
individual wells and operators is likely significant, again
underscoring the importance of responsible regulations in order to
ensure that American gas is some of the cleanest and most competitive
in the world.
According to analysis by the International Energy Agency, producers
can reduce greenhouse gas emissions by 75 percent simply by improving
supply chain practices. About half of that can be cut at no net cost--
i.e., they pay for themselves over the long term by monetizing the
methane that is captured.\2\
---------------------------------------------------------------------------
\2\ International Energy Agency, World Energy Outlook 2017, 14
November 2017.
---------------------------------------------------------------------------
Moreover, implementing only net negative cost measures could result
in an equivalent long-term climate benefit as would be achieved by
immediately shutting all existing coal-fired power plants in China.\3\
---------------------------------------------------------------------------
\3\ Energy Institute, Golden age of gas dependent on changing DNA
of industry, new EI survey reveals, press release, 19 February 2018,
https://www.energyinst.org/media-relations/media-centre/1735.
---------------------------------------------------------------------------
The other decarbonization concern associated with natural gas is
that it may ``crowd-out'' lower-carbon forms of energy. So far, this
appears not to be the case in most regions. Under proper market design,
natural gas can serve as a ``force multiplier'' for renewables that
enhances the value of renewable energy to the grid by balancing out the
intermittency of wind and solar.\4\ Eventually, natural gas may also
find new sources of demand that are consistent with long-term
decarbonization trajectories, such as in the transport sector or vis-a-
vis a hydrogen-based energy system that draws on existing natural gas
infrastructure. Natural gas, then, can be a valuable tool in the
transition to a more advanced energy economy in the United States and
around the world.
---------------------------------------------------------------------------
\4\ NREL, Opportunities for Synergy Between Natural Gas and
Renewable Energy in the Electric Power and Transportation Sectors,
Technical Report, NREL/TP-6A50-56324, December 2012.
---------------------------------------------------------------------------
Over time, it is possible that new technological advances and cost
reductions will bring to bear lower-carbon options, such as renewables
paired with energy storage or demand flexibility services, that compete
directly with natural gas in some markets. Lithium ion battery costs
were down to $230 per kilowatt-hour in 2016, compared with almost
$1,000 per kilowatt-hour in 2010, and McKinsey & Co. projects that
prices could reach $200 per kilowatt-hour by 2020 and $160 per
kilowatt-hour or less by 2025.\5\ Storage is already economical for
many commercial customers, and is increasingly being deployed by
companies on-site to reduce peak-demand and avoid demand charges.
---------------------------------------------------------------------------
\5\ Paolo D'Aprile, John Newman, and Dickon Pinner, The New
Economics of Battery Storage, McKinsey & Company, August 2016, https://
www.mckinsey.com/business-functions/sustainability-and-resource-
productivity/our-insights/the-new-economics-of-energy-storage.
---------------------------------------------------------------------------
Already, there are signs of faster-than-expected cost decline
trajectories for utility-scale renewables plus storage, with a recent
solicitation from Xcel Energy in Colorado resulting in median bids of
$36 per megawatt-hour for solar-plus-storage, and $21 per megawatt-hour
for wind-plus-storage. These bids are for projects that would be
delivered in 2023, and thus represent anticipated, rather than
realized, cost reductions.
Nevertheless, over the next 10 years energy storage coupled with
renewables and demand response may increasingly undercut the economics
of coal as well as natural gas peaker plants.
This dynamic, however, would only seem to underscore the importance
of focusing on the role of exports. LNG exports can be an important
outlet for increasing domestic natural gas production as domestic U.S.
gas demand growth begins to flatten. Over the next 5 years, the United
States is poised to see a dramatic increase in LNG exports. With most
outlooks foreseeing less than 6 billion cubic feet per day (Bcf/d) of
demand growth, but nearly 18 Bcf/d of net supply growth, around 12 Bcf/
d of new gas exports may be realized over the period. Of this,
somewhere around 3 Bcf/d of the export increase is likely to be sent to
Mexico via pipeline, while the remainder (8-10 Bcf/d) will be exported
as LNG.
However, the United States is neither the least-cost LNG exporter,
nor the closest to many key demand markets. In order to sustain and
grow the global demand necessary to support continued U.S. LNG exports,
it should support systemic drivers of global gas demand growth,
including an accelerated transition from coal to gas in emerging
markets. A number of studies have indicated that the lifecycle
greenhouse gas emissions of U.S. LNG are lower than that of Russia, and
as highlighted earlier there are ample opportunities to further reduce
these lifecycle emissions over time. The United States is better-suited
to deliver lower-carbon gas than many of its competitors, given both
numerous homegrown technologies and innovations that help reduce
emissions, as well as the comparatively more sophisticated
environmental policy-making apparatus of the United States. The United
States should not neglect these significant advantages.
Notably, the Paris Agreement on climate change may represent one of
the most compelling opportunities to create future gas demand growth. A
number of countries, including China, specifically identify natural gas
as a GHG emissions reduction strategy to meet their Paris commitments,
while others, such as India, do not mention natural gas but clearly
have a compelling need for additional LNG imports if they are to enjoy
an affordable, sustained supply of gas needed to wean the country off
of coal. When the unambiguous clean air benefits of natural gas over
coal are taken into account, its appeal for countries grappling with
harmful smog and air pollution is all the more clear.
Latin America also represents a significant opportunity, and a
logical nearby market, for U.S. LNG to contribute to decarbonization
goals. LNG aided Brazil to maintain steady energy supplies during its
historic drought periods of the mid-2010s, and many countries in the
region are planning to expand LNG import capacity as part of their
decarbonization strategies.
The United States should embrace, rather than retreat from, the
broader trends shaping the global energy market in an increasingly
climate-conscious world. Two additional points are worth making here:
(1) advanced energy will represent the fastest growing segment of the
energy market over coming decades and it is imperative that the United
States play a leadership role; and (2) climate change not only shapes
the energy market, but is a critical determinant of U.S. national
security and likewise demands a leading role by the United States.
advanced energy, innovation, and u.s. leadership
American hydrocarbon abundance should not obscure the importance of
focusing strategy on the largest growth opportunities in the global
energy sphere.
Global renewables deployment has gone from less than $20 billion
per year a decade ago to now enjoying the eighth consecutive year in
which investment has been between $250 billion to $350 billion. The
global head of the Blackrock Infrastructure Investment Group recently
stated that renewables represent ``almost 30 percent of the globally
addressable market in infrastructure. This is no longer niche, it's
fundamental to any infrastructure allocation.'' \6\ Wood Mackenzie, the
energy consultancy, forecasts an annualized growth rate of 6 percent
for wind and 11 percent for solar, compared with half a percent for oil
and around 2 percent for gas, over the next 20 years.\7\ Last year,
solar power grew by around 50 percent, with China accounting for
approximately half of this growth.
---------------------------------------------------------------------------
\6\ CNBC, Cost, not climate, is driving transition to renewables:
BlackRock's Jim Barry, 23 February 2018, https://www.cnbc.com/2018/02/
23/cost-not-climate-is-driving-transition-to-renewables-blackrocks-jim-
barry.html.
\7\ Wood MacKenzie, Could Renewables be the Majors' Next Big
Thing?, 4 May 2017.
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Whereas Europe and the United States were once dominant players in
renewable and advanced energy markets--and indeed, U.S. national labs
played a critical role in the birth of modern photovoltaic solar
technologies--other actors such as China are now playing a larger and
larger role as they recognize not only the energy system and commercial
opportunities of advanced energy, but also the geopolitical
opportunities to shape markets early on, setting key standards and
favoring certain technologies that accrue outsized domestic benefits.
This is further magnified by concerns over energy security in countries
less-rich in hydrocarbons than the United States.
Indeed, there may be limits to the heretofore exponential rise in
China's liquefied natural gas imports. In 2017, China became the
world's second largest importer of natural gas, after Japan, with an
average of 5 billion cubic feet per day. China also finds itself
increasingly dependent on imported oil, which now accounts for around
two-thirds of its total oil demand. As Chinese concerns over gas and
oil imports continue to grow, this in turn will drive further support
for renewables and other advanced energy technologies that can reduce
energy import reliance. It was widely reported at the beginning of this
year that the city of Shenzen in China has procured more electric
busses--17,000--than the number of busses both conventional and
electric in the five largest North American metropolitan fleets
combined.\8\
---------------------------------------------------------------------------
\8\ Steve Hanley, Shenzhen Completes Switch To Fully Electric Bus
Fleet. Electric Taxis Are Next, Clean Technica, 1 January 2018, https:/
/cleantechnica.com/2018/01/01/shenzhen-completes-switch-fully electric-
bus-fleet-electric-taxis-next/.
---------------------------------------------------------------------------
The United States is not yet losing the advanced energy race, and
still represents a significant market for the deployment of advanced
energy. Renewables now generate almost as much electricity as the U.S.
nuclear fleet, and if Texas were a country, it would be the fourth
largest global producer of wind power. The largest wind farm in the
free world is being built in Oklahoma.
A key question, though, is whether the United States will invest
in, and support, the historical source of its advanced energy edge--
innovation. Deployment of today's technologies is not enough. From the
Department of Energy's SunShot Initiative to the ARPA-E innovation
agency and beyond, investment in advanced energy innovation today will
continue to underwrite American energy security and competitiveness
tomorrow. Energy innovation has been, and can continue to be, a
defining strategic advantage of this country.
climate change and u.s. leadership
Finally, I would like to highlight the importance of climate change
to these discussions, not only as an exacerbating factor of the risk
landscape but also as an area where the abdication of U.S. leadership
could have deleterious effects on broader U.S. economic and energy
interests.
A historical lens reveals that the recognition of climate change as
a U.S. national security risk driver is not a new, nor a partisan,
phenomenon. In 1969, Daniel Patrick Moynihan--then an adviser to
President Richard Nixon--wrote a memo to the president raising concern
over the possible ``apocalyptic change'' represented by anthropogenic
climate disruption, and called it an issue that the ``[Nixon]
administration ought to get involved with'' and a ``natural for NATO.''
\9\ Climate change first appeared in the National Security Strategy in
1991 as an identified environmental challenge that does not respect
international boundaries, and has been included in the Worldwide Threat
Assessment since 2009 and the Quadrennial Defense Review since 2010.
---------------------------------------------------------------------------
\9\ Nixon Library, Memorandum from Daniel Patrick Moynihan, 17
September 1969, https://www.nixonlibrary.gov/virtuallibrary/releases/
jul10/56.pdf.
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This is not limited to threats that will draw on the utilization of
our military assets abroad, but also poses challenges for our
military's own capabilities and readiness. A Department of Defense
(DoD) report published in January surveyed 3,500 military sites in the
United States and found that over half have already experienced
climate-related challenges. This builds upon a 2009 DoD report which
found that 128 coastal installations, including 56 naval installations
valued at over $100 billion, would be at risk if sea level rise of more
than 1 meter were to occur. Recent projections of end-of-century sea
level rise under current assumptions range from two-tenths of a meter
to 2 meters.\10\
---------------------------------------------------------------------------
\10\ NASA, Understanding Sea Level: Empirical Projections, https://
sealevel.nasa.gov/understanding-sea-level/projections/empirical-
projections.
