[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


       LEGISLATION ADDRESSING LNG EXPORTS AND PURPA MODERNIZATION

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

                                 HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON ENERGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 19, 2018

                               __________

                           Serial No. 115-94
                           
                           
 
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      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
BILL FLORES, Texas                   JOSEPH P. KENNEDY, III, 
SUSAN W. BROOKS, Indiana             Massachusetts
MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, California
RICHARD HUDSON, North Carolina       RAUL RUIZ, California
CHRIS COLLINS, New York              SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan7
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina

                         Subcommittee on Energy

                          FRED UPTON, Michigan
                                 Chairman
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOE BARTON, Texas                    JERRY McNERNEY, California
JOHN SHIMKUS, Illinois               SCOTT H. PETERS, California
ROBERT E. LATTA, Ohio                GENE GREEN, Texas
GREGG HARPER, Mississippi            MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia     KATHY CASTOR, Florida
ADAM KINZINGER, Illinois             JOHN P. SARBANES, Maryland
H. MORGAN GRIFFITH, Virginia         PETER WELCH, Vermont
BILL JOHNSON, Ohio                   PAUL TONKO, New York
BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
BILL FLORES, Texas                   JOSEPH P. KENNEDY, III, 
MARKWAYNE MULLIN, Oklahoma               Massachusetts
RICHARD HUDSON, North Carolina       G.K. BUTTERFIELD, North Carolina
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
TIM WALBERG, Michigan                    officio)
JEFF DUNCAN, South Carolina
GREG WALDEN, Oregon (ex officio)

                                  (ii)
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
    Prepared statement...........................................     2
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     3
    Prepared statement...........................................     4
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     5
    Prepared statement...........................................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7
    Prepared statement...........................................     8

                               Witnesses

Steven Winberg, Assistant Secretary for Fossil Energy, Department 
  of Energy......................................................    10
    Prepared statement...........................................    12
    Answers to submitted questions \1\...........................   190
James Danly, General Counsel, Federal Energy Regulatory 
  Commission.....................................................    16
    Prepared statement...........................................    18
    Answers to submitted questions...............................   192
Travis Kavulla, Vice Chairman, Montana Public Service Commission.    54
    Prepared statement...........................................    56
    Answers to submitted questions...............................   206
Timothy J. Sparks, Vice President of Electric Grid Integration, 
  Consumers Energy...............................................    67
    Prepared statement...........................................    69
    Answers to submitted questions...............................   216
Karl R. Rabago, Executive Director, Pace Energy and Climate 
  Center.........................................................    77
    Prepared statement...........................................    79
    Answers to submitted questions...............................   234
Paul N. Cicio, President, Industrial Energy Consumers of America.   101
    Prepared statement...........................................   103
    Answers to submitted questions...............................   242
Charlie Riedl, Executive Director, Center for Liquefied Natural 
  Gas............................................................   121
    Prepared statement...........................................   123

                           Submitted Material

H.R. 4476, the PURPA Modernization Act of 2017, submitted by Mr. 
  Upton..........................................................   146
H.R. 4605, the Unlocking Our Domestic LNG Potential Act, 
  submitted by Mr. Upton.........................................   152
H.R. 4606, the Ensuring Small Scale LNG Certainty and Access Act, 
  submitted by Mr. Upton.........................................   155
Letter of November 30, 2017, from Terry Kouba, Vice President 
  Operations-Iowa, Alliant Energy, to Mr. Walberg, submitted by 
  Mr. Olson......................................................   157
Letter of December 6, 2017, from Susan N. Kelly, President and 
  CEO, American Public Power Association, to Mr. Walberg, 
  submitted by Mr. Olson.........................................   159
Letter of November 29, 2017, from Barbara Lockwood, Vice 
  President of Regulation, Arizona Public Service, to Mr. 
  Walberg, submitted by Mr. Olson................................   161

----------
\1\ Mr. Winberg did not answer submitted questions for the record by 
the time of printing.
Letter of December 22, 2017, from Paul Sukut, CEO and General 
  Manager, Basin Electric Power Cooperative, to Mr. Walberg, 
  submitted by Mr. Olson.........................................   163
Letter of November 29, 2017, from Patrick Reiten, Senior Vice 
  President, Berkshire Hathaway Energy, to Mr. Walberg, submitted 
  by Mr. Olson...................................................   165
Letter of November 29, 2017, from Patricia K. Poppe, President 
  and CEO, CMS Energy and Consumers Energy, to Mr. Walberg, 
  submitted by Mr. Olson.........................................   167
Letter of January 18, 2018, from Paula Soos, Vice President, 
  Government Relations, Covanta, to Mr. Walberg, submitted by Mr. 
  Olson..........................................................   168
Letter of November 29, 2017, from Gerard M. Anderson, Chairman 
  and CEO, DTE Energy, to Mr. Walberg, submitted by Mr. Olson....   170
Letter of December 15, 2017, from Diane V. Denton, Managing 
  Director, Federal Policy, Duke Energy, to Mr. Walberg, 
  submitted by Mr. Olson.........................................   171
Letter of November 29, 2017, from Thomas R. Kuhn, President, 
  Edison Electric Institute, to Mr. Walberg, submitted by Mr. 
  Olson..........................................................   172
Letter of December 6, 2017, from John P. Hughes, President and 
  Chief Executive Officer, Electricity Consumers Resource 
  Council, to Mr. Walberg, submitted by Mr. Olson................   174
Letter of January 18, 2018, from the Environmental Law & Policy 
  Center, et al., to Mr. Upton and Mr. Rush, submitted by Mr. 
  Olson..........................................................   175
Letter of November 29, 2017, from Jeff Malmen, Senior Vice 
  President, Public Affairs, Idaho Power Company, to Mr. Walberg 
  submitted by Mr. Olson.........................................   177
Letter of January 19, 2018, from the Independent Power Producers 
  Coalition of Michigan to Mr. Walberg, submitted by Mr. Olson...   180
Letter of January 17, 2018, from Nina Plaushin, Vice President 
  Regulatory, Federal Affairs, and Communications, ITC Holdings 
  Corporation, to Mr. Walberg, submitted by Mr. Olson............   182
Letter of December 19, 2017, from Greg White, Executive Director, 
  National Association of Regulatory Utility Commissioners, to 
  Mr. Walberg, submitted by Mr. Olson............................   184
Letter of November 29, 2017, from Jim Matheson, Chief Executive 
  Officer, National Rural Electric Cooperative Association, to 
  Mr. Walberg, submitted by Mr. Olson............................   185
Letter of November 29, 2017, from Paul Renfrow, Vice President, 
  Corporate Affairs, OGE Energy Corporation, to Mr. Walberg, 
  submitted by Mr. Olson.........................................   187
Letter of December 12, 2017, from Sania Radcliffe, Director of 
  Government Affairs and Environmental Policy, Portland General 
  Electric Company, to Mr. Walberg, submitted by Mr. Olson.......   188
Letter of November 29, 2017, from Frank P. Prager, Vice 
  President, Policy and Federal Affairs, Xcel Energy, to Mr. 
  Walberg, submitted by Mr. Olson................................   189

 
       LEGISLATION ADDRESSING LNG EXPORTS AND PURPA MODERNIZATION

                              ----------                              


                        FRIDAY, JANUARY 19, 2018

                  House of Representatives,
                            Subcommittee on Energy,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:15 a.m., in 
room 2322, Rayburn House Office Building, Hon. Fred Upton 
(chairman of the subcommittee) presiding.
    Members present: Representatives Upton, Olson, Barton, 
Shimkus, Latta, McKinley, Griffith, Johnson, Long, Bucshon, 
Flores, Mullin, Hudson, Cramer, Walberg, Duncan, Walden (ex 
officio), Rush, McNerney, Peters, Green, Tonko, Loebsack, 
Schrader, Kennedy, Pallone (ex officio).
    Staff present: Ray Baum, Staff Director; Allie Bury, 
Legislative Clerk, Energy/Environment; Wyatt Ellertson, 
Professional Staff Member, Energy/Environment; Margaret Tucker 
Fogarty, Staff Assistant; Adam Fromm, Director of Outreach and 
Coalitions; Jordan Haverly, Policy Coordinator, Environment; 
A.T. Johnston, Senior Policy Advisor, Energy; Ben Lieberman, 
Senior Counsel, Energy; Mary Martin, Chief Counsel, Energy/
Environment; Katie McKeogh, Press Assistant; Brandon Mooney, 
Deputy Chief Counsel, Energy; Mark Ratner, Policy Coordinator; 
Annelise Rickert, Counsel, Energy; Dan Schneider, Press 
Secretary; Jason Stanek, Senior Counsel, Energy; Madeline Vey, 
Policy Coordinator, Digital Commerce and Consumer Protection; 
Hamlin Wade, Special Advisor for External Affairs; Andy Zach, 
Senior Professional Staff Member, Environment; Priscilla 
Barbour, Minority Energy Fellow; Evan Gilbert, Minority Press 
Assistant; Caitlin Haberman, Minority Professional Staff 
Member; Rick Kessler, Minority Senior Advisor and Staff 
Director, Energy and Environment; John Marshall, Minority 
Policy Coordinator; Alexander Ratner, Minority Policy Analyst; 
Tim Robinson, Minority Chief Counsel; and Tuley Wright, 
Minority Energy and Environment Policy Advisor.

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

    Mr. Upton. Good morning.
    Today's legislative hearing is going to focus on three 
bills: two bipartisan bills addressing LNG exports introduced 
by Mr. Johnson and a bill introduced by Mr. Walberg to 
modernize the Public Utility Regulatory Policies Act of 1978, 
also called PURPA.
    I want to thank our witnesses for appearing before us today 
to give their views so that we could work to perfect these 
bills.
    On the first panel, we are going to hear testimony from the 
Department of Energy on two LNG bills, H.R. 4605, the Unlocking 
Our Domestic LNG Potential Act, and H.R. 4606, the Ensuring 
Small Scale LNG Certainty and Access Act. And we will also 
receive testimony from FERC on H.R. 4476, the PURPA 
Modernization Act.
    We also have a second panel of witnesses today so we can 
hear from industry and State regulators to better understand 
the impact of the legislation.
    As we consider this legislation, I am reflecting on our 
bipartisan codel to Puerto Rico and the Virgin Islands last 
month. It is hard to put into words the devastation and loss, 
and it is hard to fathom that it has been more than 100 days 
since the hurricane struck and yet hundreds of thousands of 
folks are still without power.
    As we learned on our trip, Puerto Rico's grid was in a very 
rough shape to begin with, and many of their power plants were 
so outdated they were still burning petroleum. I believe there 
is a real potential for Puerto Rico to expand their use of 
natural gas in these bills, especially the Small Scale LNG bill 
can be part of that solution.
    So I think I speak for all those who joined with me on the 
codel when I say that we are going to continue to stay focused 
to ensure that the territories and the people receive the 
assistance that they deservedly need.
    With that, I would like to thank this panel of 
distinguished witnesses for appearing today. I look forward to 
your testimony.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Today's legislative hearing will focus on three bills--two 
bipartisan bills addressing LNG exports introduced by Mr. 
Johnson, and a bill introduced by Mr. Walberg to modernize the 
Public Utility Regulatory Policies Act of 1978. I want to thank 
our witnesses for appearing before us today to give their views 
so we can work to perfect the bills.
    On the first panel, we'll hear testimony from the 
Department of Energy on the two LNG bills--H.R. 4605, the 
``Unlocking our Domestic LNG Potential Act'' and H.R. 4606, the 
``Ensuring Small Scale LNG Certainty and Access Act.'' We'll 
also receive testimony from FERC on H.R. 4476, the ``PURPA 
Modernization Act.'' We also have a second panel of witnesses 
today, so we can hear from industry and State regulators to 
better understand the impact of the legislation.
    As we consider this legislation, I'm reflecting on our 
bipartisan CODEL to Puerto Rico and the Virgin Islands back in 
December. It is hard to put into words the devastation and 
loss, and it's hard to fathom that it has been more than 100 
days since the hurricane struck and hundreds of thousands of 
people are still without power. As we learned on our trip, 
Puerto Rico's grid was in very rough shape to begin with and 
many of their power plants were so outdated they were still 
burning petroleum. I believe there is real potential for Puerto 
Rico to expand their use of natural gas, and these bills--
especially the small-scale LNG bill--can be part of the 
solution. I think I speak for all those who joined me on the 
CODEL when I say that we will continue to stay focused to 
ensure that the territories and their people receive the 
assistance they need.
    With that, I'd like to thank this panel of distinguished 
witnesses for appearing today and I look forward to your 
testimony.

    Mr. Upton. And I was going to yield to Mr. Walberg for a 
minute or so.
    Mr. Walberg.
    Mr. Walberg. Mr. Chairman, thank you for holding this 
hearing today. I want to also thank your staff for being a part 
of this process. They have been terrific to work with.
    I would like to quickly point out that this legislation 
that aims to bring a 40-year-old law into the 21st century is 
an important aspect to deal with. It is time that my 
constituents see the advancements made in the electricity 
sector reflected in their utility bill.
    H.R. 4476 aims to lower electricity bills for American 
families, to stop the gaming of a Federal law at the expense of 
my constituents.
    I am willing to work with all interested stakeholders 
moving forward to make changes to this legislation to ensure we 
bring real benefits to hardworking Michiganders and others all 
around the United States.
    I look forward to this hearing and yield back my time.
    Mr. Upton. The gentleman yields back.
    I yield now to the ranking member of the Energy 
Subcommittee, Mr. Rush, for an opening statement.

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

    Mr. Rush. I want to thank you, Mr. Chairman.
    Today we will be examining legislation addressing LNG 
exports and PURPA modernization. I must say, Mr. Chairman, and 
announce I do have concerns with all three bills that are 
before us today. It is my hope that the majority will work with 
our side to address each of these issues as we move through the 
committee process.
    To begin with, Mr. Chairman, H.R. 4476 would make sweeping 
changes to PURPA--changes, Mr. Chairman, that will 
fundamentally alter both its objective and its effectiveness. 
For the past 40 years, this policy has helped to promote 
wholesale distribution of electric energy while increasing 
energy efficiency and ensuring that energy consumers receive 
fair retail rates.
    PURPA's effectiveness, Mr. Chairman, has come from its 
unique role in facilitating competition in the electricity 
sector, and I am concerned that some of the proposed changes 
under H.R. 4476 will hamper the law's ability to achieve its 
original objective.
    Specifically, section 4 of H.R. 4476 would essentially 
strip away PURPA's requirement that utilities must purchase 
from certain qualified renewable energy projects, small power 
production, and cogeneration facilities.
    As you know, Mr. Chairman, under current law, there is 
already an exemption from must-buy provision if FERC determines 
that a qualifying facility has nondiscriminatory access to 
specific marked-related conditions.
    However, H.R. 4476 would give certain utilities the ability 
to refuse to purchase energy from small power producers or 
provide services to a QF if that utility determines that it has 
no need to purchase such power or the utility secures long-term 
generation resources through a competitive process and uses 
integrated resource planning, or IRPs.
    Mr. Chairman, H.R. 4476 provides little to no insight for 
nonregulated electric utilities or for those operating in 
States that do not require IRPs. My concern is that the changes 
in H.R. 4476 would replace a system that currently works well 
in ensuring a competitive environment for smaller, privately 
owned energy producers with one that severely reduces 
competition.
    Mr. Chairman, if it ain't broke, it don't need a fix.
    Additionally, I also have concerns regarding both H.R. 4605 
and H.R. 4606, both of which address the exportation of LNG, 
and neither of which is really, in the final analysis, 
necessary.
    While H.R. 4506 appears to be some sort of a sweetheart 
deal, my issues with H.R. 4605 surround its elimination of the 
section prohibiting the import or export of natural gas without 
prior DOE approval, while also removing longstanding consumer 
protections.
    So, Mr. Chairman, I look forward to today's hearing, and I 
look forward to concentrating a very robust discussion around 
these important issues.
    And with that, I yield back the balance of my time.
    [The prepared statement of Mr. Rush follows:]

                Prepared statement of Hon. Bobby L. Rush

    Mr. Chairman, today we will be examining legislation 
addressing LNG exports and PURPA modernization.
    Mr. Chairman, I must say at the outset that I do have 
concerns with all three bills before us today.
    It is my hope that the majority will work with our side to 
address each of these issues as we move through the legislative 
process.
    To begin with, Mr. Chairman, H.R. 4476 would make sweeping 
changes to the Public Utility Regulatory Policies Act, or 
PURPA, that would fundamentally alter both its objective and 
effectiveness.
    For the past 40 years this policy has helped to promote the 
wholesale distribution of electric energy, while increasing 
energy efficiency, and ensuring that energy consumers receive 
fair retail rates.
    Mr. Chairman, PURPA's effectiveness has come from its 
unique role in facilitating competition in the electricity 
sector and I am concerned that some of the proposed changes 
under H.R. 4476 would hamper the law's ability to achieve its 
original objectives.
    Specifically, Section 4 of H.R. 4476 would essentially 
strip away PURPA's requirement that utilities must purchase 
power from certain qualifying renewable energy projects, small 
power production, and cogeneration facilities.
    Mr. Chairman, as you know, under current law there is 
already an exemption from the must-buy provision if FERC 
determines that a qualifying facility, or QF, has 
``nondiscriminatory access to'' specific market-related 
conditions.
    However, H.R. 4476 would give certain utilities the ability 
to refuse to purchase energy from small power producers or 
provide services to a QF if that utility determines it has no 
need to purchase such power or the utility procures long-term 
generation resources through a competitive process and uses 
integrated resource planning, or IRPs.
    Mr. Chairman, H.R. 4476 provides little to no oversight for 
non-regulated electric utilities or for those operating in 
States that do not require IRPs.
    My concern is that the changes in H.R. 4476 would replace a 
system that currently works well in ensuring a competitive 
environment for smaller, privately owned energy producers with 
one that severely reduces competition.
    Additionally, Mr. Chairman, I also have concerns regarding 
both H.R. 4605 and H.R. 4606, both of which address the 
exportation of LNG, and neither of which is really necessary.
    While H.R. 4506 appears to be some sort of sweetheart deal, 
my issues with H.R. 4605 surround its elimination of the 
section prohibiting the import or export of natural gas without 
prior DOE approval, while also removing longstanding consumer 
protections.
    H.R. 4605 would also prevent DOE from ensuring that exports 
of LNG to non-Free Trade Agreement countries are consistent 
with the public interest.
    Mr. Chairman, under this bill information regarding LNG 
exports would be concealed from the American people, denying 
them the opportunity to provide input or even know exactly 
which countries would be receiving this vital product.
    It remains unclear, Mr. Chairman, what effect this bill 
would have on our national security, our domestic natural gas 
consumers, our manufacturing competitiveness, or American jobs.
    So I look forward to engaging today's witnesses to dig 
deeper on these important issues and with that I yield the 
balance of my time.