How might the United States best deal with these risks? The purpose
of this hearing is not to contest the most appropriate instrument or
approach for dealing with the climate challenge, but I would note the
recent words of George David Banks, a climate and energy advisor who
---------------------------------------------------------------------------
has served in both the George W. Bush and the Trump administrations:
``The Paris agreement is a good Republican agreement. It's
everything the Bush administration wanted . . . It's a climate
policy based on U.S. national interest that the Bush team
started and the Obama team kept . . . The climate agenda is not
going to go away any time soon, and if you're not engaged
aggressively, actively, there are going to be policies that are
detrimental to the United States.'' \11\
---------------------------------------------------------------------------
\11\ Lisa Friedman, Former Trump Aide Calls Paris Climate Accord `a
Good Republican Agreement', 22 February 2018, https://www.nytimes.com/
2018/02/22/climate/george-david-banks.html.
I tend to agree with this assessment, and will briefly mention a
number of ways in which lack of U.S. climate leadership may be
detrimental to U.S. economic and national security interests.
Given that, if it were to leave the Paris Agreement, the United
States would be the only country in the world not party to the
Agreement, this would leave significant scope for future evolutions of
the international climate governance regime over which the United
States would have no say but would inevitably be impacted by. In the
1960s, when awareness of climate change was emerging, the United States
accounted for 40 percent of global GDP. Today, it accounts for just
over 20 percent. An isolated United States is not large enough to avoid
the economic repercussions of agreements forged by the rest of the
world.
For example, a number of foreign officials and politicians have
floated the idea of tariffs, or even sanctions, being applied to the
United States should it unilaterally withdraw from the Paris Agreement.
With the opening of China's national carbon market this year, a growing
share of the global economy is under a formal carbon price, increasing
the dangers of tariffs or other measures to be levied against
jurisdictions without formal carbon pricing. The most punitive of these
prospects would likely never occur. Some are distant but plausible.
Others are already evident: the European Union is now refusing to
complete a new trade agreement with any partner that has not only
joined, but also officially ratified, the Paris Agreement. To take
another angle, imagine if countries were to begin prioritizing LNG
imports from countries that have ratified the Paris Agreement, just as
the United States today provides preferential LNG export approval to
countries which have a free trade agreement with the United States.
It is also worth noting that even in the absence of a Federal
carbon price, there exists a complex mosaic of de-facto carbon prices
across the United States. A wide range of regulations, from methane
rules to fuel efficiency standards, create compliance costs that equate
to an implicit price on carbon. For example, the 25 cent increase in
the Federal gas tax that has recently been debated is the equivalent of
a transport sector carbon price of around $30 per ton.
A growing number of U.S. companies are pricing carbon voluntarily,
as well. In 2017, almost 1,400 firms were integrating an internal
carbon price into business decisions, a more than eightfold increase
from 2013. Most large integrated oil companies now use internal carbon
prices between $40-$80 per ton.
While this patchwork of de-facto carbon prices is better than no
climate action, it nonetheless suffers from opacity, asymmetry, and--
undoubtedly--inefficiency. A far more efficient and effective approach
would be an economy-wide carbon price. This would level the playing
field, encourage the lowest-cost carbon reductions to be harvested
first, and would give the United States many more policy options for
defending the competitiveness of its industry vis-a-vis competitors in
countries both with and without carbon prices. A pragmatic, stable,
predictable carbon price remains a prudent policy option for the United
States.
conclusion
In conclusion, the United States finds itself at a unique point in
history in which its endowment of hydrocarbon resources, including
natural gas, are re-shaping both domestic markets as well as,
increasingly, the global energy landscape. While the growth of U.S.
natural gas exports is poised to be a positive development for energy,
economic, and climate security, this should be complemented by the
strategies, investments, and policies necessary to ensure that gas
maintains its relevance and value in the shift to more advanced and
decarbonized energy systems in the United States and elsewhere.
Moreover, excitement over the opportunities afforded by growing LNG
exports should not distract from other critical priorities, including
ensuring that innovation drives America's energy edge well into the
future. Thank you for the opportunity to provide my thoughts on U.S.
energy and geopolitics. I look forward to taking your questions.
______
Dr. Gosar. Thank you, Mr. Livingston.
Ms. Gentle, you are up next for 5 minutes.
STATEMENT OF MEG GENTLE, PRESIDENT AND CEO, TELLURIAN, INC.,
HOUSTON, TEXAS
Ms. Gentle. Thank you, Mr. Chairman, Ranking Member
Lowenthal, and members of the Subcommittee. It is an honor to
speak with you today about the role that U.S. liquefied natural
gas production, exports, and investment plays in powering the
global leadership of the United States and supporting the
safety and security of our allies.
I serve as President and CEO of Tellurian, Inc., a 2-year-
old company created to build a global natural gas business with
the intention of spending nearly $30 billion of investment in
infrastructure in this country, including manufacturing dollars
in 18 states, and creation of almost 50,000 direct and indirect
jobs.
As I speak, we are witnessing change in the global energy
system unprecedented in its scale and speed. Access to flexibly
produced LNG allows countries from Eastern Europe, to East and
South Asia, to our neighbors in our own hemisphere to diversify
their energy supply, diminish the power of sole-source
suppliers, and access gas more quickly and at a lower cost. It
helps countries meet their decarbonization goals, access more
affordable electricity, and improve their air quality and,
overall, improve their energy security.
We need your support to build out the infrastructure needed
to meet domestic and global demand for gas. We can empower our
friends and deny leverage to hostile powers while growing the
U.S. economy and employing tens of thousands of Americans
across our country.
The world is turning inexorably toward LNG. The
International Energy Agency estimates that LNG will constitute
60 percent of the total inter-regional trade of gas by 2040, up
from just 39 percent today. The world has seen a rapid increase
in LNG importers in recent years, with 10 new importers added
between 2011 and 2016 alone and a total of 38 countries now
importing LNG.
Many of these are smaller, emerging importers which seek to
grow their domestic gas markets for a range of security, public
health, and climate-related reasons. Our southern neighbors
Brazil, Chile, and Argentina rely on the spot markets to buy
gas for base-load power and to back up their renewable energy.
Shorter, more flexible contracts, the steady decline of
destination clauses, and the rise of floating storage and
regasification technology has propelled LNG and innovative U.S.
suppliers like Tellurian forward. The United States has played
a key role in driving this transition of an LNG market from one
dominated by a few powerful, inflexible suppliers to a
commoditized, integrated global gas market.
The management team at Tellurian includes in its ranks the
first innovators of destination-flexible contracts. This
feature of U.S. LNG exports has helped bolster the energy
security of our allies on every continent and disempower
unfriendly and hostile regimes who would seek to use vital
energy resources as bargaining chips or outright pressure. In
Europe, Poland's ability to import LNG forced Russia to cuts
its export prices before a single molecule had actually been
imported. Russia had little choice, as Gazprom depends on the
European market for the bulk of its revenues.
Yet, despite these developments, Russian gas still supplies
40 percent of all of Europe's supply and exported 8 percent
more gas to Europe last year. Even now, Russia seeks to expand
its influence to growing markets in Asia through the $55
billion Power of Siberia pipeline to China. In 2014, China and
Russia executed $400 billion in gas supply agreements.
In the Middle East, our allies Kuwait, the United Arab
Emirates, Israel, Egypt, and Jordan have started importing LNG
to produce electricity and potable water. The IEA noted in its
2017 World Energy Outlook that, next to Asia-Pacific, the
Middle East region will experience the greatest total gas
demand growth in the coming decades, at approximately 2.2
percent per annum.
The power sector drives the bulk of this growth. UN data
shows that our allies in the Middle East power generation from
burning oil was equivalent to the amount of electricity
generated by the great state of Ohio.
LNG imports can enhance the electric grids of these nations
and provide security of supply. Natural gas demand to fuel
desalinization facilities is also key, as the water-scarce
region requires more water to support its growing population.
In Asia, hundreds of millions of people remain without
access to reliably and cleanly produced electricity. An
analysis produced from a joint CSIS and IEA workshop in May
2017 noted, ``Asian countries, including India, will continue
to be the dominant forces globally in terms of demand for
growth for LNG.'' Among these are Japan and Korea, critical
U.S. allies, as well as China, which has relied on LNG to
address grave air quality concerns.
We at Tellurian are up for the challenge of continuing to
support our allies and worldwide energy security. Tellurian
stands firm behind supporting expanded access to clean American
energy, enhancing diversity of supply, ending price
discrimination and undermining those who practice it, and
enabling energy transitions to lower carbon fuels throughout
the world.
Simultaneously, LNG exports will continue to help the
American people by creating thousands of jobs and fueling
expansion of the economy while having limited effect on
domestic natural gas prices given continued increases in shale
productivity.
Tellurian plans to invest $29 billion in natural gas and
LNG infrastructure, but we need additional infrastructure
across the value chain to ensure American energy remains
competitive. We ask policy makers to encourage the
infrastructure investments which will support our industry and
ultimately our geopolitical goals.
[The prepared statement of Ms. Gentle follows:]
Prepared Statement of Meg Gentle, President and Chief Executive
Officer, Tellurian Inc.
the geopolitical imperatives of expanded u.s. natural gas production
and infrastructure investment
Mr. Chairman, Ranking Member Lowenthal and members of the
Subcommittee, it is an honor to speak with you today about the role
that U.S. liquefied natural gas (LNG) production, exports and
investment plays in bolstering the global leadership of the United
States and the safety and security of our allies.
Recent years have brought tremendous change across global energy
markets, including the dramatic expansion of the LNG trade. The U.S.
shale gas revolution has been a boon for the American people as the
application of new technologies has opened trillions of cubic feet of
cleaner-burning natural gas for U.S. consumption.
Exporting natural gas as LNG continues to benefit the American
people by creating thousands of jobs and stimulating economic
expansion. We expect our Driftwood LNG project alone to create at least
13,000 jobs while supporting manufacturing jobs in 18 U.S. states. U.S.
LNG exports advance American geopolitical interests and leadership by
strengthening the energy security of our allies and improving air
quality through cleaner-burning natural gas. The United States is
positioned to lead a global energy transformation as countries around
the globe grapple with an array of energy modernization and climate
challenges.
These benefits can only be achieved through a continued partnership
of all public and private constituents that support American LNG's
cost-competitiveness. Other nations such as Russia and Qatar continue
to grow their LNG export capacity, expanding their financial,
geopolitical, and industrial influence. Timely infrastructure
investment for pipelines and export facilities will be essential to
support continued U.S. leadership in the global LNG market. Our team at
Tellurian can support U.S. geopolitical goals by offering low-cost gas
supply and flexible terms, but even our plans to invest $29 billion in
American infrastructure are insufficient to meet this growing
challenge. With more investment in American energy infrastructure, the
United States is uniquely positioned to support global energy security
and air quality through a leadership position in LNG markets for
decades.
A Changing Market
The LNG market is rapidly commoditizing. Traditionally, LNG has
been traded through rigid, long-term contracts with large volumes at a
price indexed to oil. Today, LNG is increasingly traded in short-term
and spot markets, with prices reflecting global supply and demand
balances. This price transparency has supported natural gas demand
growth in financially challenged regions and countries, providing
nations with an environmental and cost-competitive alternative to coal.