    Mr. Upton. The gentleman yields back.
    The Chair would recognize the chair of the full committee, 
the gentleman from Oregon, Mr. Walden.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. I thank the gentleman from Michigan. I welcome 
our witnesses.
    Today the committee will examine legislation that will 
encourage and streamline the process for approving liquefied 
natural gas exports and modernize the Public Utility Regulatory 
Policies Act of 1978, also known as PURPA. For some of us, 1978 
doesn't seem that far back. For others, it may seem like 
ancient history.
    Under my chairmanship, I have encouraged our Members to put 
consumers first and focus on ways to grow our economy. To do 
this effectively, we need to look to see where we can update 
our laws and regulatory policies for the 21st century.
    I want to thank Mr. Johnson and Mr. Walberg for their hard 
work on these bipartisan bills. I would also like to thank the 
witnesses for appearing before us today and providing their 
views on these two important pieces of legislation.
    You know, the United States is the world's number one 
producer of oil and gas and our reserves are so large they are 
predicted to meet domestic demand for a century or more. Who 
would have thought? Up until the shale revolution, our supplies 
were dwindling. We were importing natural gas. As you would 
expect, our laws reflected that reality.
    However, we are in a completely different situation today, 
and for the first time ever we are net exporters of natural 
gas. Now, to capitalize on this incredible opportunity, we need 
to update our laws to remove unnecessary barriers to innovation 
and growth.
    As dozens of studies have shown, including those sponsored 
by the Department of Energy, LNG exports provide wide-ranging 
net benefits to consumers and the economy.
    Mr. Johnson's legislation would remove unnecessary 
restrictions on these exports which date back to the 1930s. 
These changes would help create more open, transparent, and 
competitive markets for natural gas, encourage more production 
in the U.S., create thousands of jobs, and spur further 
economic development, all good things for America.
    It should not be overlooked that LNG exports also 
strengthen our diplomatic hand when dealing with countries like 
Russia that like to use their energy resources as weapons. 
Encouraging the use of clean-burning natural gas around the 
world also helps to reduce greenhouse gas emissions and improve 
the environment. Exports are truly a win-win for all sides in 
America.
    Today we are also examining legislation to modernize PURPA. 
This is a law that was enacted to encourage the use of domestic 
energy in response to the Arab oil embargo.
    Since PURPA's passage, the Nation's power sector has 
undergone remarkable changes in the ways that electricity is 
supplied to consumers. So Mr. Walberg's legislation recognizes 
these changes and updates a 40-year-old law to ensure that it 
serves the interests of consumers and power suppliers for years 
to come.
    Now, most notably, the PURPA modernization bill will 
address the concern that certain facility developers are 
successfully evading the intent of FERC's One-Mile Rule. At 
last year's oversight hearing on PURPA, we heard examples of 
project developers building power-producing facilities just far 
enough from each other so they could avoid PURPA's 80-megawatt 
threshold, thus allowing them to receive the benefits that are 
intended for small power producers.
    H.R. 4476 offers a specific fix to address this concern, 
and I will be interested to hear FERC's thoughts on this issue 
today.
    As I have said before, the Energy and Commerce Committee 
strives to focus on the needs and interests of American 
consumers. We are putting them first.
    With that, I look forward to our witnesses' testimony and 
discussion among the committee members on the proposals to 
revise the LNG policies and to modernize PURPA for the 21st 
century.
    With that, Mr. Chairman, I am delighted you are chairing 
this hearing. I look forward to the testimony as we move this 
legislation forward. And I yield back the balance of my time.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Today, the committee will examine legislation to encourage 
and streamline the process for approving liquefied natural gas 
exports and modernize the Public Utility Regulatory Policies 
Act of 1978 also known as PURPA. Under my chairmanship, I've 
encouraged our Members to put consumers first and focus on ways 
to grow our economy. To do this effectively, we need to look to 
see where we can update our laws and regulatory policies for 
the 21st Century. I want to thank Mr. Johnson and Mr. Walberg 
for their hard work on these bi-partisan bills. I'd also like 
to thank the witnesses for appearing before us today and 
providing their views on the legislation.
    The United States is the world's number one producer of oil 
and gas and our reserves are so large that they are predicted 
to meet domestic demand for a century or more. Up until the 
shale revolution, our supplies were dwindling, and we were 
importing natural gas. As you would expect, our laws reflected 
that reality. However, we're in a completely different 
situation today--for the first time ever, we are net exporters 
of natural gas. Now, to capitalize on this incredible 
opportunity, we need to update our laws to remove unnecessary 
barriers to innovation and growth.
    As dozens of studies have shown, including those sponsored 
by the Department of Energy, LNG exports provide wide-ranging 
net benefits to consumers and the economy. Mr. Johnson's 
legislation would remove unnecessary restrictions on these 
exports--which date back to the 1930's. These changes would 
help create more open, transparent, and competitive markets for 
natural gas, encouraging more production in the U.S., creating 
thousands of jobs, and spurring further economic development. 
It shouldn't be overlooked that LNG exports also strengthen our 
diplomatic hand when dealing with countries like Russia that 
like to use energy resources as a weapon. Encouraging the use 
of clean burning natural gas around the world also helps to 
reduce GHG emissions and improve the environment. Exports are 
truly a win-win for all sides.
    Today, we're also examining legislation to modernize PURPA, 
a law enacted to encourage the use of domestic energy in 
response to the Arab Oil Embargo. Since PURPA's passage, the 
Nation's power sector has undergone remarkable changes in the 
ways that electricity is supplied to consumers. Mr. Walberg's 
legislation recognizes these changes and updates this 40-year-
old law to ensure that it serves the interests of consumers and 
power suppliers for years to come. Most notably, the PURPA 
modernization bill will address the concern that certain 
facility developers are successfully evading the intent of 
FERC's ``one-mile rule''. At last year's oversight hearing on 
PURPA, we heard examples of project developers building power-
producing facilities just far enough from each other, so they 
can avoid PURPA's 80-megawatt threshold, thus allowing them to 
receive benefits that are intended for small power producers. 
H.R. 4476 offers a specific fix to address this concern and I'd 
be interested to hear FERC's thoughts today.
    As I said before, the Energy and Commerce Committee strives 
to focus on the needs and interests of American consumers. With 
that, I look forward to our witness testimony and discussion on 
the proposals to revise our LNG policies and to modernize PURPA 
for the 21st century.

    Mr. Upton. The gentleman yields back.
    The Chair would recognize the ranking member of the full 
committee, Mr. Pallone, for an opening statement,

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Today we will be examining legislation addressing natural 
gas exports and changes to the Public Utility Regulatory 
Policies Act, or PURPA.
    While I am pleased we are taking the time to examine these 
bills, I fail to see the need for almost any of the policy 
changes that they propose.
    First, we have H.R. 4605, the Unlocking Our Domestic LNG 
Potential Act. The bill does away with the Natural Gas Act's 
prohibition on the import or export of natural gas without 
prior approval from the Department of Energy. It removes 
longstanding consumer protections and prevents DOE from 
ensuring exports of liquefied natural gas to nonfree trade 
agreement countries are consistent with the public interest.
    As a result, the public would not have an opportunity to 
know about or provide input on natural gas exports to any 
country at any level.
    Furthermore, we must have a mechanism for the Federal 
Government to know the source and destination of gas imports 
and exports, something that is critical for our natural 
security.
    DOE's process for reviewing and approving gas export 
applications is working efficiently and effectively, so I fail 
to see a reason to alter it, let alone do away with it 
completely as proposed by this bill. I am particularly 
concerned that the unrestricted export policy included in this 
bill could significantly impact domestic natural gas prices and 
adversely affect American consumers and manufacturers.
    Furthermore, unfettered exports could be even worse for 
climate change. The policy incentivizes widespread fossil fuel 
extraction with virtually no environmental protections, adds 
more fossil fuels to the electricity mix rather than replacing 
dirtier sources, and artificially props up the coal industry.
    H.R. 4606 appears to be an attempt to codify the Trump 
administration's recently proposed rule to expedite the 
approval of small-scale natural gas exports, and that rule 
would deem certain lower volume exports to non-FTA countries in 
the public interest so long as DOE's approval of the 
application does not require an environmental review under the 
National Environmental Policy Act.
    And I have concerns about this rule, but it is a model of 
restraint compared to this legislation, which would keep DOE's 
volume limit but completely jettison the requirement that 
applications qualify for a categorical exclusion from NEPA.
    It speaks volumes that this bill has even fewer 
environmental safeguards than a Trump administration proposal. 
The bill also fails to prevent applicants from using this new 
process to evade the public interest determinations required 
for large-scale exports by segmenting a large volume gas export 
into a series of smaller proposals.
    Mr. Chairman, perhaps even more troubling is that, 
according to the Congressional Research Service, only one 
project currently meets the capacity requirements of the 
administration's small-scale LNG rule but does not qualify for 
a categorical exclusion, and that is a project in development 
by Eagle LNG Partners in Jacksonville, Florida.
    Since the bill does not include a categorical exclusion 
provision, the Jacksonville facility would be the only project 
to benefit from this new expedited process. That sounds to me 
suspiciously like the kind of legislative earmark that I 
thought my Republican colleagues opposed. And I look forward to 
hearing my colleagues' views on that matter and why this bill 
is even necessary at all.
    And finally there is H.R. 4476, the PURPA Modernization Act 
of 2017, which significantly alters section 210 of PURPA. This 
provision has long ensured beneficial competition for 
generating resources, save consumers money, and further the 
growth of renewables and cogeneration.
    This committee, under the leadership of former Chairman 
Barton, struck the right balance when it significantly updated 
PURPA in the Energy Policy Act of 2005. In contrast, this bill 
lacks that balance, with two of the three main components of 
H.R. 4476 representing a direct assault on PURPA that would 
solidify the monopoly power of utilities in areas without 
competitive wholesale or retail markets.
    And having that said, I am not completely opposed to 
updating PURPA. The part of Mr. Walberg's bill dealing with the 
so-called One-Mile Rule, which many claim has encouraged the 
segmentation of PURPA projects that would otherwise not qualify 
under the law, that merits attention. It is certainly a topic 
that we would be willing to try to address in a bipartisan 
fashion. But overall, these bills really are not in the public 
interest.
    So I thank you. And I yield back the balance of my time, 
Mr. Chairman.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Today we will be examining legislation addressing natural 
gas exports and changes to the Public Utilities Regulatory 
Policies Act (PURPA). While I am pleased we are taking the time 
to examine these bills, I fail to see the need for almost any 
of the policy changes they propose.
    First, we have H.R. 4605, the ``Unlocking Our Domestic LNG 
Potential Act.'' The bill does away with the Natural Gas Act's 
prohibition on the import or export of natural gas without 
prior approval from the Department of Energy (DOE). It removes 
longstanding consumer protections, and prevents DOE from 
ensuring exports of liquefied natural gas (LNG) to non- Free 
Trade Agreement (FTA) countries are consistent with the public 
interest. As a result,the public would not have an opportunity 
to know about, or provide input on, natural gas exports to any 
country at any level. Furthermore, we must have a mechanism for 
the Federal Government to know the source and destination of 
gas imports and exports, something that is critical for our 
national security.
    DOE's process for reviewing and approving gas export 
applications is working efficiently and effectively, so I fail 
to see a reason to alter it, let alone do away with it 
completely as proposed by this bill. I am particularly 
concerned that the unrestricted export policy included in this 
bill could significantly impact domestic natural gas prices and 
adversely affect American consumers and manufacturers. 
Furthermore, unfettered exports could be even worse for climate 
change. The policy incentivizes widespread fossil fuel 
extraction with virtually no environmental protections, adds 
more fossil fuels to the electricity mix rather than replacing 
dirtier sources, and artificially props up the coal industry.
    H.R. 4606 appears to be an attempt to codify the Trump 
administration's recently proposed rule to expedite the 
approval of ``small-scale natural gas exports.'' That rule 
would deem certain lower volume exports to non-FTA countries in 
the public interest, so long as DOE's approval of the 
application does not require an environmental review under the 
National Environmental Policy Act (NEPA). I have concerns about 
this rule, but it is a model of restraint compared to this 
legislation, which would keep DOE's volume limit, but 
completely jettison the requirement that applications qualify 
for a categorical exclusion from NEPA. It speaks volumes that 
this bill has even fewer environmental safeguards than a Trump 
administration proposal. The bill also fails to prevent 
applicants from using this new process to evade the public 
interest determinations required for large-scale exports by 
segmenting a large volume gas export into a series of smaller 
proposals.
    Perhaps even more troubling is that, according to the 
Congressional Research Service, only one project currently 
meets the capacity requirements of the administration's small-
scale LNG rule but does not qualify for a categorical 
exclusion: a project in development by Eagle LNG Partners in 
Jacksonville, Florida. Since the bill does not include a 
categorical exclusion provision, the Jacksonville facility 
would be the only project to benefit from this newexpedited 
process. That sounds suspiciously like the kind of legislative 
earmark I thought my Republican colleagues opposed. I look 
forward to hearing my colleagues' views on that matter, and why 
this bill is even necessary at all.
    Finally, there is H.R. 4476, the ``PURPA Modernization Act 
of 2017,'' which significantly alters section 210 of PURPA. 
This provision has long ensured beneficial competition for 
generating resources, saved consumers money, and furthered the 
growth of renewables and cogeneration. This committee, under 
the leadership of former Chairman Barton, struck the right 
balance when it significantly updated PURPA in the Energy 
Policy Act of 2005. In contrast, this bill lacks that balance, 
with two of the three main components of H.R. 4476 representing 
a direct assault on PURPA that would solidify the monopoly 
power of utilities in areas without competitive wholesale or 
retail markets.
    Having said that, I am not completely opposed to updating 
PURPA. The part of Mr. Walberg's bill dealing with the so-
called ``one mile rule''--which many claim has encouraged the 
segmentation of PURPA projects that would otherwise not qualify 
under the law-- merits attention. It is certainly a topic that 
we would be willing to try to address in a bipartisan fashion.
    Thank you. I yield back the balance of my time.

    Mr. Upton. The gentleman yields back.
    We are now prepared to hear the testimony from our first 
panel. We are joined by, first, Steven Winberg, the Assistant 
Secretary for Fossil Energy from the Department of Energy, and 
then Mr. James Danly, general counsel from FERC.
    So thank you. Your testimony is made part of the record. 
And we would like to give you 5 minutes now to summarize that, 
and then we will go into questions.
    Mr. Winberg, welcome to the subcommittee.