These changes support a new wave of LNG buyers worldwide and create
an advantage for suppliers who can compete with low-cost supply. The
development of a spot market enables countries with varying degrees of
credit worthiness to access LNG supplies without signing long-term
contracts. The world has seen a rapid increase in LNG importers in
recent years, with 10 new importers entering the market between 2011
and 2016 and a total of 38 countries importing LNG at the end of 2017.
LNG exports from the U.S. lower-48 began from Sabine Pass in 2016,
with cargoes destined for emerging importers in our own hemisphere,
such as Brazil, Chile, and Argentina, which rely almost exclusively on
the spot markets. Some buyers purchase on a seasonal basis based on
hydroelectric variability, others as a backup for renewables, and still
others to deal with disruptions in supply. The rise of floating storage
and regasification units (FSRUs) has made it easier for other countries
to quickly access low-cost LNG supplies. FSRUs enable gas buyers to
access LNG supplies within months rather than years while minimizing
the cost to build infrastructure. By year-end 2017, 40 percent of LNG
importers used FSRUs, and IHS forecasts that over 50 percent of import
markets will use FSRU terminals by 2025.
The United States is uniquely positioned to supply this
heterogeneous market. With a stable and reliable regulatory
environment, low-cost gas, skilled labor, and flexible contract terms,
we can be the preferred supplier to the world. Indeed, Tellurian is
pioneering a low-cost, flexible and reliable LNG supply model ideal for
a maturing commoditized market. Customers have the opportunity to
invest in Driftwood LNG to access gas at cost for approximately $3/
mmBtu on the beach. Tellurian stands at the forefront of the LNG
revolution, positioned to compete in a rapidly evolving market.
Geopolitical Impacts of the New Market
The United States has played a key role in driving this transition
of an LNG market dominated by a few powerful, inflexible suppliers to a
commoditized, integrated global gas market. The management team at
Tellurian includes in its ranks the first innovators of destination-
flexible contracts. This feature of U.S. LNG exports has helped bolster
the energy security of our allies on every continent and disempower
unfriendly and hostile regimes which seek to use vital energy resources
as bargaining chips or outright pressure.
In Europe, the transformative effect of LNG imports has been
enormous. The flexible nature of LNG has allowed European buyers
dependent on a single supplier of pipeline gas to access the same fuel,
but with a greater diversity of suppliers and sources. By offering a
wider range of suppliers, LNG introduces price competition. Lithuania,
hitherto an energy island in Europe, successfully negotiated lower gas
prices from its traditional gas supplier just by publicly engaging in
talks with potential LNG suppliers. Lithuanian President Dalia
Grybauskaite has said the ability to import LNG would put an end to the
``existential threat'' of relying on one supply source.
Russia seeks to expand its market share to growing markets in Asia,
notably through the $55 billion Power of Siberia pipeline to China, a
$13 billion pipeline to Turkey, and the new Yamal LNG export terminal
in its far east. In 2014, China and Russia concluded $400 billion in
gas supply agreements and Russia intends to build additional pipelines
to serve growing Chinese demand. Low-cost LNG supplies from the United
States offer gas buyers in Europe, Asia and around the world an
opportunity to diversify their energy mix.
U.S. LNG exports can also fuel economic development and help meet
basic human needs for many of our allies and friends around the world.
Hundreds of millions of people remain without access to reliable and
cleanly produced electricity, including nations in the Middle East,
Asia, Latin America, and Sub Saharan Africa. Even those with access to
electricity often face severe air pollution, harmful to human health
and the global environment. Low-cost, clean, and reliable LNG can help
tackle these issues and improve diplomatic relationships with our
allies.
The Middle East, including our allies in the region--Kuwait, the
UAE, Israel, Egypt, and Jordan--has started importing LNG in the last 8
years to produce electricity and potable water. The IEA noted in its
2017 World Energy Outlook that next to Asia-Pacific, the Middle East
region will experience the greatest total gas demand growth in coming
decades, consuming an additional 318 bcm in the period to 2040,
equivalent to a fifth of global growth in that time frame. The power
sector drives the bulk of this growth; UN data shows that our allies in
the Middle East burned around 168 TWh of oil to generate electricity,
equivalent to all the electricity consumed in the great state of Ohio
in 2016. Natural gas demand to fuel desalination facilities is also a
key demand driver, as the water-scarce region requires more water to
support its growing population. Supplying LNG to this dynamic region
directly supports our allies' energy security and, by extension, our
military and diplomatic presence.
The same is true in Asia, where hundreds of millions of people
remain without access to reliable and cleanly produced electricity. A
CSIS analysis ``U.S. Natural Gas in the Global Economy,'' produced from
a joint CSIS-IEA workshop in May 2017, noted ``Asian countries
including India will continue to be the dominant forces globally in
terms of demand growth for LNG.'' Among these are Japan and Korea,
critical U.S. allies in the region that consumed a combined 42 percent
of global LNG in 2017.
China has relied on LNG to address grave air quality concerns; in
this winter alone, China installed gas heaters in 5.54 million
households in northern China to reduce particulate emissions. The
environmental impacts were immediate, as residents reported cleaner air
and blue skies atypical of Chinese winters. However, 426,000 of these
households reported gas shortages despite record purchases of LNG to
satisfy this increased demand for cleaner burning fuels. Not
surprisingly, the IEA estimates that China will account for 40 percent
of total global natural gas demand growth between now and 2022--but
China must have ample supply to meet its ambitious coal-to-gas
switching targets.
India, similarly, will be the other major driver of global economic
growth; despite similar air pollution and public health problems as
those facing China, Bloomberg New Energy Finance notes that in 2016
India added 16 GW of new coal-fired generation--nearly double the total
amount of renewable capacity added that year. Natural gas is well-
suited to meet India's energy modernization challenges and bridge the
gap between its stated climate and pollution goals and its tremendous
need for more power. Its government has invested accordingly: this
month, the Indian government announced that its current 4 LNG terminals
will be augmented by 11 new terminals over the next 7 years as part of
plans to have natural gas contribute 15 percent of its energy mix by
2020. Spot LNG supplies will be vital for these new terminals, many of
which will support India's enormous and growing coastal cities.
U.S. exports to Asia can fill the gap and help meet future energy
demand growth--but natural gas must be cost competitive and widely
available to compete with coal in this region. If this massive
continent continues to rely on coal to generate its accelerating power
demand, these nations will not meet their targets under the Paris
climate agreement and the global climate consequences could be grave.
Indeed, the United States is in a historic position to be a world
leader in reducing pollution and improving air quality around the
world, saving millions from dying from preventable environmental
diseases. For many governments facing these public health threats, air
quality is the driver for a coal-to-gas transition, more than climate
change alone. One study last year suggested that Sub Saharan Africa
alone saw over 175,000 preventable deaths in the region due to air
pollution. Positioning the United States as a leading supplier of a
fuel resources which could dramatically improve these problems is more
than just good business--it's good policy. It is the essence of
``smart'' power, leveraging America's energy abundance help meet basic
humanitarian needs throughout the world.
Investment in Infrastructure
The prolific U.S. natural gas resource base can support American
geopolitical, environmental and economic goals, but only through
sustained investment, initially totaling $170 billion over 5 years in
U.S. natural gas infrastructure to support expected production growth.
Earlier this month, the Energy Information Agency (EIA) forecasted that
natural gas production will reach 80.3 Bcf/d in 2018, establishing a
new record. We expect natural gas production to grow 20 Bcf/d by 2025
from five shale basins alone.
However, this natural gas is at risk of being stranded or flared
without additional investment in pipeline and LNG infrastructure. There
are six U.S. LNG export terminals approved by the Federal Energy
Regulatory Commission (FERC), under construction, and existing,
providing over 9 Bcf/d of LNG export capacity. Based on the pace of
natural gas production, the United States requires 13 Bcf/d of new
natural gas transportation and export infrastructure to support
incremental gas output. Indeed, a recent BTU Analytics report noted
that U.S. gas production growth may be limited to the total capacity
and utilization of LNG export facilities, suggesting that the United
States can produce as much LNG as the global gas market can absorb.
Typically, LNG infrastructure operates under a long multi-year
development cycle, where the speed at which decisions are made today
will impact the ability of the United States to supply low cost gas 5
years from now. We are far from the only ones with an eye to the
future. Qatar recently announced that it will increase LNG output by 30
percent, Australia is moving ahead with new LNG export infrastructure,
and Russia is planning new liquefaction plants while laying miles of
pipelines across Eurasia. Perhaps most importantly, our allies want to
buy our gas. The same CSIS analysis mentioned earlier also notes,
``Many already well-established LNG import markets in Asia have looked
toward U.S. LNG for diversification of both supplies and contractual
terms . . . Asian importers seem to recognize that the value of U.S.
LNG goes beyond price; it alleviates the region's heavy reliance on the
Middle East and the Asia-Pacific for LNG and attendant maritime
chokepoints, such as the Straits of Hormuz and Malacca.'' The United
States clearly enjoys many advantages, but our valuable supply stands
at risk of being left behind if we don't build infrastructure now.
Tellurian plans to invest $29 billion in natural gas and LNG
infrastructure, but we need additional infrastructure across the value
chain to ensure American energy remains competitive on a global basis.
In addition to laying the literal groundwork for U.S. gas exports, the
importance of a supportive, efficient policy and regulatory environment
for natural gas cannot be overstated. The potential is undeniably
there, but the United States must make deliberate decisions today to
realize the opportunity before it as we pursue ``energy dominance'' in
the years to come.
Conclusion
The United States is well positioned to help make the global LNG
market more competitive by providing low-cost supply on flexible terms
to buyers everywhere while empowering our friends and allies to have
greater control over their energy security. Tellurian stands firmly
behind supporting expanded access to American energy, enhancing
diversity and security of supply, ending price discrimination and
undermining those who would practice it, and enabling energy
transitions to lower carbon fuels throughout the world. To reach this
goal we must make investments today that will enable our leadership in
global markets in the years ahead. We encourage policy makers to
advance the supportive dialogue regarding infrastructure development
and investments which will help the energy industry play a leading role
in supporting America's international and geopolitical goals.
______
Questions Submitted for the Record by Rep. Lowenthal to Ms. Meg Gentle,
President and CEO of Tellurian, Inc.
Question 1. During the hearing, you appeared to indicate that you
did not believe that anthropogenic emissions are the main driver of
climate change. Could you please clarify your position on this issue?
Answer. Yes. Humans definitely contribute to climate change. In
fact, it is our responsibility to reduce and mitigate human emissions,
and we take that responsibility very seriously in our operations.
______
Dr. Gosar. Thank you, Ms. Gentle.
I now recognize the Ranking Member, who showed up, my
friend Mr. Lowenthal.
STATEMENT OF THE HON. ALAN S. LOWENTHAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Lowenthal. Thank you.
I thank the Chairman for allowing me to give my opening
statement after the witnesses, and I thank the witnesses for
putting up with me.
Dr. Gosar. Do I get to question you?
Mr. Lowenthal. Yes, you do. You always get the chance to
question. But this should not be counting on my time.
The topic of today's hearing is something that would have
been unthinkable 10 years ago. Back then, U.S. oil and gas
production was going down, imports were going up, and members
of this Committee were being urged to immediately open the
Atlantic Ocean to new drilling because we were in desperate
need of more natural gas.
Today, U.S. natural gas production is at record levels,
U.S. oil production is near record levels and climbing, and we
are seeing soaring volumes of exports, not imports.
Nearly all of this turnaround happened during President
Obama's time in office. While the Republicans rarely accept
this, oil production on Federal lands went up nearly 80 percent
under President Obama. He signed the law ending the crude oil
export ban, and his administration approved 24 natural gas
export licenses.
But President Obama had a real all-of-the-above strategy,
not just fossil fuels. He made the deployment of renewable
energy a top priority while also acknowledging that all forms
of energy development have impacts that must be addressed.
Summary--natural gas is seen as a very important but as an
intermediate solution. It is not the long-term solution for our
energy needs.
What is that long-term solution? Well, we have already
begun to measure it. Wind power in the United States quadrupled
under President Obama, while solar power grew almost 40-fold.
When he took office, there were no solar plants on public
lands. When he left office, 34 had been approved, with a
potential capacity of nearly 10,000 megawatts.
All told, solar and wind generation in the United States
has nearly quadrupled since 2008, generating almost 20 percent
of U.S. electricity last year.
But we are not doing enough. Global carbon emissions
continue to rise, and the impacts of climate change have become
evident. In 2017, it is the third year in a row that every
single state in the Lower 48 had above-average temperatures.
President Obama took this very seriously by signing us onto
the Paris Accord and making meaningful commitments to cut
emissions. President Trump only has a single agenda--more
fossil fuels--all in the service of an ill-defined agenda of
geopolitical bullying which he calls ``energy dominance.'' But
this is like saying that we are going to achieve
telecommunications dominance by making ourselves the world
leader on landline telephones.
Focusing on the energy of the past and ignoring the impacts
of climate change is not a formula for being dominant. It will
simply marginalize us internationally and handicap us
economically.
Other countries are already bypassing us in advanced energy
investments. Last year, a major energy consulting firm dropped
the United States to third place in the rankings of the most
attractive countries for renewable energy investment, behind
China and India. These two countries are now leading the world
in deploying renewable energy, and both governments are setting
ambitious renewable energy targets and attracting tremendous
private-sector investments.
In January of 2017, China announced that it would invest
$360 billion in renewable energy by 2020, a move that is
forecast to create over 13 million jobs and to help reduce
hazardous air pollution. India has pledged to install 100
gigawatts of solar and 60 gigawatts of wind by 2022.
It goes without saying that both nations are party to the
Paris Accord, because every single nation on Earth is party to
the Paris Accord--at least, they all will be until President
Trump makes us the odd country out.
Developing more renewable energy and increasing investments
in innovative technology is a win-win for our climate, our
security, and our economic competitiveness.
I am pleased with this hearing, because we are looking
today at some of the bigger-picture issues around energy and
where we are moving toward. But I hope that this means we will
soon have hearings on climate change and renewable energy in
this Subcommittee. If we care about geopolitical strength as
much as we say, we will give climate change the attention it
rightfully deserves.
I thank the witnesses for being here, and I yield back. And
I thank the Chairman for allowing me to speak.
[The prepared statement of Mr. Lowenthal follows:]
Prepared Statement of the Hon. Alan S. Lowenthal, Ranking Member,
Subcommittee on Energy and Mineral Resources
Thank you, Mr. Chairman, and thank you to the witnesses for being
here.
The topic of today's hearing is something that would have been
unthinkable 10 years ago. Back then, U.S. oil and gas production was
going down, imports were going up, and members of this Committee were
being urged to immediately open the Atlantic Ocean to new drilling
because we were in desperate need of more natural gas.
Today, U.S. natural gas production is at record levels, U.S. oil
production is near record levels and climbing, and we're seeing soaring
volumes of exports, not imports.
Nearly all of this turnaround happened during President Obama's
time in office. While Republicans hate to accept this, oil production
on Federal land went up nearly 80 percent under President Obama. He
signed the law ending the crude oil export ban. And his administration
approved 24 natural gas export licenses.
But President Obama had a real all-of-the-above energy strategy,
not the Fossils First approach of this Administration, and he made the
deployment of renewable energy a top priority, while also acknowledging
that all forms of energy development have impacts that must be
addressed.
Wind power in the United States quadrupled under President Obama,
while solar power grew more than 40-fold. When he took office, there
were no solar plants on public lands. When he left office, 34 had been
approved with a potential capacity of nearly 10,000 megawatts.
All-told, solar and wind generation in the United States has nearly
quadrupled since 2008--generating almost 20 percent of U.S. electricity
last year.
Still, global carbon emissions continue to rise, and the impacts of
climate change have become evident: in 2017, for the third year in a
row, every state in the Lower 48 had above-average temperatures.
President Obama took this issue seriously, signing the United
States onto the Paris Accord and making meaningful commitments to cut
emissions. President Trump has only one agenda: more fossil fuels. All
in the service of an ill-defined agenda of geopolitical bullying he
calls ``energy dominance.'' But this is like saying we're going to
achieve telecommunications dominance by making ourselves the world
leader in corded telephones.
Focusing on the energy of the past and ignoring the impacts of
climate change is not a formula for being dominant. Instead, it will
simply marginalize us internationally and handicap us economically.
Other countries are already bypassing us in advanced energy
investments. Last year, a major energy consulting firm dropped the
United States to third place in the rankings of the most attractive
countries for renewable energy investment, behind China and India.
Those two countries are leading the world in deploying renewable
energy, and both governments are setting ambitious renewable energy
targets and attracting tremendous private sector investments.
In January 2017, China announced the country would invest $360
billion in renewable energy by 2020--a move that's forecast to create
over 13 million jobs and help reduce hazardous air pollutants.
India has pledged to install 100 gigawatts of solar and 60
gigawatts of wind by 2022.
It goes without saying that both nations are party to the Paris
Accord, because every single nation on Earth is party to the Paris
Accord--at least, they all will be until Donald Trump makes us the odd
man out.
As a nation, one of our great strengths has been our ability to
lead. Not to dominate, but to lead. In countless fields, from science
and medicine to computers and the space program, we have led the world
and created entirely new industries that now form the foundation of our
economy and are responsible for tremendous numbers of jobs.
This Administration has decided leadership, much like their energy
policy, is a thing of the past.
While this Administration tries to resuscitate the coal industry,
our competitors are positioning their economies and equipping their
workers for the 21st century.
Deploying more renewable energy and increasing investments in
innovative technology is a win-win-win for our climate, our security,
and our economic competitiveness.
I'm pleased that with this hearing we're looking at some of the big
picture issues around energy, and I hope this means we will soon have
hearings on climate change and renewable energy in this Subcommittee.
If we care about our geopolitical strength as much as we say, we'll
give climate change the attention it rightfully deserves.
I thank the witnesses again for being here, and I yield back.
______
Dr. Gosar. Thank you to the Ranking Member.
And I thank the panel for their testimony.
Reminding the Members that Committee Rule 3(d) imposes a 5-
minute limit on questions. I will recognize Members for their
questions that they may ask the witnesses. I am going to start
first.
Mr. Livingston, your testimony highlights an increased
demand for lithium to store solar and wind power. Quite
frankly, renewable energy storage technology is not very
efficient. And our domestic mining industry is shackled by
regulatory roadblocks and environmental lawsuits.
Are you advocating for an increase in domestic
metallurgical mining to meet this demand?
Mr. Livingston. Thank you very much, Chairman Gosar.
I am not advocating for any specific activity----
Dr. Gosar. Why not? Because if this is an issue, this is a
critical pathway. So, why aren't you?
Mr. Livingston. Certainly. I would hope that the market
will serve that----
Dr. Gosar. You don't hope markets. I mean, this has to have
an active supply chain. So, you can't hope. You have to be
engaged one way or the other. How do you stand?
Mr. Livingston. I think this issue would merit, indeed, a
government-focused policy of exploring different options of
better understanding the U.S.----
Dr. Gosar. What are those options?
Mr. Livingston. That would include better understanding the
U.S. resource base and certain critical minerals. However----
Dr. Gosar. How is that any different right now that we are
dictated 100 percent by China with some of these critical
minerals that are essential to these batteries?
Mr. Livingston. I would say not 100 percent, though China
is a----
Dr. Gosar. Pretty darn close. It is 99.9 percent when you
continue to look at outside supply chains.
Mr. Livingston. Very true. Chile, Peru, Bolivia are also
significant players in lithium. Brazil is a----
Dr. Gosar. And if you look at who controls those assets,
they go through China.
Mr. Livingston. That may be an increasing case in some
circumstances.
What I would endorse, to answer your question, is I do
think that there is a role for a more strategic look on the
part of the United States at what is the mineral base both here
and around the world; what is the degree of substitutability
for some of these minerals and different technologies. We don't
want to find ourselves chasing certain minerals when the
technologies themselves could easily substitute for another
mineral which is more abundant here in the United States.
Dr. Gosar. Well, we are constantly doing that already.
I have limited time, so a second question to you is, how is
natural gas necessary to meet all base-load energy
requirements?
Mr. Livingston. Natural gas is, in my view, a very
important part of an advanced energy system in the United
States. It is potentially, particularly at this moment, an
important force multiplier for renewables, as well, in many
different markets. It can serve to balance out the
intermittency of solar and wind resources.
It is cleaner than coal and has many attractive
characteristics on its own, in terms of faster ramp-up and
ramp-down times. It is for this reason that natural gas plants
in the United States are more attractive than coal peaker
plants in a number of different jurisdictions.
Dr. Gosar. OK. I have limited time, so I think we will end
that.
Mr. Doran, over the last few years, increased U.S.
production of oil and natural gas has significantly impacted
the global energy marketplace. In particular, our energy
exports are helping to foster a more dynamic and diverse global
energy market.
This is providing international customers with greater
choice and helping to curb the use of energy as a political
weapon. In fact, many of our European allies see our energy
exports as a game-changer to help break their dependence on
regimes like Russia that use energy to influence their
neighbors.
What role do you see the U.S. energy production and exports
playing in global energy security?
Mr. Doran. Thank you, Mr. Chairman. I really appreciate the
question.
I would say if we look at what we face right now, we are in
an environment of heightened competition. In the energy space
in Europe, that competition is Russia.
We have to ask ourselves, what does Russia fear? Russia
fears our ability to break its monopolistic business practices.
And we could do that through the increased export of American
LNG to markets that want it.
Dr. Gosar. You bring up a good point, because we just went
to Germany this last summer, and we had a nice conversation
with the German energy ministry, which gave us a whole
portfolio in regards to alternative energy.
Then the next day we went to Eurocom, based out of Germany.
And my question to them was, where do you get your energy? It
is a contract through Germany. And my comment is, where do you
get your base load?
You can't tell me that our base load is then going to come
from Nord Stream 1 and 2. That is such an oxymoron. I can't
believe it, that we have such a disdain for Russia that we
would actually allow that to be base-load energy with our
military.
Do you see a quandary in that?
Mr. Doran. I do. And I think, Mr. Chairman, you have
identified one of those hidden costs that Russia imposes on its
customers. There is no such thing as cheap Russian gas. There
are hidden costs, and you have identified one.