 STATEMENTS OF STEVEN WINBERG, ASSISTANT SECRETARY FOR FOSSIL 
ENERGY, DEPARTMENT OF ENERGY; AND JAMES DANLY, GENERAL COUNSEL, 
              FEDERAL ENERGY REGULATORY COMMISSION

                  STATEMENT OF STEVEN WINBERG

    Mr. Winberg. Chairman Upton, Ranking Member Rush, and 
members of the subcommittee, it is an honor to appear before 
you on behalf of the administration. I will provide technical 
comments on the two bills that pertain to the Department's 
authority under the Natural Gas Act to regulate natural gas 
exports.
    DOE's authority to regulate the export of natural gas 
arises under section 3 of the Natural Gas Act. This authority 
is vested in the Secretary of Energy and has been delegated to 
the assistant secretary for fossil energy.
    Section 3(a) of the Natural Gas Act sets forth the standard 
for revision of most LNG export applications. The Department 
interprets section 3(a) as creating a rebuttable presumption 
that a proposed export of natural gas is in the public 
interest.
    Under this provision, DOE performs a thorough public 
interest analysis before acting on applications to export 
natural gas to nonfree-trade agreement countries.
    In the Energy Policy Act of 1992, Congress introduced 
section 3(c) to the NGA which created a different standard for 
free trade agreement countries that deems these applications to 
be consistent with the public interest and granted without 
modification or delay.
    Since January 2017, DOE has granted authority to export 
natural gas to two world-scale LNG projects, Golden Pass 
Products in Texas and Delfin LNG, which is proposed for 
offshore Louisiana. DOE has also granted authority to export to 
Eagle LNG's small-scale Maxville, Florida, project as well as 
an additional capacity at the proposed Lake Charles LNG 
project.
    In total, DOE has authorized 21.35 billion cubic feet per 
day of natural gas under section 3(a) for export to anywhere in 
the world not prohibited by U.S. law or policy.
    This morning I will provide technical comments on both H.R. 
4605, the Unlocking Our Domestic LNG Potential Act, and H.R. 
4606, the Ensuring Small Scale LNG Certainty and Access Act.
    H.R. 4605 would remove DOE's authority in regulating 
natural gas trade for the United States. Currently under the 
NGA, DOE has authority over imports and exports of natural gas. 
The Federal Energy Regulatory Commission has authority over the 
siting, construction, and operation of interstate natural gas 
pipelines and LNG terminals. The bill appears to make no 
modification to FERC's jurisdiction under the NGA.
    Under current law, LNG export project sponsors submit 
applications to both FERC and DOE, and most projects require 
the completion of an environmental impact statement under the 
provisions of the National Environmental Policy Act. In these 
cases, FERC is the lead agency in preparing the EIS and DOE is 
the cooperating agency. Separate from the FERC reviews, DOE 
conducts a public interest review under section 3(a) of the 
Natural Gas Act.
    Regarding H.R. 4606, all exports of natural gas, regardless 
of quantity, are subject to review and approval by DOE through 
its regulatory authority under the Natural Gas Act. Regarding 
4606, all exports of natural gas, regardless of quantity, are 
subject to review and approval by DOE under its regulatory 
authority under the Natural Gas Act.
    H.R. 4606 would amend section 3(c) to expedite approval of 
imports and exports of small volumes of natural gas. The effect 
of this bill would be to have qualifying applications granted 
without modification or delay.
    This bill appears to be similar to the volume criteria DOE 
laid out in its recent DOE notice of proposed rulemaking 
concerning small-scale natural gas exports, published on 
September 1 of 2017, which offered that natural gas export 
applications to nonfree-trade agreement countries that propose 
to export up to and including 0.14 billion cubic feet per day 
would be deemed to be consistent with the public interest.
    So in conclusion, I note that the United States has become 
the world's largest combined producer of oil and natural gas, 
resulting in an abundance of reliable and affordable energy 
resources. In 2017, the United States was a net exporter of 
natural gas for the first time on an annual basis since 1957. 
Overall, the Energy Information Administration forecasts net 
natural gas exports to average 2.3 billion cubic feet per day 
in 2018 and 4.6 billion cubic feet in 2019.
    The Department appreciates the ongoing bipartisan efforts 
to address our Nation's energy challenges and looks forward to 
working with the committee on the legislation on today's agenda 
and on any future legislation.
    Thank you for the opportunity to be here today, and I look 
forward to your questions.
    [The prepared statement of Mr. Winberg follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Upton. Thank you.
    Mr. Danly, welcome to the subcommittee.

                    STATEMENT OF JAMES DANLY

    Mr. Danly. Mr. Chairman, Ranking Member Rush, members of 
the subcommittee, I appreciate the opportunity to come here and 
testify today. My name is James Danly, and I am the general 
counsel of the Federal Energy Regulatory Commission.
    Before I begin with my opening remarks, I want to mention 
that I am appearing here today as a staff witness, and my 
opinions are not those of the Commission or of any individual 
commissioner.
    I have been asked to testify about a bill that amends the 
Public Utility Regulatory Policy Act of 1978, PURPA. That bill, 
H.R. 4476, has three provisions in it, and I will discuss 
briefly the effect of each one in turn.
    The first of the provisions, section 2, has to do with the 
so-called One-Mile Rule. PURPA defines small power production 
facilities as any power production facility which, when taken 
with the other facilities at the same site--that determination 
is made by FERC--is less than 80 megawatts. And it is worth 
pausing for a second to mention that the small power production 
facility is one of the two types of qualifying facilities under 
PURPA, the other being combined heat and power, cogeneration.
    The regulations that were promulgated by FERC pursuant to 
PURPA provide that generation facilities are considered to be 
at the same sight if they are within 1 mile of each other, if 
they share the same energy resource, and if they are owned by 
the same person or an affiliate of that person.
    The proposed bill would convert the Commission's current 
bright line One-Mile Rule to a rebuttable presumption that 
could be overcome by a number of specified statutory factors, 
for example, were the facilities that were more than 1 mile 
apart purchased with the same financing, do they share 
interconnection points, such factors like that.
    The second provision, which is section 3 of H.R. 4476, has 
to do with nondiscriminatory access. The heart of PURPA is the 
mandatory purchase obligation. That is the mechanism that 
really drives PURPA's effect. This provision requires utilities 
to purchase the electric power of the qualifying facilities 
that operate within their service territory. This is regardless 
of whether or not the utility requires that power and whether 
or not the QF participated in the procurement process of that 
utility.
    Under PURPA, the power is to be purchased from those QFs on 
a mandatory basis at the avoided cost rate that is established 
by the State instrumentality responsible for regulating those 
utilities.
    In recognition of the changing landscape of the American 
power industry, in 2005, Congress passed EPACT 2005, which had 
a provision that allowed for the termination of this mandatory 
purchase obligation when the Commission makes a finding that a 
QF enjoys nondiscriminatory access to an electric market.
    In implementing that provision of EPACT 2005, FERC 
promulgated regulations which established a threshold of 20 
megawatts above which it would be rebuttably presumed that the 
QF did have nondiscriminatory access to the market and below 
which there is a rebuttable presumption that it did not. This 
was based on the basic premise that the larger the QF's 
capacity, the more likely it is to be a sophisticated party and 
the more likely it would have nondiscriminatory access.
    The proposed bill leaves the basic mechanics of this 
threshold in place, simply lowers the threshold from 20 
megawatts down to 2.5.
    And then the last provision, section 4 of 4476, has to do 
with the State and local determinations of need. As I explained 
a moment ago, the heart of PURPA is that mandatory purchase 
obligation, and it is fundamental to the way PURPA works 
currently.
    In response to the 1970s energy crisis, PURPA was passed in 
order to establish a nationwide policy which is explicitly 
stated in the statute to encourage the development of 
cogeneration and small power production facilities. That policy 
objective was largely achieved by this mandatory purchase 
obligation.
    And as drafted, the bill would alter PURPA so as to replace 
the nationwide policy advancing those interests through the 
mandatory purchase obligation to a State-by-State regime that 
would allow State agencies to relieve their utilities of the 
obligation to mandatorily purchase power from qualifying 
facilities if the State agency certifies to FERC either that 
there is no need for their regulated utilities to purchase the 
power that the QFs produce or that the utility employs some 
type of a competitive procurement process.
    This represents a fundamental change to the mechanism of 
how PURPA operates and, as such, as the agency that is charged 
with implementing PURPA, the subcommittee and Congress are in a 
far better position to determine whether or not that advances 
the policy goals of PURPA.
    With that, I have no more remarks to start with. I would 
just like to thank you all for the opportunity to give my 
thoughts on these bills. I look forward to your questions.
    [The prepared statement of Mr. Danly follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Upton. Well, thank you very much.
    Mr. Danly, back in 2015, Senator Murkowski and I wrote to 
FERC regarding the state of PURPA in the face of changes that 
the electricity markets have undergone in the last number of 
years. And in that letter, we asked FERC to take a 
comprehensive look at PURPA and its regulations. I know that 
you held a 1-day conference to discuss those concerns.
    Can you tell us what FERC has been doing to update the regs 
and policies since that letter went?
    Mr. Danly. Certainly. Yes.
    The Commission has kept PURPA in mind for years. It is one 
of the main statutes we administrate, and the technical 
conference was convened.
    After the presentations and submissions in the technical 
conference were reviewed by staff, further comments were 
solicited on a number of questions that were thought would be 
valuable to amplify the positions of the people who appeared 
and submitted the initial round of comments.
    Those were received, I believe in November of 2017 or 
thereabouts, and the issue is still pending before the 
Commission today for consideration.
    Mr. Upton. Do you have some guess as to when they will come 
to a conclusion or make some finding to go forward?
    Mr. Danly. I do not know when that will happen. It is 
certainly one of the subjects that the Commission has 
actively--that it is actively pursuing.
    Mr. Upton. Mr. Winberg, we are all grateful that the U.S. 
is now the largest producer and exporter of LNG. A number of us 
on this panel have gone places overseas to look at the need and 
the requests for additional LNG exports to those countries.
    In the past, there has been a pretty big backlog of 
requests by companies to be able to export LNG. Can you tell us 
what that list may look like today in terms of requests for 
approvals by the Department of Energy?
    Mr. Winberg. Yes. Thank you, Chairman Upton.
    There are actually 54 applications that have been filed. 
There are 29 that have gone through final approval and there is 
1 that is conditionally approved. So out of the remaining 24, 
they are in various stages of the approval process. A lot of 
them are going through the NEPA process, which I am sure, as 
you know, can be a very lengthy process. So that is the status.
    I can tell you that in 2017 there were three that were 
approved, Golden Pass, I mentioned in my testimony, Delfin, and 
then Lake Charles. That was an amendment to an existing one. 
And then the Eagle Maxville LNG, which is the small-scale 
facility.
    Mr. Upton. And as I recall, each of these projects as they 
go forward, if they are approved, could mean as much as $100 
million in terms of infrastructure construction. Is that still 
about the right number, the dollar amount?
    Mr. Winberg. I think that is a probably a good number. And 
a fair amount of investment needed to get through the NEPA 
process, because you have to do a front-end engineering and 
design study, and that is quite expensive as well. So, yes.
    Mr. Upton. Well, I would just like to say that as these two 
bills begin to move forward through the process, we look 
forward to your engagement and commitment to work with us to 
help us make improvements to that legislation.
    Mr. Winberg. Happy to do so.
    Mr. Upton. With that, I will yield to the ranking member of 
the subcommittee, Mr. Rush.
    Mr. Rush. I want to thank you, Mr. Chairman.
    Mr. Danly, I really want you to clear up something for me. 
I am somewhat confused in terms of your opening statement.
    Are you here as a witness for FERC or are you a witness for 
the staff?
    Mr. Danly. I am sorry. I didn't understand the question. 
Could you say it again?
    Mr. Rush. All right. You said in your opening statement 
that you were not representing the commissioners, but you were 
representing the staff.
    Mr. Danly. Yes. That is correct.
    Mr. Rush. Explain that to me.
    Mr. Danly. I am the general counsel. I am not one of the 
commissioners. The Commission is a multimember independent 
agency. The Commission as an agency can only speak through its 
orders, which are issued by the votes of the commissioners. I 
am not only unable to predict what they are going to do at a 
specific time. I am actually restricted by our regulations from 
making predictions about what they are going to do and when.
    Mr. Rush. All right.
    Mr. Chairman, is that sufficient for this committee.
    Mr. Upton. Yes. Yes.
    We would like you to help us with the Senate. Are you able 
to do that?
    Mr. Danly. I am happy to try.
    Mr. Rush. All right. Thank you, Mr. Chairman.
    All right, Mr. Danly, in your testimony, you noted that 
H.R. 4605 would delete section 3(a) of the Natural Gas Act, 
which includes a public interest standard for judging whether 
or not to approve LNG terminals.
    What is the significance of omitting the public interest 
determination? And why do you suggest that this committee 
should consider reintroducing such a standard as this bill 
moves through the committee process?
    Mr. Danly. Thank you for the question.
    I offered that thought in my testimony for really only one 
purpose. Because it appeared to me that the purpose of the two 
bills was to make alterations to what was squarely within the 
DOE's jurisdiction, I thought that perhaps there was an 
unintended consequence of removing that public interest 
standard on the basis of which FERC is charged with overseeing 
the siting, construction, and operation of LNG terminals. And I 
wouldn't want the committee to unintentionally remove the 
public interest standard that applies to FERC's role in LNG 
terminal approvals as opposed to the DOE's.
    Mr. Rush. Mr. Winberg, under current law the DOE is 
responsible for conducting the public interest review under 
section 3(a) of the Natural Gas Act. So I would like to hear 
from you your thoughts on the significance of vetting this 
section.
    Mr. Winberg. Thank you for the question.
    The administration has not taken a position on either of 
these bills. Congress gave authority to the Department of 
Energy to perform the public interest review. We certainly look 
forward to working with this committee to review the bills in 
more detail and to understand the implications that they have. 
But ultimately----
    Mr. Rush. I certainly want to pick that up. My time is 
running out--I think it is pretty clear.
    I want to ask Mr. Danly and yourself, Mr. Winberg, do FERC 
or DOE have any concerns over hastily approving significant 
amounts of LNG for exports and how that might impact prices for 
domestic natural gas customers or manufacturing competitiveness 
or jobs here in the U.S.
    As well, we already just witnessed natural gas price spikes 
during the most recent cold snap. Are either of you concerned 
about unintended consequences if we start basically approving 
any and all requests for LNG exports willy-nilly or without a 
public interest review?
    Mr. Danly. I can give a very quick answer. FERC does not 
have anything to do with the public interest analysis for 
exports, and I don't have any opinions on the subject.
    Mr. Winberg. To date, DOE has approved just a little over 
21 BCF per day for LNG exports. Currently there are only about 
3 billion cubic feet per day being exported, so there is plenty 
of room within what has been authorized and how much we are 
exporting.
    And the studies that we have done, the most recent study 
suggests that we could have exports up to 28 billion cubic feet 
per day with no negative economic benefits or no detriment to 
the price of gas in the United States or our economy.
    To your point on the recent deep freeze, bomb cyclone, and 
the high prices, I would suggest to you that that is probably 
more a function of inadequate pipelines than it is the resource 
base. The price of natural gas in Dominion South and down in 
Texas went up slightly. The price in New England, of course, 
was up at about $150. And that spread was mostly due to 
inability to get gas up into the Northeast during that deep 
freeze.
    Mr. Rush. I yield back, Mr. Chairman.
    Mr. Upton. Thank you.
    Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Again, thanks to our witnesses for your testimony today.
    Mr. Danly, as you know, QF developers can skirt the intent 
of FERC's One-Mile Rule by breaking a large project into 
smaller projects to bypass the FERC's size limitation. H.R. 
4476 directs FERC to investigate a list of factors if somebody 
challenges a QF developer's application.
    My question is, can FERC implement these changes to the 
One-Mile Rule without H.R. 4476 becoming law?
    Mr. Danly. Yes. That is something that we can pass 
regulation--we can probably get a regulation for.
    Mr. Walden. Well, that would appear to be a pretty easy fix 
for FERC to make to its regulations. I don't know if you can 
answer this or not, but is that something FERC has on its mind 
to do?
    Mr. Danly. I do not know what the commissioners have on 
their mind. I know that----
    Mr. Walden. Do you know what they have on their agenda?
    Mr. Danly. I do know what they have on their agenda. And 
among other comments that were submitted, both orally and in 
writing, to our tech conference, suggestions along the lines of 
the provisions of H.R. 4476 were included. It is under active 
consideration among all the other comments.
    Mr. Walden. So you are limited on what you can predict?
    Mr. Danly. Yes.
    Mr. Walden. Got it.
    Mr. Winberg, in 2010 and 2012, the Obama administration 
Department of Energy commissioned studies on the macroeconomic 
impacts of LNG exports. The major findings in the LNG exports 
would benefit the entire economy, not just the oil and gas 
producers.
    Could you walk me through some of those findings and answer 
this question: Does the Department of Energy plan on updating 
the study since the last one appears to be from 2012?
    Mr. Winberg. At this point, we don't have immediate plans 
to update the study. As I mentioned, the last macroeconomic 
analysis that we did, we evaluated 28 billion cubic feet per 
day as a number that we could live underneath that umbrella. I 
also mentioned earlier, I believe, that currently we are only 
exporting 3 billion cubic feet per day.
    So there is a good deal of headroom between where we are 
and where we think we can go and still provide a lot of 
economic value to the country through construction jobs and 
operation and maintenance jobs on these LNG facilities.
    I do not have any specific numbers for you relative to the 
economic impact. I am happy to get those for you, though.
    Mr. Walden. Yes, I think that would be helpful. There is a 
big debate out there about the importance and effects of LNG 
exports and jobs and effect on greenhouse gas emissions.
    Can you talk at all about what happens when it leaves the 
country and kind of the fuel switching that may or may not take 
place, where it goes, LNG?
    Mr. Winberg. That is a big part of--a component of our 
public interest review, to understand where the LNG is going.
    Having come out of the natural gas business, and especially 
in seaborne trade, I can tell you it becomes very difficult to 
start chasing molecules that are in ships. It is just the way 
the seaborne trade operates. So it isn't easy to track those 
molecules necessarily.
    However, on LNG tankers, if they are going from port to 
port, we know where the fuel is being delivered. But at any 
point in time, some of those tankers can be diverted.
    Mr. Walden. OK.
    All right. I guess that is all I have.
    Mr. Chairman, I yield back.
    Mr. Upton. Mr. McNerney.
    Mr. McNerney. Well, I thank the Chair, and I thank the 
witnesses.
    Mr. Danly, what forms of generation is 4476 aimed at 
specifically?
    Mr. Danly. Do you mean which category of QF? That is the 
small power production facilities.
    Mr. McNerney. Well, I mean, are they aimed at wind or----
    Mr. Danly. The types of power production facilities that 
can qualify as a QF under that part of the regime are 
renewables, waste, facilities powered by waste, and----
    Mr. McNerney. What would be the most impacted? What form of 
generation would be the most impacted?
    Mr. Danly. I would think probably renewables would be, but 
I am not certain. I haven't thought about that specifically, 
but that seems to be logical.
    Mr. McNerney. Well, does H.R. 4606 benefit more than one 
corporation?
    Mr. Danly. I am sorry, 4606 or 4476?
    Mr. McNerney. 4606. I have changed the subject.
    Mr. Danly. Oh, OK. I am sorry. I apologize.
    Could you say that good question again, because that threw 
me?
    Mr. McNerney. Does that benefit more than one corporation?
    Mr. Danly. I don't know. I would presume--you know what? I 
do not know the answer to that. I can't tell you. I am sorry.
    Mr. McNerney. Do you have an answer, Mr. Winberg?
    Mr. Winberg. I think 4606, as I understand it, is intended 
to allow expedited permitting of small export and import 
facilities. As was noted earlier, there is only one right now, 
but that is not to say that there won't be more applications.
    Mr. McNerney. So there is only one right now. So, 
basically, we are considering a bill that is essentially an 
earmark, which are currently prohibited by House rules.
    Mr. Winberg, moving on, how do you determine whether 
granting the exports is in the public interest?
    Mr. Winberg. There are a number of factors that we 
evaluate. We look at economic impacts, international impacts, 
security, and natural gas supply, and environmental impacts, 
among others. But those are the four chief factors that we 
evaluate with the public interest regime.
    Mr. McNerney. So you examine the impact of LNG imports on 
domestic supply of natural gas and the international impacts of 
LNG exports. Is that right?
    Mr. Winberg. Yes, sir.
    Mr. McNerney. Do you think that the DOE process is valuable 
for ensuring that U.S. LNG exports are strengthening the energy 
sector of our allies and not benefiting those who seek to harm 
us?
    Mr. Winberg. Yes, sir, I do.
    Mr. McNerney. Well, good. I think we should be mindful of 
the effects of removing DOE from the LNG export approval 
process. Shouldn't we be careful before we green light exports, 
unlimited LNG exports, without consideration of our national 
security interests?
    Mr. Winberg. I think that is up to the Congress to decide. 
But whatever Congress decides, we will implement it.
    Mr. McNerney. OK. Thank you.
    Mr. Chairman, I yield back.
    Mr. Upton. Mr. Barton.
    Mr. Barton. Thank you, Mr. Chairman, and thank our 
witnesses on this panel.
    I have a comment since I didn't give an opening statement. 
I have got a question or two.
    Some of the comments I heard in the opening statements and 
some of the questions from the minority on the question period 
remind me of the debate that we had 3 or 4 years ago on 
exporting oil, crude oil.
    We were prohibited, we as a country, from exporting crude 
oil. And because of hydraulic fracturing and horizontal 
drilling in their shale formations, there became a fairly 
substantial price disparity between the domestic price of crude 
oil and the international price. The Arab oil cartel, or the 
OPEC oil cartel, artificially elevated the world price.
    And when we introduced my bill to repeal that, that Mr. 
Cramer was a big part of and Mr. Flores and a number of other 
people in this committee, Mr. Cuellar on the Democratic side, 
we heard these complaints about national security and things of 
this sort.
    Well, what happened? We repealed the crude oil ban. As I 
speak today, we are exporting about 2 million barrels of oil 
per day. The U.S. domestic producer is now in the driver's 
seat. Supply and demand set the price and the price on average 
is about half what it was from 3 years ago.
    It is coming up a little bit. It is a little bit between 
$55 and $60 a barrel, but it has been as low as $23. But it is 
darn sure not over $100 a barrel like it used to be.
    American free markets are determining the price of oil in 
the world, and we are creating trillions of economic benefit 
every year in the U.S. and overseas. So it has been an 
unmitigated success.
    Now, let's look at natural gas. We literally have more 
natural gas production capability in the United States than we 
know what to do with. We really don't know what the resource 
base is, but we know it is extremely large.
    By any normal economic assumption, we have enough natural 
gas, if we never found anymore, to handle the expected demand 
of the United States for the 100 to 200 years.
    So Mr. Johnson and I think Mr. Latta and a few others have 
introduced these two bills, 4605 and 4606, and they have the 
intention of doing for the natural gas markets what the crude 
oil export repeal ban did for oil markets. I don't think there 
is any downside to that at all.
    So I just want to put this in context. This country has 
been so blessed with natural resources, and then doubly blessed 
with an economic system based on freedom and free markets and 
free market capitalism, that we are literally the envy of the 
world. We are the dominant energy producer in the world, and we 
are going to be.
    And Mr. Johnson's bill is simply an acknowledgment of that 
and says let's use this economic resource that we have to 
benefit the rest of the world and create more economic benefit 
here in the United States.
    Now, I have one question to Mr. Winberg. The bill, 4605, as 
currently constructed, only deals with LNG, liquefied natural 
gas. I am sure that the Department of Energy and the FERC too 
are aware that there are other natural gas liquids that can be 
produced and can be exported.
    And I have asked Mr. Johnson to consider making a 
modification that his legislation would apply not only to pure 
liquefied natural gas, but to other natural gas liquids also.
    Mr. Winberg, do you believe that, if you support the bill, 
that we should make that modification so that we create a level 
playing field for all types of liquefied natural gas products?
    Mr. Winberg. The Department of Energy has responsibility 
for public interest review for liquids also, as well as LNG. I 
think it is not my place to suggest to Congress as to whether 
they ought to modify or expand the modification of 4605.
    Mr. Barton. Well, let me rephrase it. Do you believe the 
Department would officially oppose creating a level playing 
field for natural gas products to be exported?
    And the answer is, no, we do not oppose it.
    Mr. Winberg. Congressman Barton, what I know is that we 
have an abundance of oil and natural gas in this country. Your 
statement, I absolutely agree with. And I share the statement 
about the resource base as well, the reserves and the resource 
base in the United States. And our opportunity to become a 
continued long-term net exporter of natural gas, natural gas 
liquids and oil, is something that is in the interest of the 
United States.
    Mr. Barton. My time has expired.
    I appreciate the generosity of the chairman.
    Mr. Upton. Mr. Peters.
    Mr. Peters. Thank you, Mr. Chairman.
    Just thinking about Mr. Barton's characterization of the 
abundance of energy, which I think we all agree on, and he 
knows better than anyone, this isn't your issue, but the rush 
to drill for oil off the coast seems incredibly ill-timed given 
that abundance--I guess except in Florida, which the Federal 
Government seems to think is the only costal State with 
tourism. But that is not your issue.
    I guess the issue I wanted to ask you about, Mr. Winberg, 
is the nature of the public interest discussion, I think, 
clearly one concern when that law was passed was supply, and I 
think that that has been fairly well established. That is not 
so much a concern of ours if we have enough energy for the next 
two centuries.
    Mr. McNerney also talked about the national security 
interests that may come up in the movement of natural gas.
    But the third was, we mentioned, and I just want to explore 
a little bit, was the environmental interests.
    Can you describe for me what the nature of the analysis is 
around environmental concerns when you are talking about making 
this public interest determination?
    Mr. Winberg. Actually, the environmental assessment for LNG 
under the Natural Gas Act falls to FERC, so we are a supporting 
agency. So they do the vast majority of the NEPA review.
    So I apologize. I can't speak to detail.
    Mr. Peters. Right. I may be confused then.
    Mr. Danly, maybe you can answer this. Is this environmental 
analysis going to be eliminated as part of the proposed bill?
    Mr. Danly. No. The process by which the siting and 
construction operation is conducted is still going to have 
certain coordination between different agencies for approval. 
So, for example, for these marine gas terminals, we would have 
coordination with the Coast Guard, Department of 
Transportation.
    Mr. Peters. No, I understand that. I am talking now about 
the movement of natural gas. Because my understanding was that 
there was an analysis in Mr. Winberg's section on the 
environmental impacts associated with the import and export of 
natural gas. Is that not right? Am I reading that wrong? Maybe 
I misheard.
    Mr. Winberg. That is correct, but it is a joint effort 
between FERC and DOE.
    Mr. Peters. OK. So if the bill passes, and I want to 