Dr. Gosar. And utilizing the country of Lithuania, which is
actually a valuable lesson. Here they were 100 percent dictated
on their energy dependence by Russia, and now, with liquefied
natural gas, they are less than 30 percent.
Do you look at that as one of the forecasting models for
the future?
Mr. Doran. I hope so. When we look at options, that is the
important part. Just the ability to have alternatives to
Russia, in the case of Lithuania, has actually decreased
Lithuania's natural gas price by 55 percent and lowered
Russia's total imports by 65 percent to Lithuania.
That is what victory in an energy competition looks like.
And in the case of Lithuania, America is starting to win. We
want that for the rest of our allies.
Dr. Gosar. Thank you, Mr. Doran.
I now yield 5 minutes to the Ranking Member for his
questions.
Mr. Lowenthal. Thank you, Mr. Chair.
I would like to make a statement, one short statement,
before I ask questions, that while we are talking about LNG
exports, this is an opportunity also to support local American
shipbuilding by requiring a small percentage of exported crude
and LNG to travel on U.S.-built and U.S.-flagged vessels.
Congressman Garamendi is soon going to be introducing the
Energizing American Shipbuilding Act in the near future which
would do exactly that. I am not here to say support or not, I
just hope that we at least look at that to make sure that
American shipbuilding also benefits by the growth of LNG.
My first question is for all the witnesses. Yes or no, just
simply, and we will start off right away with Mr. Smith. Are
human emissions from burning fossil fuels the primary driver of
global climate change? And do you believe climate change is a
threat to our society and the economy?
Mr. Smith?
Mr. Smith. Yes.
Mr. Lowenthal. Next, Mr. Doran?
Mr. Doran. I am not a climate scientist, so my answer has
to be ``I don't know.''
Mr. Lowenthal. You are a ``don't know.''
Next, Mr. Livingston?
Mr. Livingston. Yes.
Mr. Lowenthal. And Ms. Gentle?
Ms. Gentle. I am not an expert on climate change. I do not
believe that human emissions are the primary driver of climate
change.
Mr. Lowenthal. Thank you.
We have two yes's, one not an expert, and one who does not
believe that human emissions are the primary.
Mr. Livingston, in June of last year, President Trump
announced his intentions to withdraw the United States from the
Paris climate agreement. In his Rose Garden speech, he said
participating in the Paris Accord would, ``undermine our
economy, hamstring our workers, weaken our sovereignty, impose
unacceptable legal risks, and put us at a permanent
disadvantage to the other countries of the world.''
Is this true? If not, what would you say will be the most
significant geopolitical impact if the United States fully
withdraws from the Paris Agreement?
Mr. Livingston. Thank you very much, Representative
Lowenthal.
I would underscore some of the comments I made in my
opening statements again, in that I agree with Mr. Banks,
adviser to both George W. Bush and to President Trump, on this
issue in that the Paris Agreement should not be viewed as a
partisan issue. I don't think the Democrats or Republicans have
a monopoly over the issue of climate change, nor do I believe
any one party has a monopoly over any one energy source. These
should be non-partisan, American issues.
A few features of the Paris Agreement are worth noting. It
is indeed a flexible agreement. The United States can adjust
its commitment unilaterally at any time it wishes to with no
penalties therein. It involves all countries. China and India
are also required to make commitments, which was not previously
the case in other international climate policy architectures
that were being attempted prior to the Paris Agreement's
formulation.
So, it displays a number of characteristics which were
indeed the intended outcome of early efforts by Republican
administrations, including the George W. Bush administration,
to address the global challenge of climate change.
In terms of the repercussions should the United States
leave, as I mentioned, I do think it will open up the United
States to unnecessary risks of action, particularly vis-a-vis
trade, imports, tariffs, carbon border adjustments, et cetera.
So, I would note that the downsides of leaving the Paris
climate agreement are both uncertain and unnecessary.
Mr. Lowenthal. Thank you.
I want to follow up. You mentioned China and India, and I
also indicated earlier that they are investing billions of
dollars in renewable energy development, and both made
ambitious commitments under the Paris Agreement to reduce their
emissions. However, both nations are two of the top fossil fuel
consumers and greenhouse gas emitters in the world.
How are we supposed to believe that China and India really
care about climate change and want to assume, kind of, global
leadership positions when they are two of the biggest
contributors to the problem?
Mr. Livingston. It is a very good and fair question, and it
is a question which is often asked and should be. The points I
would make are twofold.
In terms of motivations, Number one, one need not believe
that they care about climate change, first and foremost, as the
driver of their actions. It is enough to simply look at air
qualities in cities such as New Delhi, Beijing, et cetera, to
understand why they are taking action on moving coal generation
outside of cities or near cities, why they are moving to
cleaner forms of energy. So, air pollution being one factor and
the political legitimacy questions that are involved therein.
The second is that, increasingly, these countries see
industrial policy benefit to moving on climate and, in
particular, are becoming exporters of clean energy technologies
and advanced energy technologies.
Mr. Lowenthal. Thank you, Mr. Chair, and I yield back.
Dr. Gosar. I thank the Ranking Member.
The gentleman from Colorado, Mr. Lamborn, is recognized for
5 minutes.
Mr. Lamborn. Thank you, Mr. Chairman, for having this
hearing.
Thank you to all the witnesses for being here.
I am not going to ask about the Paris Accord, because that
is really not the topic that we were supposed to be discussing
today. It is LNG and U.S. geopolitics.
Mr. Doran, I see in the news that Boston recently received,
about a month ago, a big shipment of LNG from Russia. What is
wrong in the Northeast where they are taking Russian natural
gas? We have tons of natural gas in the United States if you go
farther west than the Northeast. What is wrong with this
picture?
Mr. Doran. Thank you, Congressman.
I would put it pretty straightforward: for Vladimir Putin,
it is personal. Liquid natural gas has become a heightened
field of competition, and Russia is increasingly trying to
compete with the United States. That is something this
Committee should keep an eye on.
Mr. Lamborn. Why does Boston and the Northeast have to get
it all the way from the Arctic in Russia instead of from
pipelines closer, by domestic states that are inside the United
States?
Mr. Doran. As this Committee knows, one of the things that
we are trying to see is an increased level of globalization in
the liquid natural gas market. So, increasingly, we are going
to see, I hope, LNG acting like a barrel of oil, where you can
buy and sell it, it is a fungible commodity that you can buy
and sell it anywhere in the world.
The fact that Russia wanted to sell its natural gas to
Boston, I would propose to this Subcommittee, was a political
act and not necessarily a fundamental economic act on the part
of Russia or downstream consumers.
Mr. Lamborn. Mr. Smith, would you agree with me that there
are problems with permitting of and allowing of pipelines in
the Northeast to bring gas in from the West?
Mr. Smith. Yes. Thanks for the question, Congressman.
We are not a producer, we are an LNG exporter. We benefit
from having natural gas we bring from numerous states down to
our facility. We have actually been able to create a supply
chain that allows us to ensure that we have reliable sources of
natural gas and that we don't have constraints.
Other parts of the country have seen some transportation
constraints and some pipeline constraints. That is driving some
price spikes, when you have some irregular weather or other
things that create volatility in local Citygate prices. And
given that we do have an increasingly liquid global market for
LNG, it is going to attract cargos in from different places.
We think this was probably a one-off in terms of having a
very high price spike that is driven by shortages in
transportation, but that is probably what is behind that.
Mr. Lamborn. Ms. Gentle, are you able to comment on
permitting problems in the Northeast for gas pipelines?
Ms. Gentle. Tellurian is also not active in the Northeast.
We have always pursued a philosophy that we will build
infrastructure in communities where they welcome the
infrastructure and jobs in the local community.
Mr. Lamborn. OK.
Then, for you and Mr. Smith, for the export facilities that
allow LNG exports, are there any permitting issues that are
outstanding today?
I know that the Trump administration is, in my opinion,
more reasonable in terms of allowing permitting to go forward.
I think the Obama administration made a start, but we are
building on what was just started in the last administration.
Mr. Smith. Thank you for the question.
As we look at the market, there are over 20 billion cubic
feet of natural gas that has been permitted for projects.
Currently, about 10 billion cubic feet are being constructed.
As we look at our process and the processes that Cheniere
has gone through, we don't see permitting as the primary issue.
There are still commercial issues. It is still a challenging
market.
Cheniere is having some success in signing long-term
contracts to take natural gas to destinations around the world,
again, in a way that creates value in the United States,
creates U.S. jobs, and helps our balance of trade.
There are financing issues and commercial issues, but we
don't see the primary problem as being permitting. I think that
is something we have been able to----
Mr. Lamborn. Ms. Gentle, to finish out, do you have
anything to add?
Ms. Gentle. We have $17 billion worth of infrastructure
sitting in the FERC amid the permitting process. We have long
enjoyed a very good partnership with the FERC. On a global
scale, it is a very transparent and clear regulatory process.
We were set back a little bit by the lack of the quorum at
the FERC, but we are very happy to now have a clear pathway
forward and a scheduling notice. We are the only company that
is developing LNG infrastructure that has a scheduling notice
in their FERC process and also has a signed EPC contract to
move forward with construction.
And we are very enthusiastic about the Administration's
continued support for a streamlined and efficient regulatory
process.
Mr. Lamborn. OK. Thank you all.
Dr. Gosar. I thank the gentleman.
The gentleman from Virginia, Mr. Beyer, is recognized for 5
minutes.
Mr. Beyer. Thank you, Mr. Chairman, very much.
First, I want to start out by highlighting that the
Majority memo discusses how NEPA is problematic in the approval
of the construction of LNG terminals, specifically citing the
frivolousness of how NEPA allows for public comments and for
environmental concerns like greenhouse gas emissions.
So, let me defend NEPA using real-time Virginia examples.
Because FERC was considering two pipelines in my Commonwealth,
and separately, not together, one of which, the Mountain Valley
pipeline, will destroy about 100 miles of the Appalachian
Trail.
And here is the thing--we don't need two new pipelines. The
demand isn't there. And we certainly don't need them
constructed in separate areas to double the environmental
damage.
The FERC approval process was widely considered a rubber
stamp. The fact that it approved the Atlantic Coast Pipeline
when there was an incomplete environmental statement means that
certainly was not an impediment in the NEPA process. The fact
that FERC approved the pipeline without a final EIS for another
reinforces how flawed the process is.
So, if anything, it seems that FERC has been a disaster,
which is both sides of the political aisle. Both Republican and
Democratic Members of Congress agree. So, we should be very
careful before we argue that we should gut NEPA and the ability
for local communities to weigh in.
Ms. Gentle, first of all, I do think Paris is a
geopolitical issue of great importance. How do you square LNG
exports with the commitment of countries to reduce their
greenhouse emissions under the Paris Agreement?
Ms. Gentle. Thank you very much for the question.
As a hiker on the Appalachian Trail in Virginia, I am
sympathetic to your concerns. And I think that natural gas
actually has a tremendous opportunity to support international
goals for decarbonization and also for increased use of
renewables in the overall power generation mix.