understand what it would do, it would be to eliminate this 
public interest analysis associated with the movement of 
natural gas, whether you did it or FERC did it. Isn't that 
right?
    Mr. Winberg. Well, our read of 4605 is that it does not 
appear to affect FERC's requirements under the Natural Gas Act.
    Mr. Peters. The first requirements are associated with the 
siting of a facility, not with the movement of the natural gas. 
Is that correct?
    Mr. Danly. That is correct.
    Mr. Peters. Is there today an analysis of the environmental 
effects associated with the movement of natural gas, import or 
export, that would be eliminated by virtue of this bill?
    Mr. Winberg. Potentially, yes.
    Mr. Peters. I think so.
    So what I want to know is, what are the components of that 
analysis which we would be giving up? What are the things that 
you are looking at as an assessment of the environmental 
impacts of the import or export of natural gas?
    Mr. Winberg. I don't know the specific components of the 
environmental impacts portion. I certainly can get that over to 
your office.
    Mr. Peters. I would love to see that. I think we ought to 
know kind of what we are giving up. In particular, I am a 
little concerned--I think natural gas offers a lot of 
potential. I think we all understand it burns cleaner than 
coal. But in my other subcommittee we had Mr. Pruitt in, and he 
didn't seem to be as convinced about the need to control 
fugitive methane emissions as I think some of us are.
    And fugitive methane emissions can really surrender the 
benefit of natural gas from a climate perspective even though 
it burns cleaner than coal. If you are losing a lot of it to 
the atmosphere in terms of extraction or distribution, we are 
losing that benefit, and I think we would like to know that. I 
think that might be part of the analysis that we want to look 
at and associated with import and export.
    So I would like to have that information and appreciate 
your sending it over.
    Mr. Winberg. I would be happy to do so.
    Mr. Peters. Thank you, Mr. Chairman. I yield back.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. Great hearing.
    Thanks for being here.
    Would our clerk put on the--and members on the committee 
have seen this photo before numerous times, some may have not, 
import terminal. And I point to the front. I am not a Navy guy, 
so what is the front? The bow? The bow.
    And on the front of the blue terminal, which is really a 
ship, on the bow you see in English the word ``independence.'' 
Can anyone guess where that is located?
    It would give you an idea that it might be a North 
American-placed vessel or a vessel placed in England, an 
English-speaking country, but that is actually an import 
terminal in Lithuania. And I note that because it addresses 
this issue about the importance to national security of LNG 
imports and exports for those of us.
    So the public interest, I think, Mr. Winberg, as we talk 
about this vague term, and then you kind of define down, part 
of it is the public interest to our strength with our allies 
and friends. Lithuania and the Baltic countries, I spent a lot 
of time dealing with their interests, a former captive nation, 
a former Eastern European country, that has been part of a 
concerted extortion by the Russians using the tool of energy.
    This has allowed them to free themselves from the shackles 
of Russian energy extortion. And so it talks about the great 
ability.
    Now, they have been crying for U.S. LNG, and I think they 
finally first--this has been up for about 18 months now. And I 
think they have now recently signed a contract with Chevron 
for, quote/unquote, like you said, the molecules are molecules. 
The world market is the world market. That is what I keep 
trying to preach to them.
    But U.S. LNG, they want U.S. natural gas into their port. 
So that is going to happen. And it is a sign of, for them, 
freedom and democracy, strength, and alliance with the West. So 
that is why a lot of us are just so excited.
    You just look at the Eastern European, the former captive 
nations, just go from the Baltic Sea down to the Black Sea, and 
you see the turmoil, and you still see the stress that other 
countries have. Hence the discussion that we are having about 
smaller LNG terminals in this debate. It has been a good 
hearing in that.
    For this terminal, in that region of the world, there are 
smaller LNG terminals being debated and planned for up the 
Baltic Sea into Finland and those areas which will not have a 
need for a larger terminal or may have difficulty with ice 
where a smaller terminal can provide the access.
    Now, a lot of us had a chance to--well, not a lot of us, 
but some of us had a chance to go down to see Puerto Rico 
during--in a hurricane. And we are talking about, really, 
energy security for them. A smaller LNG terminal would be great 
for them. It would be part of the all-the-above energy strategy 
if you want to help Puerto Rico free themselves from kind of 
their--the capture they have, because they are an island nation 
and have a failed electric system.
    And there is a lot of this debate.
    So I wouldn't be so quick to rush judgment on the 
importance of incentivizing smaller LNG facilities, or at least 
freeing it up and giving some more access for expedited 
permitting, because there is, I believe, a pent-up demand from 
that worldwide. And I think now with the current hurricanes 
that have gone through, the signal has been sent that even our 
own citizens of our country were probably benefited by that.
    So, Mr. Winberg, in my 18 seconds left, just can you 
confirm that the public interest in national security is part 
of the public interest debate?
    Mr. Winberg. Yes, absolutely, I can confirm that. And our 
DOE proposed rule for small facilities is exactly targeted to a 
large degree at Caribbean nations, island nations, and on 
islands that truly do need LNG in small quantities.
    Mr. Shimkus. And I would just end by saying an LNG terminal 
is probably not $100 million. It is probably in the $2 billion 
to $3 billion or the $4 billion in construction and economic 
benefits.
    And I will I yield back.
    Mr. Upton. Mr. Tonko.
    Mr. Tonko. Thank you, Mr. Chair.
    And thank you to our witnesses for joining us today.
    Mr. Danly, am I correct that under PURPA, qualified 
facilities must have a capacity less than 80 megawatts?
    Mr. Danly. Not entirely. There is a nuance that I should 
point out, which is that cogeneration facilities, which are 
also qualifying facilities, can have larger than 80-megawatt 
capacities.
    Mr. Tonko. OK. And is that threshold listed, stated in 
PURPA statute?
    Mr. Danly. Yes. It is a statutory threshold of 80 
megawatts.
    Mr. Tonko. OK. Thank you.
    The current existing presumption is that qualified 
facilities with a net capacity above 20 megawatts have 
nondiscriminatory access to interconnection services and 
markets. What types of barriers exist for small producers that 
may hinder their ability to get their market access?
    Mr. Danly. The presumption that that threshold is based on 
is that the much, much smaller qualifying facilities are simply 
less sophisticated parties that don't have the resources and 
personnel or experience interacting with the market that larger 
energy companies that might be making the larger QFs would 
have.
    So it comes down to technical expertise, experience in 
having their power provided to markets in others contexts, 
things like that.
    Mr. Tonko. And transmission services or interconnection 
ability?
    Mr. Danly. Sure. Everything from the process of getting 
connected to actually ensuring that they get dispatched.
    Mr. Tonko. OK, thank you. And is this threshold for 
presumption of nondiscriminatory access in the PURPA statute or 
was it established by FERC?
    Mr. Danly. FERC established the 20-megawatt limit.
    Mr. Tonko. Was that after the EPA Act of 2005?
    Mr. Danly. Yes, that is correct. Yes.
    Mr. Tonko. So in 2006, FERC conducted an extensive 
proceeding and established a presumption that all facilities 
larger than 20 megawatts have nondiscriminatory access to 
market. What was the reason behind the 20-megawatt threshold 12 
years ago?
    Mr. Danly. In part, the 20-megawatt number is used in other 
parts of FERC's regulations. For example, it is the dividing 
line between the large interconnection and small 
interconnection agreements that we have in other contexts. For 
creating a rebuttable presumption, a line has to be drawn 
somewhere, and it accorded with other parts of FERC's 
regulatory regime.
    Mr. Tonko. And what is your understanding of the 
significance--section 3, let me first state, section 3 of H.R. 
4476 would lower that threshold to 2.5 megawatts.
    Mr. Danly. Yes.
    Mr. Tonko. So what is your understanding of the 
significance of that threshold?
    Mr. Danly. Of the 2.5-megawatt threshold?
    Mr. Tonko. Yes.
    Mr. Danly. That presumably this would be enacted, because 
the judgment of the subcommittee in the House is that the times 
have changed such that even smaller qualified facilities have 
sufficient sophistication to get access to the markets on a 
nondiscriminatory basis. I assume that that would be the intent 
of the bill.
    Mr. Tonko. I have heard concerns from a number of 
industrial energy users. Apparently, some industrial qualified 
facilities are certified as small power producers. Can you 
explain how or why this happens?
    Mr. Danly. Do you mean as opposed to being cogeneration 
facilities?
    Mr. Tonko. Right.
    Mr. Danly. I am not sure about the specific facts of the 
case. Do you have any more information about that?
    Mr. Tonko. Not offhand. But I am just wondering if you have 
any sense of understanding the significance for that threshold.
    Mr. Danly. I would imagine that in the ordinary course of 
business, because cogenerators are not limited to 80 megawatts, 
they would typically choose to be designated as a cogenerator. 
So nothing springs to mind immediately as to why they would 
make that decision.
    Mr. Tonko. Well, to clarify, not all industrial qualified 
facilities would be exempt from this legislation.
    Mr. Danly. No.
    Mr. Tonko. OK. Thank you, Mr. Danly.
    Well, Mr. Winberg, you had earlier explained the factors of 
DOE using factors to determine whether an LNG export project is 
in the publicinterest. And, obviously, our Nation's energy use 
and needs change over time.
    So I, for one, believe that this is a feature of the system 
that these projects are evaluated and that someone is assessing 
the consequences for American consumers and manufacturers as 
well as our energy and national security.
    So I think that is important to bear in mind as we go 
forward with some of the bills that are introduced and the 
changes that would be produced.
    And with that, I yield back, Mr. Chair.
    Mr. Upton. Mr. Latta.
    Mr. Latta. Well, thanks for being here.
    And thank you very much, Mr. Chairman.
    And if I could follow up a little bit where my friend from 
Illinois was with his discussion on the LNG exports going into 
the Baltic nations.
    Mr. Winberg, DOE has recently issued a proposed rule for 
small-scale LNG exports. Small-scale LNG projects could serve 
markets in Latin America and the Caribbean, but these job-
creating projects are bogged down with a lot of unnecessary red 
tape.
    Where do you see the greatest potential for small-scale LNG 
projects are right now for U.S. producers?
    Mr. Winberg. As we talked about earlier, I think primarily 
the Caribbean, Central America, and South America, possibly 
some European countries as well. But for those small loads on 
seaboard trade, distance becomes an issue if you have got----
    Mr. Latta. Right. And besides, when we are talking about 
Lithuania and Latvia and Estonia, when you are talking about 
other European countries, who would you have in mind on that? 
Because I know that some of us were over to see some of the LNG 
ports out around in the Iberian Peninsula. Where else would you 
see?
    Mr. Winberg. DOE doesn't take a position on where LNG ought 
to be traded. We have free trade agreement countries and 
nonfree trade agreement countries.
    So as we get in the applications, we review them, based on 
whether it is FTA or non-FTA, but we don't take a position on 
where LNG should be traded.
    Mr. Latta. OK. And under the H.R. 4606, how would this 
improve the process for permitting these small-scale 
facilities?
    Mr. Winberg. Our read of 4606 is that any small export or 
import would be granted without modification or delay. So it 
would be, in effect, the same procedure that we would use with 
FTA countries.
    Mr. Latta. Let me follow up. There was a little bit of 
discussion when we were talking about Puerto Rico. As we all 
know, that Puerto Rico's grid was devastated by Hurricane 
Maria, and here we are more than 100 days out and power 
restoration is still not completed.
    What role could a small-scale LNG play in Puerto Rico's 
grid modernization?
    Mr. Winberg. I think the role that LNG would play would not 
be so much in the grid modernization, but perhaps in the 
electricity production modernization, which arguably is a part 
of it. They burn a significant amount of oil. Also, there are 
opportunities for LNG to be brought into Puerto Rico to 
displace oil, lower-emission, higher-efficiency units. So there 
are some significant advantages.
    Mr. Latta. Thank you very much.
    Mr. Chairman, I yield back.
    Mr. Upton. Mr. Loebsack.
    Mr. Loebsack. Thank you, Mr. Chair. Great discussion today, 
as always. I always learn a lot in this committee, and we have 
great witnesses and great questions from my fellow Members.
    Once again, I have to brag about Iowa and wind power.
    Mr. Upton. Time has expired.
    Mr. Loebsack. Too bad.
    Look, Iowa is a success story when it comes to wind energy. 
Texas is as well. Texas produces more wind energy than Iowa, 
but----
    Mr. Barton. Give him more time, Mr. Chairman.
    Mr. Loebsack. For the size of our State, we are doing 
great. And the fact of the matter is over a third of our 
electricity in Iowa comes from wind, and it has just been a 
great story. It is good-paying jobs, plays a critical role in 
our economy. In 2016, Iowa produced about 20 million megawatts 
of wind energy, and by 2020, I think we are going to get to 40 
percent of our electricity is going to come from wind.
    So, obviously, when we move forward on PURPA, I think it is 
really, really important that we ensure that wind energy is 
deployed in the most cost-effective manner for my constituents, 
and also ensure that the Federal Government continues to play a 
role in promoting renewable energy. I think that is absolutely 
critical going forward and I think we can get some good 
bipartisan agreement on that.
    I really just have a question for Mr. Danly. There are 
concerns, of course, about this, qualified facility developers 
who have been developing some large wind farms, and they 
intentionally disaggregate and place portions of the project 
more than a mile apart to ensure that it doesn't exceed the 
PURPA megawatt threshold.
    How will this legislation, Mr. Danly, going forward, ensure 
that qualified projects are not subdivided to take advantage of 
higher PURPA prices?
    Mr. Danly. The intent of the legislation is to allow the 
presumption of that One-Mile Rule, which is the bright line 
rule currently established by FERC regulation. That at the 
moment is an absolute rule.
    It would convert that to a rebuttable presumption. And it 
can be rebutted by a series of statutory listed factors: 
whether they share common financing, if the land comes from the 
same purchase, if they share an interconnection, if they use 
the same resources, have the same people on it. That would be 
the list of the various factors.
    And if the presumption is rebutted, then having crossed 
that 80-megawatt threshold, they would not qualify for the 
other benefits that come with being a qualified facility, most 
importantly the mandatory purchase obligation.
    Mr. Loebsack. So that is how you see it. It is implemented 
in that sense, in what FERC will do to implement this.
    Mr. Danly. Say that again, please.
    Mr. Loebsack. So that is how you see the implementation 
going forward.
    Mr. Danly. FERC will implement it by, when asked, 
presumably conducting a review on the fact-based statutory 
factors.
    Right now, qualifying facilities are certified by one of 
two ways, primarily through self-certification or by having a 
FERC review process. So it may have an impact on that second of 
the two ways of being certified, which is really a minority of 
QFs get certified that way.
    And then for the others, presumably people who have an 
interest that is adverse to that determination or that self-
certification would bring a petition for FERC to review it. 
That is my presumption--I am not sure, of course--based on what 
the bill currently reads.
    Mr. Loebsack. Because it is a big issue, there is no 
question about that, and I am sure not just in Iowa.
    In your opinion, also, does it make sense to allow States 
to require QFs to participate in a competitive solicitation 
process to ensure that renewable energy is deployed in the most 
cost-effective manner?
    Mr. Danly. To the extent that the subcommittee and Congress 
do not want to advance PURPA's goals under the current 
mechanisms that PURPA has, then having a competitive process is 
another viable alternative.
    Mr. Loebsack. OK. Thank you.
    Thank you. I yield back, Mr. Chair.
    Mr. Upton. Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chair. I appreciate it.
    And thank you, gentlemen, for joining us today.
    Mr. Winberg, LNG exports and PURPA reforms are two issues 
very, very worthy of our committee's consideration, especially 
as it relates to bringing our energy policy into the 21st 
century.
    I am encouraged by this administration's effort to find 
sensible ways to unleash America's energy. Secretary Perry and 
the DOE have carried out that approach through their continued 
approval of LNG export permits and through the agency's work on 
small-scale LNG exports.
    But DOE can only do so much, as the current law pertaining 
to LNG exports was written at a time when our energy landscape 
was very different than it is today. The bills we are 
discussing today reflect the realities of our energy abundance, 
with over 2 trillion cubic feet of recoverable natural gas 
beneath our feet.
    Congress, and this committee in particular, have done a lot 
of work to advance bipartisan bills that encourage LNG exports. 
Last Congress, LNG export bills advanced not only in the House, 
but through the Senate as well, always with bipartisan support.
    So I think I have heard you say it before this morning, Mr. 
Winberg, but because these are my bills that we are talking 
about today I will sleep better if I hear you say it again. 
Will you help continue that work by working with the committee 
and me on these bipartisan bills that we are discussing to 
advance LNG exports?
    Mr. Winberg. Yes, absolutely, we would be delighted to 
help.
    Mr. Johnson. OK, good. Do you know if the DOE has plans to 
further its work on expediting and reforming LNG export, the 
process, the permitting process?
    Mr. Winberg. We do through our latest notice of proposed 
rule, which we came out with on September 1 of last year, and 
that specifically addresses the small-scale exports.
    And so we have received comments on that. It is not 
finalized. It hasn't been published in the Federal Register. 
But we are reviewing the comments and we plan to publish 
shortly. It is fairly closely in line with 4606.
    Mr. Johnson. OK. All right.
    My colleague Mr. Shimkus touched on this a little bit. You 
know, for too long we have seen countries like Russia use 
energy as a weapon. They have a stranglehold on Europe's energy 
supply. But with our LNG exports, that has already started to 
change.
    How, in your opinion, have U.S. exports of natural gas 
helped our allies and strengthened our hand diplomatically on 
the global stage?
    Mr. Winberg. I think the access or the production of U.S. 
fossil energy resources, whether coal, oil, or natural gas, 
have had a profoundly positive impact with our allies in 
helping them to ensure energy security and, therefore, security 
in general, much as it has here in the United States.
    Mr. Johnson. Well, Russia gets about--and experts differ on 
the exact number--but somewhere on the order of about 50 
percent of their revenue comes from the sale of oil and gas. 
About 80 percent of that resource runs under pipelines that go 
across the Ukraine. Seventy percent, I have heard, of their oil 
and gas sales are to our friends and allies in the region. And 
they have been known to turn the switch off when things weren't 
going their way in the past.
    I believe that this gives the administration, especially in 
light of the events going on in the world and the temperature 
of our relationship with the Russians, in particular, today, a 
new and different kind of leverage than we have had in the 
past. Would you agree with that?
    Mr. Winberg. Absolutely.
    Mr. Johnson. OK. All right.
    Mr. Chairman, I yield back.
    Mr. Upton. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman. Good hearing, I 
agree.
    Mr. Danly, you indicated that or seemed to indicate that 
very few self-certifying applications come through the system. 
And I have got a pretty extensive list of folks that do self-
certify in my State. We got over 2,000 megawatts here in just a 
little over a year and a half. Could you comment on that?
    Mr. Danly. I think I may have been misunderstood. We get 
about 2,000, roughly 2,000 self-certification requests a year, 
and just a handful of the FERC certifications in which the 
agency does the certification on behalf of the entity.
    Mr. Schrader. OK. Because there clearly is a ton of it 
going on.
    And we sent you all a letter, many members of the 
committee, including myself, back in June, talking about the 
gaming of the system. I have got a couple of great examples 
here where Fresh Air Energy in Jefferson County, Oregon, has 
three different applications that were approved for 79.66 
megawatts, just under that 80. And then again in Klamath 
County, again, Fresh Air Energy had five successful sitings for 
80 megawatts.
    So, clearly, we need to be doing something with the system 
to prevent that gaming.
    From your technical review hearing, what is the current 
state of play from the Commission with regard to solving some 
of these problems and dealing with that one by one?
    Mr. Danly. So the Commission was in receipt of the oral 
presentations at the technical conference and the 
postconference submissions, and it is currently under review 
before the Commission.
    Mr. Schrader. OK. In your testimony, you comment about the 
rebuttable presumption, and you have elaborated here about the 
conditions that might be used to deal with some of these 
instances. But you also talk about resources.
    Without having that clear bright line, what sort of 
resources is the Commission going to need to be able to 
adequately get through the application process, as you now 
have?
    Mr. Danly. It is difficult to predict the number of people 
that might challenge a self-certification. If challenges come 
up, then it is going to require a fact-intensive review in some 
mechanism. I can't imagine what the mechanism would be yet; we 
haven't dealt with it.
    But there would have to be some mechanism to review the 
facts that are under the statutory factors. And it would 
require a significant amount of personnel time if we find 
ourselves facing----
    Mr. Schrader. You would need more resources than you 
currently have?
    Mr. Danly. I am not sure that is true. I just know that it 
is going to require us to devote time and manpower to a subject 
that we have never had to deal with before.
    Mr. Schrader. OK. So either you have a lot of extra 
employees right now or you can easily--or you need more people 
to deal with the process.
    Mr. Danly. Presumably. But depending upon the shape of the 
final bills that are passed, we could find ourselves having 
less work to do on other subjects.
    Mr. Schrader. OK. OK. Very good. Very good.
    Talk a little bit about the State-by-State determinations 
rather than having FERC do it. How would that, to your point a 
moment ago, affect your workload?
    Mr. Danly. Do you mean the State-by-State determinations as 
to whether there is need or a competitive solicitation process? 
It would not directly have much of an impact on FERC staff 
time. That would really have more to do with whether or not the 
QFs are even able to participate.
    So that really is an issue of whether or not the 
subcommittee wants to abandon this national policy. It is not a 
resources question for us.
    Mr. Schrader. How would that affect the industries 
themselves or the partners, our energy partners?
    Mr. Danly. Well, depending upon what decision each State 
makes, the effect could be that there are less incentives for 
qualifying facilities of different types to put forth the 
effort and the risk of trying to develop a generation facility. 
It could be that that has a stultifying effect. But in other 
areas where there are competitive markets, it may not.
    It is difficult to predict in the laboratory of democracy 
the different possible outcomes. This is one of the great 
problems with PURPA, is how complicated it is with all the 
different State regimes for avoided cost calculations and the 
like.
    Mr. Schrader. Shifting gears a little bit, we haven't 
talked a whole lot about the industrial qualified facilities. 
What degree of problems with the gaming issue are presented by 
these facilities compared to the others?
    Mr. Danly. When you say the industrial ones, I took----
    Mr. Schrader. Cogeneration.
    Mr. Danly. OK, cogeneration. Right.
    Cogenerators are in a really different category from the 
small power producers. They are very often in industrial 
facilities that are, in fact, themselves net consumers of 
electricity. They are either using the heat that is produced 
for industrial processes to generate electricity after the 
process is over beforehand, and this is simply a way to make 
money and be more efficient in the use of the generation.
    Mr. Schrader. They are not part of the problem?
    Mr. Danly. When it comes to gaming?
    Mr. Schrader. Yes.
    Mr. Danly. No.
    Mr. Schrader. I yield back. Thank you.
    Mr. Upton. Mr. McKinley.
    Mr. McKinley. Thank you, Mr. Chairman.
    I applaud Bill Johnson's legislation on LNG. I think this 
is something we have needed for some time, and he has addressed 
a problem that is starting to emerge or issue of how we might 
be able to help out with that.
    Our districts are right opposite each other. The only thing 
that separates his congressional district from mine is the Ohio 
River, and that is just a line on the map.
    So we are in the middle of the Marcellus and the Utica 
Shale gasses formations, and we are seeing this resurgence as 
this country is pivoting away from fossil fuels or coal in a 
way that we have an opportunity to take an advantage of the 
Marcellus and Utica Shale gasses that are there.
    It has had a profound effect on our valley, improving the 
morale and the hope that we are going to see in this country 
some positive things happen with that.
    We are now at a point between our two districts that with 
the Marcellus and Utica, we are producing 50 percent of all the 
shale gas in this country, 50 percent. That is incredible, the 
opportunities then that come with that.
    So, again, I thank Congressman Johnson for that.
    From what I can gather, talking to EIA, is that this shale 
gas, the potential that we have from these two formations, 
could provide all the gas for this country for 58 years. Fifty-
eight years.
    That is only with 50 percent. Remember, the rest of the 
country, down in Texas and elsewhere, they have got shale gas 
formations there coming. But just from the Marcellus and the 
Utica, we could provide all the gas in America for 58 years.
    So it really is opening up a new opportunity for us, and 
what we have to do is get this bill passed and continue to do 
this.
    Some of the critics say that if we export our LNG, it is 
going to raise prices. That has not been proven to be true. It 
is not accurate at all. It is just unimaginable opportunities 
that we have if we can pursue this.
    And what the impact is for my district in West Virginia, 
there is a study out done by the Fraser Institute that ranks 
around the world about 97 different jurisdictions, States, 
countries, about where would you put your investment in fossil 
fuels? Where would you invest in energy?
    Two years ago, West Virginia ranked 22nd in the world where 
they should invest. Last year we ranked fifth, fifth best place 
in the world to invest, because of what this formation, what it 
is going, the opportunity we have in creating that.
    So we are seeing as a result of that, we are seeing now 
that we have the second-fastest growing GDP in America, in West 
Virginia. We are seeing Cheniere over in China investing $84 
billion in West Virginia, is trying to explore and use this gas 
to try to help create jobs for people with this.
    So I see just a series of things, but yet we hear pushback 
from some people: We don't want to do this. We want to leave 
that gas in the ground.
    So I am saying, what I don't understand--I will start with 
you, Steve--excuse me, Mr. Winberg, you and I have known each 
other for too many years--why would people want to stop 
something, this momentum that is recreating wealth, 
opportunity, and an economy and strong families and keeping 
them? Why would people stop that?
    Mr. Winberg. Sir, I really can't answer that question on 
why people would want to stop it. But to your point in the 
Marcellus and Utica area, there are numerous opportunities. 
There is an LNG opportunity.
    We need more pipeline capacity to remove that rich resource 
that you have in your State and in surrounding States and move 
it into LNG terminals, for example, at Cove Point, to take 
advantage of the liquids in the Marcellus Shale for ethane 
production, which then goes into chemical production, the 
opportunity to move that gas up into the Northeast, where it 
was so badly needed just a couple of weeks ago.
    So numerous opportunities there. You can articulate them 
much better than I can.
    Mr. McKinley. I think the ethane storage, you and I have 
had meetings about that, instead of sending it elsewhere, if we 
will be able to use that here in our area, that is positive.
    But I also want to emphasize to you again, Mr. Winberg, I 
am not trying to go away from coal. I just think we can have a 
dual track in energy dominance.
    And this is an opportunity. We just have to continue to 
explore it and put more money into research and how we might be 
able to have clean coal technology as well as we are developing 
this petrochemical industry in other than the Gulf Coast.
    Not that I don't support my friends in the Gulf Coast. I 
think as a safety valve, we should have someplace else as well.
    So, with that, I yield back my time.
    Mr. Upton. Mr. Green.
    Mr. Green. I do represent the Gulf Coast.
    I want to thank the chair and the ranking member for this 
hearing today.
    Both PURPA and LNG exports are issues that in our area I 
care deeply about. And to follow my friend from West Virginia, 
when folks at my meetings come up and say, we want to leave it 
in the ground, I say, that is not a Texas value, if we can sell 
it to someone or build a plant.
    And I have to admit on the export of LNG, I was concerned, 
because the upper Texas coast--well, literally, most of the 
Texas coast, from Corpus Christi over in Louisiana, is huge 
petrochemical complexes. And with the reasonable-priced LNG, we 
have seen huge numbers of expansion and new chemical plants, 
just because of the availability of the natural gas and the 
different molecules that you get from there.
    I was concerned that we may price ourselves out of the 
market, but I haven't seen that. We have Cheniere there in 
Louisiana. I mean, we have a number of ports along Texas that 
have permits in the process, and they are not small ones. They 
are very large. And, in fact, I had a joke a few years ago that 
if you had a 5-foot ditch that ran from the Gulf of Mexico into 
it Texas land, they wanted an export permit for LNG. And if you 
do the small ones, you may end up making that truthful.
    But one of my concerns is I have always been a very big 
supporter of NEPA, but smaller plants may not have that issue. 
But I am concerned about the exemption of that for these 
smaller plants, because it wouldn't be unusual for maybe a 
company to build five export facilities that was just below the 
level so they could get past the NEPA review. So I think our 
committee needs to look at that.
    Mr. Winberg, the small volumes, like I said, is important. 
Under the DOE proposed rulemaking, how many companies would 
qualify for the streamlined process for quick expedition? Do 
you have any idea how many companies that would qualify for the 
streamlined process?
    Mr. Winberg. Yes, sir. If you are asking about the current 
applications that we have----
    Mr. Green. Either the current applications or ones that 
have been built.
    Mr. Winberg. At present, there is only one that would 
qualify, and that is the Eagle Maxville LNG small-scale 
facility.
    I do not know how many other developers or potential LNG 
exporters might be considering small facilities. We have heard 
there are a couple people out there that are interested in 
this, but we haven't gotten any applications, and so I can't 
comment on it specifically.
    Mr. Green. OK. Do you have an estimate on what the daily 
volumes increase would be under such a rule, if it became 
final?
    Mr. Winberg. I don't have an estimate, but the limit that 
we would have for the small-scale facilities would be 0.14 
billion cubic feet per day for a facility. But, again, not 
having an estimate on how many might try and avail themselves 
of this small-scale opportunity, I can't give you a total 
number.
    Mr. Green. DOE in its proposed rulemaking required a small-
volume exporter to meet categorical exclusions critical under 
NEPA to be approved.
    Can you tell me why the DOE felt it was important to 
include NEPA protections under this rule?
    Mr. Winberg. Yes, I can. It is because the small-scale 
facilities, based on what we have seen, the primary markets 
would be the Caribbean, Central America, and South America. And 
without a small rule exclusion or a small facility exclusion, 
the cost to build a large facility for that many potential end 
use points we believe would be prohibitively expensive.
    Mr. Green. OK. One of the concerns I have is when FERC does 
it, does FERC also require a NEPA review?
    Mr. Danly. For the siting construction, yes.
    Mr. Green. OK. So is there any duplication between what DOE 
does and what FERC does for the NEPA review? Is there any----
    Mr. Danly. In fact, in our review--you are a cooperating 
agency, correct?
    Mr. Winberg. Right.
    Mr. Danly. So, yes, there would be no overlap.
    Mr. Green. So there is no dual regulations or oversight?
    Mr. Danly. The statutory regime neatly divides the 
responsibility into two different buckets: FERC for siting, 
construction, operation, and DOE for export.
    Mr. Green. I am out of time, but one of my concerns is that 
the bill today would take away what the DOE has done on the 
rule, and I have a concern on that.
    Mr. Chairman, obviously, I have a lot of questions, and I 
will submit them.
    Mr. Upton. Great. Thank you.
    Mr. Flores.
    Mr. Flores. Thank you, Mr. Chairman.
    I appreciate the panel for joining us today on these 
important pieces of legislation.
    Mr. Danly, I have two quick questions for you. The backdrop 
for the first question is this. Under the current framework for 
the Natural Gas Act, FERC has delegated authority over LNG 
export facilities. And in your testimony, you have stated that 
H.R. 4605 primarily concerns the authorities of the DOE. The 
DOE witness seems to agree with that, because he stated the 
bill makes no modification to FERC's jurisdiction.
    And so we need to make sure we get this on the record 
clearly, and so the question is this. Does H.R. 4605 affect or 
expand FERC's jurisdiction in any way?
    Mr. Danly. Upon my reading of it, no. But if you have a 
specific idea, I am happy to talk more about it.
    Mr. Flores. No. I mean, I read it the same way you do. And 
so we just need to get that into the record so that some of the 
other comments that have been made here today are rebutted by 
the testimony of our expert witnesses.
    The next question is, as you are probably aware, there are 
new technologies to transport natural gas and natural gas 
liquids other than in an LNG form. And so, because of that, 
they can be transported either in vehicles or in vessels that 
are not LNG vessels, and also in ways other than pipelines. And 
so I understand that DOE has determined that imports and 
exports of these mixtures should be regulated under the Natural 
Gas Act.
    Since the export facilities for these different types of 
products are not LNG terminals and they are not connected to 
interstate gas pipelines, FERC doesn't appear to have any 
apparent authority over siting and construction. So if H.R. 
4606 were to become law, would FERC take that same position, 
that they do not have jurisdiction over the export of these 
products since it is not LNG and not connected to pipeline?
    Mr. Danly. I cannot predict what the Commission will 
determine as far as what its jurisdiction is, but the way I 
read it here, it would remain the same. There is no 
jurisdiction.
    Mr. Flores. OK. I think you have read it correctly.
    Thank you. I yield back the balance of my time.
    Mr. Upton. The gentleman yields back.
    I would note that votes have started on the House floor. We 
are going to do Mr. Kennedy, and then we are going to take a 
recess until we come back after votes.
    So Mr. Kennedy is recognized.
    Mr. Kennedy. I promise I will be brief, with the eyes of 
everybody in this room now upon me now to be so.
    I want to thank the witnesses for coming. I want to thank 
the chairman and ranking member for an important hearing, very 
helpful on a number of issues.
    Mr. Danly, it is a pleasure to meet you. We have not had a 
chance to meet personally yet, but I appreciate your presence 
here. As you might be aware, our office has worked very closely 
with a number of folks at FERC, including your predecessor, on 
a couple pieces of legislation. I know you are not here to talk 
about one of them today, but I did want to try to clarify a 
couple of things.
    You testified over in the Senate back in October about one 
of those bills, the Fair RATES Act, that has passed unanimously 
by this body already this Congress and passed unanimously out 
of the House of Representatives, again, last Congress as well.
    We worked very closely with FERC in the drafting of that 
legislation. Your predecessor had testified as well, largely in 
support of that. I gather from your testimony on the Senate 
side that you have some reservations there.
    Candidly, looking at some of the testimony, I am not 
entirely certain I understand what those reservations are. I 
don't want to put you on the spot, given that you are not here 
today to speak about that.
    Mr. Danly. I am happy to answer questions about it.
    Mr. Kennedy. So the point of the legislation is to try to 
make sure that consumers always have at least some knowledge as 
to and a voice in some of the decisions that are being done by 
FERC.
    What happened, the legislation itself was in response to 
essentially a forward capacity auction, FCA 8, several years 
ago, where forward capacity prices, because of a shortfall, 
went from a billion dollars before to $3 billion to then $4 
billion to $3 billion, so $10 billion over the course of 3 
years, and in that specific auction deadlocked two-two.
    Now, what was interesting also about that deadlock is a 
Democrat and Republican appointee was on one side and a 
Democrat and Republican appointee was on the other. Because 
there was a two-two tie, because of a gap, in my view, of the 
way that the statute was drawn, a two-two tie becomes, in 
effect, an approval by operation of law.
    Mr. Danly. That is correct.
    Mr. Kennedy. And there is no way for consumers to then 
appeal it. What this legislation seeks to do is to say a two-
two tie should enter as a decision so that that can be 
appealed.
    The mission of FERC--I believe I have it right--or part of 
the mission is to, quote, assist consumers in obtaining 
reliable, efficient, sustainable energy services at a 
reasonable cost through appropriate regulatory market means.
    Obviously, putting them in a circumstance where you have 
this tripling and then quadrupling of these capacity rates 
without any measure then to get a rehearing or justification 
for that, particularly given the unique circumstances that 
surrounded Forward Capacity Auction No. 8, seemed ripe for a 
fix to that statute.
    Clearly, the House of Representatives agreed. It was a 
bipartisan bill. Again, it passed actually on the first day of 
the Trump administration.
    So I understand your reservations. I also am cognizant of 
the fact that I promised the chairman here I would be quick. 
All I am asking for is some engagement with you and your office 
to try to understand in a bit more detail what your concerns 
here are, as I believe that the bill was meant to address that 
concern.
    Mr. Danly. I would be delighted to work with you. Do you 
want me to express the reservations I did before?
    Mr. Kennedy. To keep my friendship with Mr. Upton, no.
    Mr. Upton. We budgeted 2 minutes. It has been 4 now.
    Mr. Kennedy. We will follow up.
    Mr. Upton. All right. Thank you very much.
    We are going to have to come back. I know Mr. Walberg has 
questions that he wants to ask. I think it will be pretty 
quick. We are told that we have three votes on the House floor, 
so we will do that and then we will come back.
    [Recess.]
    Mr. Olson [presiding]. The hearing will come back to order, 
and we will proceed as before with the Members asking questions 
from the witnesses. The next question will come from the 
gentleman from Michigan, Mr. Walberg, for 5 minutes.
    Mr. Walberg. Thank you, Mr. Chairman. I appreciate the 
opportunity to get well on my way to 10,000 steps.
    Mr. Danly, thank you for being here. And we appreciate the 
work of your staff in assisting us, getting us information as 
we have developed our legislation to this point. So I 
appreciate that.
    State utility commissions set avoided cost rates. They have 
the authority to do a number of things, appropriate length of 
PURPA contracts. It seems to me that they have significant 
authority in implementing PURPA.
    I noticed in your testimony you stated granting PURPA 
exemption findings to the States would create a State-by-State 
energy program. Essentially, I view this as providing State 
regulators with the tools to help each of them meet their 
State's electricity needs at the lowest cost to the ratepayers.
    Couldn't one argue that extending FERC's waiver authority 
is keeping in line with State implementation, coupled by strong 
Federal oversight?
    Mr. Danly. So, yes, you make a point here, which is that 
there is already some degree of balkanization in the way that 
PURPA is implemented, because the actual recovery under the 
mandatory purchase obligation is set at the rate that is 
established by the State utility commissions. There is no doubt 
about that.
    And this would be a further step in the direction of 
allowing the States to act independently of one another, based 
upon their own either political or policy goals. The only 
difference is if a QF is capable of being guaranteed a recovery 
of some amount that is based upon an avoided cost rate, that is 
a thing that is different in kind, I think not degree, from 
whether the rate is X or X plus 5 percent.
    Mr. Walberg. It would still allow strong Federal oversight 
if we move that direction still further?
    Mr. Danly. Yes. There would be Federal oversight of the 
utilities, as there already is, but there would be a different 
way that QFs would be functioning in the market in the States, 
based upon what the State legislature--rather, the regulatory 
commission wants.
    Mr. Walberg. Since PURPA was signed into law back in 1978, 
transmission access has become open to competitive generators, 
organized markets have been developed, and even bilateral 
markets. There is robust trading in those markets with 
independent generators.
    Given that the electricity sector has changed drastically, 
do you believe that the implementation of PURPA has fully kept 
pace?
    Mr. Danly. I agree with your point that there have been big 
changes, and, in fact, Congress recognized this in 2005, with 
the passage of EPACT 2005, where it allowed the States to get 
out from under--or, rather, the utilities to get out from under 
the mandatory purchase obligation in the areas with organized 
markets.
    I do not wish to opine on whether or not PURPA has kept 
pace. There are definitely changes going on in the market, and 
it is properly the role of Congress to decide how to respond to 
those changes.
    Mr. Walberg. OK. Well, let me then add to that or put it 
this way. Do you believe the current law represents the 
maturity of competitive markets, State renewable energy 
portfolio standards, investment tax credits, production tax 
credits, zero emission credits, reduced cost in renewables, and 
greater access to markets for smaller power producers?
    Mr. Danly. OK.
    Mr. Walberg. Put it all in there.
    Mr. Danly. Yes, yes.
    So the answer is that there are a huge number of different 
policy vehicles available to the State governments and the 
Federal Government to achieve policy goals, and PURPA is but 
one of those tools that is used to achieve a goal.
    Some people say that it is abusively used and creates 
market distortions, and others say that it is a necessary 
requirement in order to promote this congressional mandate to 
encourage QFs being developed. That, as I say, is a question 
for your consideration.
    Mr. Walberg. I appreciate that. I won't ask the followup 
questions then on that basis.
    I am a believer in an all-of-the-above energy approach. I 
believe a diversified electricity portfolio is crucial.
    With that being said, I fear PURPA is inhibiting my 
constituents from benefiting from the lowest-cost source of 
renewable electricity.
    What FERC policies would need to be modified to ensure the 
best deal for customers in moving forward? Could I get--I would 
get a smile.
    Mr. Danly. I hate to say this, but I can't speak on behalf 
of the Commission or predict its actions. Right now, the 
Commission is reviewing the comments that came out of the tech 
conference, and we are actively working, as you are well aware, 
with members of the subcommittee here to talk about possible 
legislative reform.
    Mr. Walberg. Well, thank you. I appreciate it.
    My time has expired.
    Mr. Olson. The gentleman yields back.
    The Chair now calls upon himself for 5 minutes.
    First of all, thank you and welcome to all the witnesses.
    As many of my colleagues mentioned, U.S. shale has made 
America number one in the world for natural gas, and that fact 
has allowed America to make our world safer, more secure, with 
cleaner air and cleaner water.
    Mother Russia has used their natural gas dominance to force 
Eastern European nations to cower instead of seeking freedom. 
Our LNG exports have changed that forever.
    As Chairman Shimkus said about Lithuania, I want to point 
out what has happened in Poland. Poland was part of the Iron 
Curtain. The first shots in World War II happened in Poland. 
Russia came in to counteract Germany. They were in that curtain 
until 1989 and beyond.
    They are a member of NATO. They broke away from Russian 
dominance led by a worker from a shipyard, Lech Walesa. But 
they had an Achilles' heel: Mr. Putin still controlled their 
energy, their natural gas.
    This past summer, guess what happened? A large LNG tanker, 
American tanker from Cheniere, in Sabine Pass, docked in 
Poland. It docked in Gdansk, Mr. Walesa's hometown. That simple 
act said: Good-bye, Mr. Putin. Hello Uncle Sam. And that same 
story is happening in other nations we care about, like Japan, 
South Korea, and India.
    And I will be honest with you, too, this energy boom has 
been great for my home State of Texas.
    My first question is for you, Secretary Winberg. Can you 
talk about the administration's views on energy exports as a 
national security matter? Is there coordination between DOE, 
Department of State, Defense, USTR, Commerce, Ag, all the 
people involved in trade, are they working together to make 
sure this happens?
    Because natural gas is not just fuel and power. Also big 
for agriculture. Their crops, their stock, their fertilizers 
come from natural gas.
    And so are you guys looking with all those other guys to 
make sure we seize this opportunity? Any questions, any 
comments about that?
    Mr. Winberg. Yes, we are. And I agree with your assessment 
of the value that U.S. energy has brought to our friends and 
allies around the world. We are working with other agencies, 
other departments to continue that growth in U.S. energy 
dominance and our ability to export to, again, our friends and 
allies.
    Mr. Olson. So, again, just to confirm, you see this as an 
important part of our national security going forward, U.S. 
exports of oil and natural gas?
    Mr. Winberg. And coal.
    Mr. Olson. And coal, you betcha, you betcha.
    The next one is to you, Mr. Danly. As you know, Texans like 
to brag we are big oil and gas, number one in America for over 
half a century. That has not changed. But what has changed the 
last 10 years? Wind power. Texas is number one in America, by 
far and away, for wind power. And we are concerned about the 
One-Mile Rule with wind power. As you said, FERC determines 
that wind production is at the same site based on the One-Mile 
Rule.
    Can you talk about how FERC decided that standard and 
whether it has been reconsidered over the years? Because people 
are concerned about that back home, one-mile standard towards 
wind production.
    Mr. Danly. Certainly. So the one-mile standard was 
implemented by Federal Energy Regulatory Commission regulation 
and it is based upon a simple measurement of the distance from 
one of the facilities to another. There is nothing complicated 
about the specific site points of the location.
    It can become complicated when there are multiple 
generating facilities in propinquity with each other, but it is 
basically a fairly straightforward locational distance 
requirement.
    Wind and solar, which have larger footprints, are open to 
more difficult analysis, because you can say, at what point, at 
what part of the, let's say, the PV array do you measure the 1 
mile from or how far apart do the individual turbines have to 
be. And so that is a consideration in an interest in reforming 
the One-Mile Rule.
    Mr. Olson. OK. I am out of time. One final question. It is 
very important for people back home. Are you both happy the 
Houston Astros are now the World Series champions, yes or no?
    Mr. Winberg?
    Mr. Winberg. Coming from Pittsburgh, that is a very 
difficult question to answer.
    Mr. Danly. I am happy that you are happy.
    Mr. Olson. Well played, running for office.
    Again, we are done with the questions from Members. I want 
to thank all the panelists. I apologize for the votes. This 
panel is adjourned. We are going to recess for what, for a 
couple minutes, just to get the second panel set up. But thank 
you, thank you, thank you.
    [Recess.]
    Mr. Olson. Welcome to our second panel. And I apologize. 
Today, as you know, in DC is kind of a unique day, having some 
things happen on both sides of the Hill that are very 
important. And I just want to read you something from our whip: 
``Members are reminded to remain flexible, as additional votes 
may be possible.''
    So I just want to apologize before. We will try to get this 
done as quickly as possible. And I am so thankful you guys are 
here.
    And I will start out with the first questions and stick to 
the 5-minute rule. Oh, yes, opening statements. I apologize. No 
questions about the Houston Astros. We will just go from my 
left to my right.
    And, Mr. Kavulla, you are recognized.