I would cite to the example of the Iberian Peninsula just
this last year as a perfect example of the partnership between
natural gas and renewable energy, where the Iberian Peninsula
depends a lot on hydroelectric and wind power for their
renewable power generation. They had a lack of wind and a lack
of rain this past year, and there was a 50-percent increase,
therefore, in natural gas imports. Thankfully, they have the
back-up gas-fired power generation that enabled them to have
reliability in their grid. And Portugal now is, I think, the
largest importer in Europe of U.S. LNG.
Mr. Beyer. Thank you.
Countries in the Caribbean are dependent on Venezuela's
PetroCaribe program for fiscal support. Can the U.S. LNG
exports be of help to these small countries?
Ms. Gentle. Absolutely. We believe that there are systems
that can be developed for distributed LNG, somewhat like a hub-
and-spoke. So, a large LNG vessel could depart from the United
States carrying LNG and then off-load to a hub in the Caribbean
onto smaller vessels and then bring LNG to the Caribbean and
displace oil-fired power generation, significantly cutting the
cost of power for our very important neighbors and allies.
Mr. Beyer. Won't more LNG exports mean more methane leakage
at home?
Ms. Gentle. We certainly are very focused on this issue. It
is important for the industry to work together also with
government and regulators to ensure that we absolutely
minimize, if not eliminate, methane emissions and especially
leakage.
Newer infrastructure is, of course, much more secure in
terms of leakage, so we are turning our attention to producing
gas in the United States and ensuring that through older
infrastructure we can reduce the leakage.
Mr. Beyer. It has been argued that we need LNG in order to
keep energy prices low in the United States. If we are
exporting it, though, won't that drive up domestic prices?
Ms. Gentle. There actually are numerous studies that have
been done over the past 5 years or so by the EIA, who have
commissioned independent studies on this very issue. We agree
it is an important concern. And the findings have been that we
have such a vast reserve base in the United States that can be
produced at very economic cost, that the impact of exports will
be very minimal to the domestic prices.
As an example, we have seen over the last several years
that increased improvements in drilling technology have
actually reduced the cost of production. We are now below $1 in
MMBTU of production cost in the field in many of our major
basins, which, for the first time ever, actually makes us
competitive on a global basis with all suppliers around the
world.
Mr. Beyer. Thank you.
Mr. Chair, I yield back.
Dr. Gosar. I thank the gentleman.
The gentleman, the Chairman for the Full Committee, Mr.
Bishop from Utah, is recognized.
Mr. Bishop. Thank you, Mr. Chairman.
I appreciate the witnesses, especially this topic area that
we have.
The past two decades in the United States have truly been
revolutionary. There was a time when manufacturing was leaving
this coast because of excessive cost for energy as well as lack
of security and what the future will be. That has all changed
now. We have revolutionized how we develop our domestic
product; we are maximizing that, not only here but abroad.
I am interested in a lot of discussions--maybe Mr.
Lamborn's question. Boston, it was shipped in there because
there was a pipeline stranglehold in Pennsylvania and New York.
You can't get it there. So, if you are not going to be able to
do it by pipeline, you have to build some LNG ports. And that
is really the problem that we have.
It is ironic, because we just came back from a CODEL in
Australia, and I found out that Australia is probably going to
be the leading LNG exporter by 2019. At the same time, I also
found out that western Australia, where all the produce of the
stuff is, has the same attitude toward eastern Australia, where
the population is, as I from the western United States have
toward eastern--nothing personal--United States. In fact, they
call them the wise men of the East, with as much derision as I
would as well.
But, ironically, even though they have the resources there,
in the East, they are still having brownouts. And they are
still exporting LNG and then trying to legislatively keep it
there to try to solve that problem. And the problem comes from
the stuff that we are looking at as well.
There are no pipelines that go east and west in Australia.
They all go north and south. To build one across the desert
would be terribly expensive. But to have LNG ports in Sydney
and Melbourne so that you could move it by transporting that
way would be very easy to do.
The other problem is, in the East, that is where they have
their coal, and they have banned their coal-fired stuff for
whatever political reason they wanted to, which has caused them
to have--even though they have all sorts of exports and
potential and development, they are still coming up with
policies that give them rolling blackouts and brownouts in the
process.
But that is the same thing that we could be looking at in
the United States. Not only are we talking about the ways of
helping our allies in Europe, especially the Baltic states, but
also a lot of this LNG is going up to China, Korea, and Japan.
Working with our allies, we could become a part of Pacific
stability so that we could be a counterforce to some countries
in the Pacific that are not necessarily that positive toward us
right now, as well as providing for our own country at the same
time.
So, Mr. Smith, let me get to you. We talked a lot to them
about permitting processes. Are there some things we can learn
about the permitting process in Australia and maybe in Canada--
because they always look at Canada as having a better
permitting process--that we could learn to make it easier for
us to try to use the resources to solve these geopolitical
problems at the same time?
Mr. Smith. Thank you, Congressman, for the question. Lots
of issues there at the end of the statement that you just made
around some of the challenges on the East Coast and in
Australia and also issues that we have to deal with as an LNG
exporter in the Gulf Coast.
First of all, we spoke a moment ago about the permitting
process. In all cases, we always like these things to roll
along a little bit more quickly. We are in a hurry to build
what we can, to deploy the capital that we have raised to
construct our terminals. But, overall, we think having a
transparent, rigorous process in the United States has been
part of our competitive advantage.
When we go to India, when we go to China, when we go to
other countries and we are selling these long-term agreements,
we do so with a confidence that the regulatory process that we
have to go through here withstands the legal scrutiny that it
is put under.
Mr. Bishop. Like, the transparency is obvious, and it is
good. What we are talking about also is the length of time that
it takes before a company can start the process to when they
can be in production and making it.
And the point of this is trying to be, we have this LNG
that is very positive here that can make us a true source of
strength to our allies, both in Europe and in the Pacific,
where we have countries that are not friendly to the United
States that are actually trying to push their will upon us.
That is one of the things we are looking at in an energy
bill that we will be bringing to the Floor, trying to partner
with our states to streamline the permitting process--not
change the rules, but allow the paperwork to be done in a way
that we can actually be up and in production to actually
assist.
And one thing I found out in our trip to Europe, as well as
this recent trip to Australia, is the United States can play a
huge role in working with our allies to stabilize,
geopolitically, this world if we are smart on how we actually
do it. And that is one of the reasons why we have to have more
pipelines and right-of-ways. We also have to have more LNG
ports. And we have to be able to do it faster, quicker. Not
taking away the transparency and accountability, just the time
it takes to do what is blindingly obvious.
I am sorry. I went over 40 seconds. I apologize. I will
give you an extra 40 seconds on our next markup. Is that OK?
And I will take it from Lowenthal's time.
Mr. Lowenthal. I can probably get it spoken in less than 4
minutes.
Dr. Gosar. The gentleman from Florida, Mr. Soto, is
recognized for 5 minutes.
Mr. Soto. Thank you, Mr. Chairman.
On November 7, 2017, last year, Syria, despite being
embroiled in a civil war, managed to become yet another country
that joined the Paris climate agreement, leaving us with the
infamous distinction of being the only country on the entire
planet that is not part of the Paris climate agreement now.
Having looked up some of the trends with liquefied natural
gas, Mr. Doran, it seems that the Paris Agreement has actually
increased demand for liquefied natural gas in Europe. Is that
fair to say?
Mr. Doran. I would argue, respectfully, that the market is
driving a great deal of demand, plus increased European
regulations that shift the fuel mix in Europe to a more
diversified mix, including natural gas.
Mr. Soto. Well, thank you for that. And, certainly, we have
some other analysts who have said that, because the liquefied
natural gas actually reduces emissions, it is helping both the
United States and our European allies reduce their emissions so
that they could actually comply with the Paris climate
agreement.
Ms. Gentle, Mr. Smith, do you all support the Paris climate
agreement because it increases the demand for liquefied natural
gas from the United States?
We will start with you, Mr. Smith.
Mr. Smith. Thank you for the question.
Cheniere is on the record as supporting the United States'
participation in the Paris climate agreement. We actually sent
a letter encouraging the United States to remain in the
agreement.
Subsequent to the decisions that the Administration has
made, which we understand, it really does not impact the
reality of our commercial situation. We are selling in a global
market. Every single customer to whom we sell resides in a
country that is part of the Paris Accord. And those countries
see that the product that Cheniere sells is the one that helps
them reduce emissions, increase reliability, et cetera.
Mr. Soto. Has the Paris climate agreement helped you
increase sales for your company?
Mr. Smith. What I would say is that the global driver to
reduce emissions and increase diversity of supply, and to take
into account these environmental issues, has been a net benefit
for Cheniere.
Mr. Soto. Ms. Gentle, has your company seen an increase in
demand because of that?
Ms. Gentle. I would say that the commitment that various
countries have made to the Paris Agreement to reduce emissions
and have a balanced electric generating profile has generally
increased demand for natural gas because----
Mr. Soto. Thank you for that. I have limited time, but I
appreciate that comment.
Turning next to Mr. Livingston, how critical are the wind
and solar tax credits to continuing to encourage renewable
energy production in the United States?
Mr. Livingston. I can say that in recent years they have
been incredibly important in allowing this industry to gain its
footing and to help provide additional support where the full
external costs of other energy resources are not internalized
via carbon price. So, it is another method to try to level the
playing field.
These technologies, wind and solar, are increasingly
maturing. I don't know exactly what point in time, but within a
few years they will no longer need that credit for their
survival to the same degree they did in the past. However, it
remains an important, and it has been a very important policy
instrument for supporting those technologies.
Mr. Soto. A lot of us have had mixed feelings about the
tariffs on solar-powered panels coming in from China. Is this a
plus or is this a minus for the industry domestically? What is
your opinion on that?
Mr. Livingston. Yes, sir. Thank you for that question. It
is a good one.
I think that addressing China's dumping of solar modules
and panels in the United States would have been best addressed
a number of years ago. At this point, it is too late. So, I
think that the effect of the tariffs is likely to be more
pernicious than not.
Just a few notes.
Number one, I believe the duration, including the step-down
over the number of years that the tariffs will be in place,
does not give enough time for U.S. manufacturing to make actual
investment decisions. The step-down occurs in such a way that
the benefits would be accrued mostly in 1 year or 2 years, and
then for all the out-years you would still have them be out-
competed by Southeast Asia, East Asia, et cetera.
Number two, solar manufacturing is becoming increasingly
automated and advanced. That is not necessarily a negative
thing, but it is a reality of the market. In fact, First Solar
has a plant in Toledo, Ohio, that had to close due to Chinese
dumping, reopened, highly automated, and now produces solar
panels which can compete with Chinese panels that are in fact
30 percent cheaper. So, to the degree----
Mr. Soto. My time is up, so thank you for that.
I yield back.
Dr. Gosar. I thank the gentleman.
The gentleman from Colorado, Mr. Tipton, is recognized for
5 minutes.
Mr. Tipton. Thank you, Mr. Chairman, and thank the panel
for taking the time to be here.
It is interesting, listening to some of the dialogue that
we are having right now, in terms of the benefits of
responsibly developing a resource and to be able to develop LNG
for export.
I did want to address, Mr. Smith, your comments that you
don't actually deal in the production. You just facilitate
actually being able to sell it. You rely on the pipelines and
other producers to be able to get it through.
I just read a report on CNBC that Shell Oil had just made
the comment that the market for LNG could face a shortage by
the mid-2020s due to underinvestment in new projects.
How important is it for us, as a country, to be able to
maintain the edge, not only for our own energy security, our
own jobs, keeping those prices low for American consumers, but
also being able to address something Mr. Doran had mentioned,
being able to compete on the world stage as well, given that we
had Mr. Putin with his hand on the valve for a lot of Europe?
Mr. Smith. Thank you for the question, Congressman.
We absolutely believe that LNG is tremendously important in
that area. We see that there are players in the market, like
Cheniere, that are having success and selling into various
markets. There are other projects that I think have the
potential to come on line. And we see an increasing amount of
LNG coming out of the United States, which is not only really
beneficial for our country in terms of job creation, but also
provides opportunities and options for our allies and our
trading partners around the world.
So, those U.S. molecules being able to project American
influence through exporting of hydrocarbons developed right
here in the United States we see as being very positive, not
only for our economy but also for the global economy and,
again, for our allies and trading partners who buy LNG from the
United States.
Mr. Tipton. Great.
Would you concur with what Shell was just noting, that if
we don't have the continued investment, the continued
development in terms of being able to build the export
facilities out, to be able to address that, with some of the
suppressed prices that are out, that we may actually have an
actual shortage? That it is important to keep those investments
going?
Mr. Smith. I think it is very important to ensure that we
can move capital to these projects, that new projects do get
built.
Cheniere does see a next wave of LNG projects being
constructed. We are expecting to get a final investment
decision on our third train in the Corpus Christi facility in
Texas, which will be the first new production, new final
investment decision made in the United States since 2015.
We see other projects coming forward. So, we absolutely
feel that that is a real opportunity to build capital right
here in the United States, and we think that is really
important.
Mr. Tipton. Great.
In my part of the world, the West Slope of Colorado, in the
Piceance Basin, with the Mancos Shale, we have the USGS coming
out and saying it could be the second-largest reserve that we
have in the country.
And, Ms. Gentle, you are nodding your head. I know you are
well aware of, probably, that particular area.
How important is it for us to be able to have those
pipelines to be able to deliver it? You made the comment you
want to be able to go where you are welcomed. I think everybody
will welcome having heat on in the winter, cooling on in the
summer, no matter where you are--to be able to actually deliver
that and have that sustainable, affordable supply.
Ms. Gentle. We concur it is absolutely critical. And,
overall, we believe that over $170 billion of investment is
needed in pipeline and export infrastructure in the country,
which was originally piped to deliver gas from the Gulf Coast
to the major cities on the East Coast, West Coast, and Chicago
market area. Now that supply is coming from west Texas,
Rockies, Northeast, all of the pipeline systems have to be
rerouted and new pipelines have to be built.
Mr. Tipton. Great.
Mr. Chairman, I think it is remarkable, if we step back in
time, not long ago they were saying that we were going to run
out of energy in this country, we were going to have to be
importing LNG into the United States, and now we are in a
position to where this country can lead. We can put our people
to work. We can address a lot of the complications that we see
in terms of the geopolitical issues they are facing over in
Europe and elsewhere with American ingenuity, American
inventiveness, to be able to create this abundant, affordable
supply of energy, to be able to keep the lights on, and to be
able to keep our people employed.
Thank you for holding this hearing, and thank our panel for
taking the time to be here.
Dr. Gosar. I thank the gentleman.
The gentleman from California, Mr. Costa, is recognized for
5 minutes.
Mr. Costa. I want to thank the Chair and the Ranking Member
of this Subcommittee for holding a hearing which I think is
very timely, given what is occurring not only in Europe but
around the world. The geopolitics of natural gas and gas
exports, obviously, are critical in terms of our relationships.
As a Democratic co-chair of the Transatlantic Legislators'
Dialogue, I work closely with our European allies. We meet
twice a year on multilateral relations that can strengthen our
democracies in Europe and our influence as it relates to
freedom around the globe.
I think this Administration has had positive and negative
effects on our European allies, and I think many of them are
very obvious. One of the positive effects is that this
Administration has had a continuation of policies that led to
the development of America's unconventional oil and gas
resources that were really begun in the last administration,
the Obama administration. I have said for 14 years on this
Committee that I support using all the energy tools in our
energy toolbox, and I think I have been consistent.
The development of these resources have had a remarkable
impact on the global landscape on energy. Only last year, as we
all have acknowledged, the United States became a net exporter.
It is commendable it provides opportunities not only for the
United States to improve the security of our allies and the
globe by weakening the influence of bad actors like Russia, but
it also provides an opportunity to wean these countries off, as
we have all agreed upon--I think there is a sense of agreement
here in the Committee--kind of unusual--that we wean these
countries off of other energy sources that, obviously, don't
have the same common agreement in human rights and other values
that we all, as a democracy, support.
Energy sources that emit a larger percentage of greenhouse
gases, of course, contribute to climate change. We know that.
This is one of the areas where, generally, European leaders
wish we would rejoin the Paris climate agreement and disagree
with the current action of this Administration.
But I can tell you, from our regular dialogue, that
development of natural gas resources sends a strong message
around the world in favor of open, non-politicized global
energy markets. This is already having an important effect on
behaviors and policies, as all of us have generally
acknowledged. Europe is actively working to diversify its
external suppliers and become increasingly dependent on imports
of oil and gas.
The EU is working to develop infrastructure, as was noted
by the Chairman, that will permit energy to flow around Europe
continental-wide. And that is important. It is in this area
that the European gas diversification and the United States may
play the biggest geopolitical role. The existing licensing of
the regime for U.S. LNG exports to the EU is a restriction that
should not exist, I believe, with close allies like the EU and
the United States.
There is a proposal in the framework of the Energy and
Natural Gas Act of 2017 that has been submitted to Congress to
restrict the amount of time that the Department of Energy has
for assessing non-free-trade agreements in LNG export
applications to 45 days. I think that is important.
While this would be a good step, the complete removal of
the requirement of the Department of Energy to approve LNG
exports to the EU, I think, would bring significant economic
and employment benefits to the United States, enhance the
energy security for Europe, and it would build better
relationships that I think have suffered in the last year.
It makes no sense for multiple Federal agencies to be
involved in processing permits to export gas to countries which
we already have free trade agreements with. These are the type
of common-sense policy changes that could not only improve our
economy but our national security as it relates to our allies
in Europe.
Let me ask some questions.
Mr. Smith, are there some beneficial aspects to removing
the requirement of the Department of Energy approval of the
export LNG to countries which already have free trade
agreements with the United States?
Mr. Smith. Thank you for the question, Congressman.
One thing I would note is that these are major investments.
Cheniere has invested over $30 billion in our facilities.
Generally, in order to underpin those investments, one would
need to be able to send liquefied natural gas both to FTA
countries and non-FTA countries.
Mr. Costa. Are there drawbacks to removing the
requirements?
Mr. Smith. Are there drawbacks? There are probably not any
drawbacks. I am not sure that there are any benefits either.
Mr. Costa. The benefits certainly outweigh whatever
drawbacks there may be.
Do any of you want to comment on this?
Mr. Doran. Mr. Congressman, if I can just jump in really
quick, I would say that you are exactly correct. Atlanticism
means increasing the ties that bind with our allies. Cutting
red tape in the export of American hydrocarbon resources to our
allies is a good thing for us and it is a great thing for
countries that we are treaty-bound together with. That is the
nature of Atlanticism, and that should be, in my view, a
priority for this Congress.
Mr. Costa. And weaning them off of Russia, which obviously
does not have any interest in supporting these democracies, as
we know.
Mr. Doran. I would heartily concur.
Mr. Costa. Thank you.
Dr. Gosar. I thank the gentleman.
The gentleman from Georgia, the dog himself, Mr. Hice, is
recognized.
Mr. Hice. Thank you, Mr. Chairman.
I am intrigued with our discussion and the line of
questioning Mr. Costa was going down. Right now in Georgia, the
first next-generation liquefaction plant is under construction
at Elba Island. It should be beginning production by the middle
of this year and in full production by the end of the year.
And they have actually obtained authorization from the
Department of Energy for our free-trade-agreement countries, to
export to those countries. They will be producing 2.5 million
metric tons a year. Obviously, that is a huge economic issue
for Georgia, and for our country and beyond.
I am not sure exactly who all to address my questions, but,
Mr. Smith, I will begin with you. Considering the current rate
of production of natural gas and the capacities of Elba Island,
the production plant there, do we have enough plants in America
to keep up with the production needs?
Ms. Gentle. We do not have enough plants to keep up with
the production.
The EIA is estimating that we will have a 25 percent
increase in natural gas production in this country by 2025.
That is an additional 20 Bcf a day of production over and above
the 80 Bcf a day almost that is produced today. And there are
roughly 8, including Elba Island, 8 Bcf a day of export
infrastructure that is under construction today. We still need
12 to 13 Bcf a day of additional demand, and most of that will
need to be export.
Mr. Hice. So, are you saying we would need an additional 12
plants? How many more plants would be needed so we keep up with
the production needs?
Ms. Gentle. If they were Elba Island-sized plants, we would
need six. If they were Tellurian-sized plants, we would need
three.
Mr. Hice. OK.
What, if anything, needs to be done here in the House of
Representatives or, even more specifically, in this Committee
to help speed the process up, to get production up to where it
needs to be?
Ms. Gentle. So, incidentally, we are a producer of natural
gas. We produce gas in the Haynesville, which is in north
Louisiana. And we are really asking legislators to do one
primary thing, and that is to continue to support the
streamlined and efficient regulatory process.
By way of example, when I did work for Cheniere, we
permitted the Sabine Pass export terminal in 12 months, and it
will take us about double that time to permit the Driftwood LNG
facility. So, you can see that, even from the very first plant
to today, we have had a considerable increase in the time that
it takes to complete the process even though we have the exact
same people working with the local, state, and Federal
officials.
So, it will be beneficial for us, anything that can help
streamline the process. Make sure FERC has the appropriate
resources to be able to work through the permits that they have
in front of them and stick to the timelines that are already
part of the policy that don't allow extra tolling procedures to
add 30, 60, 90 days to comment periods.
Mr. Hice. Very good. All right.
And, again, I am not sure who would be best to answer this
last question, because my time is running out. I think, Mr.
Smith, I want to go to you, but anyone else can chime in.
As our export capacity grows, we will increasingly,
obviously, be able to compete with other countries, like
Russia, and the impact that that will have in Europe, I think,
is significant.
Do you feel that our ability to export LNG to Europe would
reduce the leverage of Russia in the region and improve the
national security of those countries?
Mr. Smith. Thank you, Congressman.
I think the answer to that is definitely yes. The fact----
Mr. Hice. Real quickly, before you go further, let me just
get everybody else. Just go down the line.
Mr. Doran. Yes, if we can increase the interconnectivity of
countries in Europe so that the natural gas not only goes to an
LNG receiving facility on the water but then it can move across
borders to other allies that are landlocked and more distant
from maritime facilities.
Mr. Hice. Well, that is what I am getting to. But would it
help the national security?
Mr. Doran. Yes, it would.
Mr. Hice. OK.
Mr. Livingston. I fully agree. Yes, it would. And, I think,
it is a positive contributor to Europe's own energy union
strategy, as Peter mentioned.