  STATEMENTS OF TRAVIS KAVULLA, VICE CHAIRMAN, MONTANA PUBLIC 
   SERVICE COMMISSION; TIMOTHY J. SPARKS, VICE PRESIDENT OF 
 ELECTRIC GRID INTEGRATION, CONSUMERS ENERGY; KARL R. RABAGO, 
  EXECUTIVE DIRECTOR, PACE ENERGY AND CLIMATE CENTER; PAUL N. 
 CICIO, PRESIDENT, INDUSTRIAL ENERGY CONSUMERS OF AMERICA; AND 
CHARLIE RIEDL, EXECUTIVE DIRECTOR, CENTER FOR LIQUEFIED NATURAL 
                              GAS

                  STATEMENT OF TRAVIS KAVULLA

    Mr. Kavulla. Thank you, Vice Chairman. And Vice Chairman 
Olson, Ranking Member Rush, it is great to be back before you 
today and in front of all the members who are here of the 
Subcommittee on Energy. Thank you for the opportunity.
    My remarks today address only H.R. 4476, the PURPA 
Modernization Act of 2017.
    I am the vice chairman of the Montana Public Service 
Commission. Today, I am also here on behalf of the National 
Association of Regulatory Utility Commissioners, or NARUC.
    NARUC is a nonprofit organization founded in 1889, and our 
members are the public utility commissions in all 50 States, 
the District of Columbia, and U.S. territories. It is our 
members who are primarily responsible, as Congressman Walberg 
has already pointed out, for implementing PURPA.
    I would like to thank him for his efforts in working on 
this legislation as well as his staff. And on behalf of NARUC, 
I would like to express our support for it unreservedly.
    PURPA is nearly four decades old at today's point, and it 
reflects the reality of another era when renewables were 
scarce, demand was booming, and the country looked for ways to 
diversify its energy portfolio and shield itself from 
overreliance on foreign sources of supply.
    Today, the world has changed dramatically. The U.S. Energy 
Information Administration reports that nearly half of utility-
scale capacity installed in 2017 came from renewable resources.
    More than half of States, including my own, have their own 
renewable energy mandates, and even those which do not, such as 
Iowa, have shown substantial additions in renewable capacity, 
not because of PURPA, but because of the falling cost curve of 
renewable technologies, such as solar and wind.
    A revision of PURPA, in other words, does not have to be 
anti-renewables, and this bill we do not consider to be anti-
renewables.
    To the degree that PURPA was enacted at a time when 
renewable technologies were not the norm, that norm has changed 
profoundly.
    And there has been another significant transition too. 
Nearly all States today require power generation to be procured 
through competitive means. Even in States that do not have 
consumer choice or are restructured, monopoly utilities are 
nonetheless typically required to procure resources through 
competitive solicitations.
    In short, other events have transpired that have 
accomplished PURPA's twin goals of advancing QF technologies 
and introducing competition into the sector, rendering PURPA 
itself largely needless.
    PURPA mandates that power sales be at the utility's avoided 
cost, which on its face sounds unobjectionable. Conceptually, 
it means that consumers would pay no more or no less for PURPA 
resources than they would pay for non-PURPA alternatives.
    However, FERC has long held that PURPA requires that States 
forecast the utility's avoided cost into the future for the 
purpose of offering QFs a long-term contract at 
administratively determined rates. This type of administrative 
pricing essentially requires States to guess at future market 
prices, allowing QFs to lock in rates that often substantially 
overstate the actual avoided cost.
    This approach is fundamentally different when compared to 
procurements that use competitive mechanisms, like auctions or 
requests for proposals, to discover the least-cost resources.
    And, indeed, courts have recently determined that 
competitive programs that attempt to implement PURPA are at 
odds legally with the law. Even California, which has done 
probably more than any other State to implement pro-renewable 
policies, has found that its PURPA program compliance is not in 
compliance with the law, according to a recent court ruling.
    It is almost universally acknowledged that a competitive 
process is optimal, more optimal than administrative pricing, 
because generators there with a profit motive can vie against 
one another for the business of the Nation's consumers, and 
that this is a best practice, compared with prices set by a 
State commission through a trial-like proceeding where the 
cost-reducing aspect of competition is absent.
    Subsection 4B forthrightly acknowledges this and would 
allow competitive solicitations to substitute for 
administrative pricing regimes.
    In addition to the flaws underlying the so-called avoided 
cost pricing, PURPA's mandatory purchase obligation is a poor 
match to the relatively flat and sometimes even declining 
customer demand for electricity seen in many parts of the 
United States.
    In many parts of the country, new power plants of simply 
any kind may not be needed, a testament, in large part, to the 
increasing energy efficiency seen in the market, and yet 
unneeded power plants are in some places nevertheless being 
brought online, due to PURPA's mandatory purchase obligation.
    In sum, PURPA's flawed approach to administrative pricing 
and its mandatory purchase obligation is harming consumers. 
Ironically, it is even at odds with the values of competition 
and conservation that are at the heart of PURPA itself.
    Again, I would like to express NARUC's thanks to 
Congressman Walberg and the subcommittee members for 
considering this piece of legislation. Thank you.
    [The prepared statement of Mr. Kavulla follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Olson. Thank you, Mr. Kavulla.
    The Chair now calls upon Mr. Sparks, who is the vice 
president of Electric Grid Integration with CMS Energy. Five 
minutes, sir.

                 STATEMENT OF TIMOTHY J. SPARKS

    Mr. Sparks. Vice Chairman Olson, Ranking Member Rush, 
Representative Walberg, and distinguished members of the 
subcommittee, thank you for the opportunity to testify 
regarding H.R. 4476, the PURPA Modernization Act of 2017. My 
name is Tim Sparks, and I am vice president of Electric Grid 
Integration for Consumers Energy, referred to throughout this 
testimony as CE.
    CE is the principal subsidiary of CMS Energy and is 
Michigan's largest energy provider, serving natural gas and 
electricity to 6.7 million of the State's 10 million residents. 
CE and parent company CMS Energy were recently honored as the 
top performer for Michigan companies by Newsweek in its annual 
green rankings.
    Recent activities include helping our customers save over a 
billion dollars through energy efficiency, producing 10 percent 
of our customers' energy from renewables, reducing our waste 
use for electric generation by 17 percent, removing 1 million 
cubic yards of landfill space in 2017, closing 7 of the 
company's 12 coal-fired power plants, opening two community 
solar power plants with a third on deck for 2018. We have 
learned that we can increase renewable generation and keep 
costs low for our customers.
    Enacted 40 years ago, PURPA mandates that electric 
utilities purchase power from qualifying generating facilities 
at forecasted prices set by State public service commissions.
    Now, four decades later, America's energy landscape looks 
nothing like it did in the 1970s, and it is therefore 
imperative that PURPA be modernized. H.R. 4476 takes a modest 
but important step in this direction.
    First, the bill provides clarification to stop abuse of the 
One-Mile Rule. H.R. 4476 allows a challenge to be pursued 
should QFs not properly adhere to the criteria for calculating 
capacity and avoid gaming the system.
    Second, the bill recognizes the QFs between 2.5 megawatts 
and 20 megawatts already have nondiscriminatory access to 
markets in those parts of the country with organized regional 
transmission organizations, or RTOs.
    RTOs assure unbiased open access to the electric 
transmission system within their footprints. Many of the QFs 
within which Consumers Energy was obligated to contract over 30 
years ago now have access to the transmission system as an 
independent power producer.
    Without recognizing this access to the electric 
transmission system and electric market, Consumers Energy 
estimates its customers will pay approximately $18 million 
annually above market prices to QFs larger than 2.5 megawatts. 
This increased cost of our customers is formulated by the 
State-calculated avoided cost rate and applied to the QF's 
output.
    Recently, the Michigan Public Service Commission announced 
a new avoided cost rate for Consumers Energy. While we 
appreciate their steadfastness in doing their due diligence as 
mandated by Federal law, the rate still remains well above 
market.
    To illustrate this point, in 2017 Consumers Energy received 
683 applications from new independent generators looking to 
interconnect to our electric system as potential PURPA QFs. The 
5-year average prior to the new MPSC rate order was just shy of 
200 applications per year.
    The existing and potentially new PURPA contracts greater 
than 2.5 megawatts could cost our customers an estimated $35 
million annually above market over the next 5 years.
    The third provision in the legislation recognizes the 
critical role State public service commissions play in keeping 
energy costs low for customers. The bill would allow greater 
flexibility to suspend the mandatory purchase obligation when 
additional electric capacity is not needed by the utility's 
customers.
    I want to be clear on one thing: Consumers Energy is not 
advocating for less renewables in our energy mix. In fact, 
since 2005 we have increased our renewable portfolio from 3 
percent to 10 percent and will meet Michigan's new renewable 
requirement of 15 percent by the end of 2020. We have 
accomplished this through competitively bid renewable contracts 
and company-developed assets unaided by any expansion of higher 
cost PURPA QFs.
    In closing, PURPA served its original intended purpose of 
expanding renewables. However, as shown, the law is simply 
outdated and our customers are bearing the price. Between 2006 
and 2015, Consumers Energy customers paid 300 million above 
market prices for electricity from PURPA generators less than 
20 megawatts. It is time for this law to be updated, which is 
why we strongly urge the passage of H.R. 4476.
    I thank you for your time today.
    [The prepared statement of Mr. Sparks follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Olson. Thank you, Mr. Sparks.
    The Chair now calls upon Mr. Karl Rabago. Karl is the 
executive director of Pace Energy and Climate Center.
    Sir, you have 5 minutes, opening statement.

                  STATEMENT OF KARL R. RABAGO

    Mr. Rabago. Thank you, Chair Olson, Ranking Member Rush, 
members of the committee.
    [Continuing after audio error] against market abuse and 
improper discrimination.
    My name is Karl Rabago. I am appearing actually in my 
capacity as a principal of Rabago Energy LLC. I worked in the 
electricity sector for about 30 years, after spending 12 years 
as a cavalry and JAG officer in the United States Army. I have 
been a public utility commissioner in the State of Texas, a 
Deputy Assistant Secretary at U.S. DOE, a utility executive, 
and a frequent expert witness in State proceedings.
    I am also the executive director of the Pace Energy and 
Climate Center at Pace University in New York. I am not 
appearing before you in that capacity, but I do bring greetings 
from one of my office mates, former Congressman Richard 
Ottinger, who founded the center where I work and who codrafted 
and sponsored PURPA when he sat in this body 40 years ago.
    The first thing I am going to do is describe some very 
serious concerns with H.R. 4476. Second, I am going to share 
with you some general thoughts about PURPA.
    H.R. 4476 should be rejected by this body in favor of a 
more measured and competition friendly approach. Section 2 
would eliminate FERC's One-Mile Rule and instead mandates a 
rebuttable presumption, inviting utilities to use FERC 
litigation as an anticompetitive tool.
    The result would make project financing more expensive or 
even impossible for private sector small power producers who, 
unlike monopoly utilities, cannot pass their litigation costs 
onto captive ratepayers.
    Section 3 would create a presumption that all facilities 
2.5 megawatts or greater in size have nondiscriminatory market 
access, but the record does not support that presumption. 
Section 3 would expose many small power producers to market 
access discrimination and would stifle competition.
    Section 4 puts the utility fox in charge of the power 
sector hen house. Under the bill, the monopoly utility can 
almost unilaterally determine competitors' market 
opportunities. It would take the small power sector back 40 
years to the days when utilities ran their markets like cartels 
and consumers paid the price.
    In sum, PURPA modernization, as proposed in the bill, tilts 
the law so steeply in favor of monopoly utilities that it would 
frustrate Congress' long history of efforts to grow and improve 
competitive markets in the electricity sector.
    Now just a few general issues.
    PURPA is 40 years old, but we still do not have truly 
competitive and nondiscriminatory markets for qualifying small 
power producers and cogenerators. There are still many States 
where utilities, and even some of their regulators, perpetuate 
the very problems that led to PURPA. The real problem today is 
the need for modernization of a utility business model that is 
now more than 100 years old.
    Second, PURPA is working well in many places. The Michigan 
Public Service Commission recently concluded a case involving 
Consumers Energy and all the utilities in Michigan, 
demonstrating that it was ready, willing, and able to address 
questions like how to use IRP processes to inform avoided cost 
calculations, how to account for and keep up with market 
changes, and how to chart a course for future improvements in 
avoided cost methodologies.
    Third, there is a competitively significant difference 
between how utilities want to treat qualifying facilities and 
how they treat themselves. Utilities' shareholders would never 
build power plants based on a 2-year contract. They would never 
limit their earnings to marginal cost-driven market prices. 
They can't even keep their existing generators running with 
those prices today. And utilities would never wait until there 
was an energy or capacity shortage crisis to begin planning for 
or building a new power plant.
    Fourth, market prices and competitive solicitations can 
inform but cannot replace the avoided cost determinations under 
PURPA. Market prices are the result of bidding strategies and a 
system designed to generate lowest short run prices for energy 
and capacity, not build power plants. Competitive bids tell you 
the lowest bid anyone is willing to offer, but that does not 
tell you what anything is worth.
    To establish full and fair avoided cost, more work does 
need to be done by State regulators. That work increasingly 
includes evaluating distribution level costs that are avoided 
by small generators, values that FERC rules and procedures may 
actually not fully assess.
    So, finally--well, I will just stop there and say thank you 
very much for the opportunity to address this committee, to 
address these important issues, and I look forward to standing 
for your questions.
    [The prepared statement of Mr. Rabago follows:]
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    Mr. Olson. Thank you, Mr. Rabago. And thank you also for 
your service to our Army. Please pass on to Chairman Shimkus, I 
just want to say congratulations, congratulations. In 16 years 
your Army has beaten my Navy twice, but two in a row, so well 
done.
    Mr. Rabago. As a former professor at West Point, I have to 
tell you, it felt good this year. But that doesn't cover all of 
the problems.
    Mr. Olson. Well said.
    Our next witness is Paul Cicio. And Paul is the president 
of the Industrial Energy Consumers of America.
    Welcome back. You have 5 minutes, Mr. Cicio.