Ms. Gentle. I fully agree as well.
Mr. Hice. OK. Great.
I am sorry, my time is up, Mr. Smith. If you have more
comments, please submit that. We would appreciate it.
Thank you.
Dr. Gosar. I thank the gentleman.
The gentlewoman from Wyoming, Ms. Cheney, is recognized for
5 minutes.
Ms. Cheney. Thank you very much, Mr. Chairman.
And thank you to all of our witnesses for being here.
Mr. Doran, I wanted to start with you. Could you talk a
little bit more about--you mentioned in your written testimony
the fact that Secretary Tillerson has been clear about our
opposition to the NS2 pipeline. Talk about what you see as the
next steps, what are the next actions we need to take in terms
of opposing that pipeline, making clear that we view it as
fundamentally inconsistent with our interests.
Mr. Doran. Thank you, Congresswoman. I will be brief and
direct. I will sum it up in three points.
The first one is that, for years, Europeans have been
asking the United States to lead from the front. So, when
Secretary Tillerson was in Warsaw declaring America's
opposition to Nord Stream 2, something that is against our
interests, against the interest of allies, America was
demonstrating the kind of leadership that we have been looking
to see. That is good.
Now we need to align the rhetoric with actual actions that
can truly support allies and help achieve what America has
wanted, and that is to increase a market environment where
energy is not politicized, it is a commodity like anything
else. That should be the goal.
How do we do this? First of all, we need to recognize that
Russia is not competing on a fair playing field. Russia
provides subsidies that industry in America cannot match one-
to-one, so we actually have to use existing rules and
regulations to our advantage.
As a citizen, I would propose to this Committee that the
Countering America's Adversaries Through Sanctions Act of 2017,
and especially section 257 that directs the State Department to
increase its outreach to Ukraine to increase their energy
security and promote their reform process, are essential parts
of the fight against Nord Stream 2.
Ms. Cheney. Thank you.
And then you also mentioned in your response to Mr. Hice
the importance of infrastructure in Europe and
interconnectivity in Europe. As we look at what options are
available to us in the United States to help counter the
weaponization of energy that the Russians have clearly
undertaken, what are the specific things that you see that the
Europeans need to do? How can we help to encourage that kind of
activity and that kind of interconnectivity?
Mr. Smith?
Mr. Smith. We don't have a particular position on Nord
Stream, on the pipeline itself. We do believe that the U.S. LNG
industry is providing a product to Europe that is valuable for
our customers there on the continent, particularly with our
allies and trading partners.
We are seeing that markets are driving U.S. LNG into the
European market in a way that is providing new flexibility and
diversity to those customers. So, even if molecules are not
going from the United States to Europe, just the fact that that
is an option, just the fact that those are available to those
customers, we think, is providing a valuable service.
Ms. Cheney. Have you seen action on the part of countries--
this is for either Mr. Smith or Mr. Doran. I think in your
testimony, Mr. Doran, you called them, obviously, the
landlocked countries--but actions to indicate their willingness
to take the kinds of steps that would be needed in order to
either wean themselves from or prevent them becoming dependent
upon Russian sources of energy?
Mr. Doran. I would say this: the answer is yes, and the key
right now has been a lack of options. For the very first time
in years, we are beginning to see those options emerge. The
process is not done. Interconnectivity is beginning to happen,
but the job is not done.
If we can find ways to increase cross-border,
multidirectional interconnectors across countries in Europe and
across borders, that is a crucial next step in the development
of a market-based energy and especially gas market in Europe.
I would encourage the Administration and, to the extent it
is appropriate, for Congress to encourage the Administration to
show strong American leadership.
Also, in the case of Croatia, we would like to see, as an
American, new LNG receiving facilities in the Adriatic as well
as in Poland's Swinousjscie and Lithuania's Klaipeda
facilities.
Ms. Cheney. Thank you very much.
I will yield back the balance of my time. Thank you, Mr.
Chairman.
Dr. Gosar. I thank the gentlewoman.
We are going to go a lightning round. The Ranking Member
always has to put up with me, so we recognize the Ranking
Member for his questions.
Mr. Lowenthal. First, I want to thank the Chair for
acknowledging that I have to put up with him. But that is a
whole other issue, and that would take a lot longer than my 5
minutes. But I do appreciate working with the Chair. Obviously,
it was said in jest.
This question is really going to be for Mr. Smith and Ms.
Gentle.
Between 2009 and 2015, oil and gas producers on public and
Indian lands flared, vented, and leaked over 460 billion cubic
feet of natural gas. According to the Government Accountability
Office, taxpayers are losing as much as $23 million a year in
lost royalty revenues from this wasted energy resource.
As you are aware, the Obama administration developed
regulations requiring industry to reduce natural gas venting,
flaring, and leaking at operations on public lands. The Trump
administration is trying to undo this rule even after Congress
specifically voted to keep it.
My first question to Mr. Smith is, does Cheniere support
the 2016 Bureau of Land Management Methane and Waste Prevention
Rule? And what are some of the economic and environmental
benefits of decreasing natural gas flares and leaks?
Mr. Smith. Thank you, Congressman, for the question.
Cheniere is the largest purchaser of natural gas in the
United States. We purchase from nine states throughout the
United States. We are on the record already as supporting the
BLM rule.
I would note that the majority of the gas we purchase, or
that is produced in the United States, is produced on public
lands, so one could discuss the overall impact of that rule.
But, overall, as we endeavor to work with suppliers to
reduce methane emissions, one thing you note is that, if you
are concerned about energy security, you are concerned about
economic development, you are concerned about climate or
methane or greenhouse gas emissions, this is great low-hanging
fruit. Because this is the one area in which you can reduce
emissions and you can actually sell the stuff that you are
reducing.
So, we think that there are a lot of actions that producers
can take to make headway in this area, and we look forward to
working with our suppliers to make that happen.
Mr. Lowenthal. Thank you.
Ms. Gentle, as President and CEO of Tellurian, do you
support the 2016 Bureau of Land Management Methane and Waste
Prevention Rule? And what are the economic and environmental
benefits of decreasing natural gas flares and leaks?
Ms. Gentle. Yes, we support minimizing flares.
Mr. Lowenthal. Do you support the rule?
Ms. Gentle. We support the rule, and we support minimizing
and preventing flares, leaks, and venting on public and private
land all across the industry.
And there is an enormous environmental benefit. As Mr.
Smith said, not only are you able to reduce the emissions, you
are also able to sell the gas. And then the gas can displace
other fuels that have higher emissions than natural gas when
used, for example, in power generation, where natural gas has
50 percent or more of the reduction in carbon emissions
compared to even the cleanest coal-fired power plant in service
today.
Mr. Lowenthal. Thank you.
Thank you, Mr. Chair. I yield back.
Dr. Gosar. OK.
All four of you listened very carefully. What was the
question you wished was asked, and what is the answer?
We are going to start with Mr. Smith first.
Mr. Smith. Well, thanks for the question. That is a tough
one because you actually asked pretty good questions. I think
we had an opportunity to talk about the things that were
important to us.
Perhaps the question that I would raise would be what do we
think the prospects are for a company like Cheniere going
forward in terms of creating economic value.
We pointed to some of the successes that we have had in
terms of long-term commercial agreements into Europe, into
India, into China. We believe that there is more of that to do.
And we have appreciated the support that we have gotten
particularly from the Department of Commerce and particularly
in making inroads into China.
The China deal is really an opportunity to help balance of
trade, to project American influence abroad by taking
hydrocarbons developed right here in the United States and
selling those into China. So, we appreciate that support and
hope that it would continue in the future.
Dr. Gosar. Mr. Doran?
Mr. Doran. Thank you, Mr. Chairman. That is probably one of
the best questions I can imagine.
I would say this: what happens when we win? If we were in a
competition geopolitically and in a market competition with
other suppliers of energy to Europe, what happens when America
succeeds and we win?
And I think the answer to that question would be: we will
find increased opportunity for American jobs at home. We will
find better relationships with allies who are looking for signs
of long-term American commitment to their security. Energy
security, as you have identified, is a national security
priority.
So, when we win, we will see a variety of economic as well
as strategic benefits to American interests in Europe.
Dr. Gosar. Mr. Livingston?
Mr. Livingston. Terrific.
I would like to build off of Mr. Doran's question and ask
myself: what can be done to ensure and invest in American
dominance or winning the next battles that lie in energy
markets globally? The answer to that would be to build on
America's superlative strength, the key source of America's
energy edge, which is innovation.
So, what I would recommend, to the degree that it is within
Congress' ability to do so, is to support some of the vessels
and some of the agencies and initiatives that have supported
that energy innovation over time.
Whether it be ARPA-E, whether it be initiatives like the
SunShot Initiative, the United States has a rich history of
creating the technologies that end up defining energy ethics
across the world, be it nuclear energy, shale drilling
technologies, the modern solar PV industry, et cetera.
And I would urge and encourage the United States and
Congress to continue to invest in capabilities that will
guarantee a prominent U.S. role in those energy technologies
for years to come.
Dr. Gosar. Ms. Gentle?
Ms. Gentle. Thank you, Mr. Chairman.
As you all have noted, for the first time we are now a net
exporter of energy, not only of natural gas but also oil. And
this gives the United States an unprecedented opportunity to
fundamentally change the global energy balance of power and
bring energy security to our allies.
One thing we did not talk about, I guess the question we
did not ask is: what happens if we don't continue to support
exports? And the answer to that is that we will hurt the
industry that we have worked over the last decade to build up
in this country and attain our own energy independence.
If we don't allow the continued growth of markets,
including domestic and export markets, we will not be able to
sustain the investment in upstream drilling both for oil and
natural gas.
And, as we continue to see, especially in the Permian, the
commingling of gas associated with oil production, we need to
find markets to that gas in order to continue producing oil, or
we will have increased venting or shut-ins of production.
So, the support of the export market is really at the same
time supporting our own domestic industry.
Dr. Gosar. Those are actually great questions.
The only comment I have, Mr. Livingston, is in IP,
intellectual property. That is kind of problematic now that we
are no longer the leader in the world. China has taken that
purview, and it has been noted all the way around the world.
But I have to compliment you. Great questions. Maybe we
ought to put you guys up on the dais.
I thank the witnesses for their valuable testimony and the
Members for their questions.
Members of the Committee may have some additional questions
for the witnesses, and we will ask you to respond to those in
writing.
Under Committee Rule 3(o), members of the Committee must
submit witness questions within 3 business days following the
hearing by 5:00 p.m., and the hearing record will be held open
for 10 business days for those responses.
If there is no further business, without objection, the
Subcommittee stands adjourned.
[Whereupon, at 3:50 p.m., the Subcommittee was adjourned.]
[LIST OF DOCUMENTS SUBMITTED FOR THE RECORD RETAINED IN THE COMMITTEE'S
OFFICIAL FILES]
Rep. Gosar Submissions
--BLUEPRINT 2025--Comments on Oversight Hearing, detailing
concerns on the analytics and communications
technologies of the 1970s and 1980s dictating our
environmental review procedures of the 21st
century.
--BLUEPRINT 2025--Statement for the record from November
29, 2017 Oversight Hearing, regarding support for
NEPA modernization and of insights into the lengthy
permitting processes.
[all]