                   STATEMENT OF PAUL N. CICIO

    Mr. Cicio. Thank you, Vice Chairman Olson and Ranking 
Member Rush and subcommittee members. Thank you for this 
privilege.
    Regarding H.R. 4476, the PURPA bill, we extend a thank you 
to Representative Walberg for exempting manufacturing 
cogeneration from the proposed changes to PURPA. The exemption 
recognizes that manufacturing companies are not in the business 
of generating and selling power and are not creating market 
problems.
    However, it is very important that the bill also exempt 
manufacturing company PURPA facilities that are classified at 
FERC as small power producers. To not do so would negatively 
impact their ability to produce low-cost power thereby reducing 
competitiveness and jobs. Congress should not pull the rug out 
from underneath these capital investments that were made with 
PURPA regulatory assurances.
    Also, manufacturing companies who have installed wind and 
solar units inside their fence line or intend to do so in the 
future for purposes of reducing electricity costs or reducing 
greenhouse gas emissions would be negatively impacted. We do 
not believe that that was the intent of Mr. Walberg. We look 
forward to working with him to exempt this class of QF 
facilities.
    Regarding LNG exports and H.R. 4605, IECA is strongly 
opposed to this legislation. The bill presents Members of 
Congress with a decision: Either to vote for the bill and 
support the oil and gas industry or oppose the bill and support 
your voters back home who risk higher natural gas and 
electricity costs long-term.
    DOE's own LNG study that is entitled ``Macroeconomic 
Impacts of Increased LNG Exports From the United States'' 
illustrates that the net economic benefits of LNG exports 
almost exclusively serve the oil and gas industry and the 
public is impacted economically. The report concludes, quote, 
``Expansion of LNG exports has two major effects on income. It 
raises energy costs and, in the process, depresses both real 
wages and the return on capital for all other industries,'' 
that is ``all other industries,'' unquote.
    Raising energy costs, depressing real wages, and the 
reduction of the return on capital on U.S. industries, one 
would conclude that increasing LNG exports cannot possibly be 
in the public interest. These impacts are exactly what happened 
in Australia.
    The bill is anti-consumer and removes the Natural Gas Act 
public interest test, which Congress put in place, which you 
put in place wisely.
    Importantly, the legislation is actually not needed. 
Volumes already approved by the Department of Energy for 
nonfree trade and free trade agreement countries is equal to 71 
percent of 2016 demand. That is 53 billion cubic feet a day.
    The excessive volume approved by the Department of Energy 
is a legal issue. Exporting 71 percent of U.S. demand cannot 
possibly be in the public interest. It is a violation of the 
Natural Gas Act.
    The DOE has failed to implement its regulatory 
responsibilities under the Natural Gas Act. It has not acted to 
protect the U.S. economy and the consumers from excessive 
future LNG exports. Congress is responsible for assuring 
implementation of the Natural Gas Act and safeguarding the 
American public with affordable and reliable natural gas.
    The Natural Gas Act is the law of the land. We urge the 
subcommittee to act to provide oversight of DOE-approved 
volumes and make remedy to protect the public interest. This is 
particularly important given that the 2017 AEO demand forecast 
indicates that 56 percent of the lower 48 natural gas resources 
would be consumed by 2050.
    I look forward to your questions.
    [The prepared statement of Mr. Cicio follows:]
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    Mr. Upton [presiding]. Thank you.
    Mr. Riedl.

                   STATEMENT OF CHARLIE RIEDL

    Mr. Riedl. Good afternoon, Subcommittee Chairman Upton, 
Subcommittee Ranking Member Rush, and members of the committee. 
Thank you for the opportunity to testify today. My name is 
Charlie Riedl. I am the executive director of the Center for 
Liquefied Natural Gas.
    CLNG represents the full LNG value chain, providing it with 
unique insights on the benefits LNG brings to the U.S. and 
global economies. CLNG operates within the Natural Gas Supply 
Association, a national trade association that has represented 
the U.S. natural gas industry for more than 50 years. This 
gives us a deep understanding of the entire U.S. natural gas 
supply portfolio.
    I am pleased to be here today in support of Congressman 
Johnson's efforts to improve the liquefied natural gas 
permitting process and encourage members of the committee to 
support his legislation. Representative Johnson has been 
steadfast in spearheading legislative solutions to improve the 
permitting process for liquefied natural gas facilities.
    And the time for action is now. As Representative Johnson 
has said himself, the window of opportunity for LNG exports 
will not remain open indefinitely. The U.S. is awash with 
affordable natural gas. And as other countries look to enjoy 
these same benefits the United States enjoys, we are in a 
unique position to meet the growing demand globally.
    However, there is a tight window to capture the market 
share, and providing regulatory and legislative certainty will 
help U.S. exporters claim our share of the global market. By 
allowing the United States to export natural gas after 
completing the FERC review process, as proposed in H.R. 4605, 
the Unlocking Our Domestic LNG Potential Act, a more certain 
and consistent regulatory environment would be created to 
unlock that future potential.
    The length of time for DOE permitting has varied widely to 
date. The first six LNG projects had delayed an average of 2.6 
to complete the permitting process. That period of review is 
unnecessarily long, and we can and should do better.
    The LNG export opportunity, the very reason we are able to 
have this conversation today, is because of our vast supply of 
natural gas. It is the supply that is growing by the year that 
underpins the economic and environment benefits we can achieve 
with exports. Technological breakthroughs in the oil and 
natural gas industry have unleashed an energy renaissance, 
establishing the United States as the world's largest natural 
gas producer.
    As I speak today, the U.S. natural gas resource has reached 
an all-time high. According to the U.S. Potential Gas 
Committee, these numbers continue to increase, up 68 percent 
since 2005, according to the U.S. EIA.
    This alone is impressive, but consider this: During that 
same time, our total natural gas resource estimates also 
continued to increase.
    New domestic supplies of affordable natural gas have 
created competitive advantage for U.S. manufacturers, leading 
to greater investment in industry, investment in jobs, and 
creation of additional workforce. Experts forecast additional 
industrial investment of $135 billion to build 59 new 
manufacturing projects and expand 11 additional projects in the 
next 5 years.
    There are those who suggest we must choose between exports 
and our domestic manufacturing sector, but study after study 
tells us otherwise. According to a study from the Department of 
Energy, exports will not compete with our manufacturing sector 
for supply. And it is important to note that additional exports 
will be met by new production of natural gas.
    What we are finding is that LNG exports can and will react 
to both the global marketplace and domestic demand. Less than 2 
weeks ago, the Northeast was hit by the bomb cyclone, one of 
the coldest weather systems to reach our shores in years, and 
natural gas met record-setting levels of demand admirably. As 
the bomb cyclone moved along the East Coast, the import 
customers of the Cove Point facility in Maryland responded to 
price signals and delivered LNG gas to meet domestic consumer 
demand, demonstrating the flexibility of LNG at a time of 
increased demand.
    In-depth research by DOE in 2015 found that exports are a 
net benefit to the U.S. economy. The DOE study determined that 
increased production will drive investment to revitalize 
economically depressed regions of the U.S. and bring thousands 
of jobs to those areas. In fact, the September 2017 study by 
ICF showed that exports could generate more than 450,000 jobs 
and more than $73 billion for the economy by 2035.
    LNG exports do more than just provide jobs and investment. 
They offer an opportunity for also strengthening America's 
foreign policy interests abroad. LNG exports are already 
supporting our national security interests by strengthening the 
energy security and weakening those nations who look to use 
natural gas for political leverage.
    So in conclusion, the promise of more LNG facilities in the 
United States brings a promise of a new era benefiting the U.S. 
economy and our global allies. Our enormous natural gas 
resource base ideally positions the U.S. to compete on a global 
level for the market share.
    Free and open trade of U.S. LNG sends the important signal 
of unencumbered exports to the market. Artificially limiting 
LNG exports could undermine commitments to free and open 
markets as well as lead to complaints in international trade 
cases in the future.
    In closing, we commend Representative Johnson for his 
leadership and steadfastness in championing LNG over the course 
of the last several years. His legislation would ensure that 
consistency in the review process without sacrificing the rigor 
and thoroughness or our review.
    I thank you for your time today and look forward to 
answering your questions.
    [The prepared statement of Mr. Riedl follows:]
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    Mr. Upton. Thank you. Thanks all for your testimony.
    Since I was a little late coming back, we will start with 
Mr. Olson for questions.
    Mr. Olson. I thank the chairman.
    Again, welcome to our five panelists.
    My first question is for you, Mr. Riedl.
    As you heard in the first panel, I was pretty strong about 
LNG exports, that they are a national security matter for our 
country. We mentioned some countries like Lithuania, Poland, 
South Korea, India, Japan. Can you talk about some countries 
like that or other countries where our gas has been shipped, 
can be shipped, and about what upcoming projects might we send 
overseas, how can we expand that market?
    Mr. Riedl. I can answer the question, and thank you for it.
    So a couple of things. You touched on some of the countries 
that we are already sending gas to. To date, we have got one 
facility operating in the lower 48 that is exporting natural 
gas, a second that is going to come online very soon. That 
single project that is exporting right now out of the U.S., 
Sabine Pass Cheniere project, has exported to over 25 
countries.
    That is expected to continue to increase. And I think that, 
as you continue to see additional cargoes of LNG moving into 
Europe, as they start to see the reliability of U.S. LNG coming 
there, other countries are going to look to come online. 
Germany just opened an LNG import facility in the Port of 
Hamburg. So I would expect there is another opportunity for 
U.S. LNG to start being delivered to Germany.
    But I think the other area that we didn't talk about is in 
South America, in Latin America. There are enormous 
opportunities there that we haven't necessarily fully exploited 
yet.
    Mr. Olson. And do you agree, if we don't export our LNG and 
don't sell it to overseas, that market will be swamped by other 
countries, other entities, that we will drop the ball, let them 
control these nations or have influence with them that we 
should grab right now? Can we do that? And can you confirm that 
that is a benefit of exporting our liquefied natural gas?
    Mr. Riedl. Absolutely. Yes. The timeframe, as I said in my 
testimony, is limited for this opportunity for U.S. LNG. You 
think about the length of time that contracts are typically 
signed, 15- to 20-year-length contracts. So right now countries 
are looking to purchase LNG, and if we don't capitalize on it, 
there are other exporting countries that absolutely will.
    Mr. Olson. On our trip with our Chairman Upton and Chairman 
Walden to Asia a couple years ago, we went to Japan, China, and 
South Korea. All those nations, especially Japan and South 
Korea, were just craving our exports of our oil and natural 
gas. They are tired of being strung out by Russia and OPEC. 
They want that freedom, that independence, and right now we can 
do that. Thank you.
    My final question for you is I kind of want to make you--I 
am not going to ask you guys, ``Do you like the Houston Astros 
being the world champs?'' But they have a player named Jose 
Altuve, MVP of the American League, a little man about 5 foot 5 
tall, but a great power hitter.
    I will make you Jose Altuve. I am going to throw a big, fat 
pitch right down the middle for you to knock out of the park. 
My question is, what are some of the benefits to a State like 
my State of Texas from increased exports of LNG?
    Cream that pitch.
    Mr. Riedl. Happy to.
    There are a couple. One is obviously the job creation that 
comes along with it here domestically.
    The other major opportunity that I would point to is the 
obvious, is the geopolitical impact. You mentioned some of 
those countries that are craving U.S. LNG.
    The third is the environmental impact that we could have in 
helping other countries meet some of their environmental 
standards. And you look to a country like China, for instance, 
and Beijing. Last quarter they reported a 54 percent reduction 
in CO2 emissions. Greenpeace actually reported that. So you 
start to see the impact of switching from other fuels to 
natural gas and the environmental impacts that would happen 
there.
    So those are the three that I would point to.
    Mr. Olson. And obviously jobs back home. A little town 
called Beasley, Texas, there is a company there called Hudson 
Products. They make the compressor blades for these LNG bundled 
shares to be passed to the top of those trains you see that--
they probably sold 5,000 units, and more are coming. So that is 
big for Texas, small little towns thriving because of our 
export of liquefied natural gas.
    My final is for you, Vice Chairman Kavulla.
    We are in a very different world than we were when PURPA 
was passed a long time ago. And as you know, as I mentioned, my 
State, number one for wind power in America. In fact, it is the 
fastest growing job sector in our State. And there have been 
hours the past year where wind has supplied over 50 percent of 
our statewide power--50 percent.
    If we make changes to PURPA, do you think it would change 
the investment decision to keep building wind turbines in a 
State like mine?
    Mr. Kavulla. Vice Chairman Olson, no, I do not. I think 
renewables have been deployed throughout the country in 
response to price signals that clear through open markets and 
competitive solicitations issued by individual utilities and 
overseen by State commissions.
    And if you look at my testimony, you will see that that is 
how the vast majority of renewables are being brought online; 
in contrast to renewables that come to State commissions and 
litigate in front of them asking for us to play crystal ball 
reader about what future market prices are.
    Mr. Olson. Thank you.
    My time has expired. I yield back.
    Mr. Upton. Mr. Rush.
    Mr. Rush. I want to thank you, Mr. Chairman.
    Mr. Cicio, as you may have heard during the first panel, I 
asked both representatives from FERC and DOE if they had any 
concern with hastily approving LNG exports and impact that 
might have on domestic natural gas consumers, manufacturing 
competitors, and American jobs.
    Were you satisfied with their answers?
    Mr. Cicio. Thank you for that question.
    No, not at all. You know, we have examined all of the DOE 
studies that were due, that were completed, to justify the 
approval of nonfree trade agreement LNG exports. And we find 
them woefully inadequate to establish whether or not it is in 
the benefit of the country and satisfies the public interest.
    Where we are today is that a total of around 53, 54 BCF a 
day of LNG exports for free trade and nonfree trade have been 
given final approval. That is 70 percent of U.S. demand in 
2016. Shipping that volume cannot possibly be in the public 
interest.
    So we are unsatisfied with that. We think that they have 
not fulfilled the Natural Gas Act and the regulatory 
responsibility to protect the consumer long-term.
    This is not a short-term concern. This is a long-term. But 
we are making decisions today as to whether these terminals get 
approved and then will be built later on. So this is why we 
have to be careful not to overcommit legally on approving these 
applications today for the future demand that will happen.
    Mr. Rush. Sir, I want to thank you.
    Mr. Rabago, in your testimony you note that H.R. 4476 will 
grant utilities full control to determine the size of their 
competitors' market. Additionally, under this bill, a utility 
could refuse to purchase energy or capacity from a qualified 
small power facility if the utility unilaterally determined 
that it has no need for energy or capacity in an IRP process.
    Why is this problematic? And what impact might this 
provision have? Who would be responsible for oversight under 
this section of the bill as it is currently drafted?
    Mr. Rabago. Thank you, Ranking Member Rush, for that 
question.
    In order to answer it, we have to understand that there is 
IRPs and then there is IRPs. We have only 40 States in this 
country, as I believe, or roughly 40 States in this country 
that even have IRPs.
    The level of regulatory oversight by State commissions of 
those IRPs varies dramatically, the time period that those IRPs 
are meant to address varies dramatically, and the authority of 
the regulators to actually dig into the details of these 
integrated resource plans varies dramatically.
    In some places, basically the utility puts together their 
set of assumptions, their set of evaluations about resource 
needs, and then basically sends it over to the Commission. And 
the Commission may or may not even have authority to read it, 
much less question it or approve it.
    So what we are really doing is saying that in a planning 
process, which isn't even focused on procurement under section 
4(a) and (b) in the proposed bill, that a utility can use that 
to definitely exclude a competitive offer of energy without any 
real regulatory oversight.
    As you heard earlier on, even FERC is unsure the extent to 
which they have any authority to look at the use of these IRP-
type decisions as a subterfuge for basically undermining 
competition. My concern, therefore, is that section 4(a) and 
(b) essentially puts the utility in the driver's seat and a lot 
more qualifying facilities will be denied access to markets as 
a result.
    Mr. Rush. Thank you, Mr. Chairman. I yield back.
    Mr. Upton. Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Riedl, thank you for your kind words. We have been 
working for a long time on the LNG issue and the ability to put 
America into the LNG markets globally.
    You know, my district in eastern and southeastern Ohio that 
sit on top of the Utica and the Marcellus Shale is no stranger 
to the economic benefits of the shale energy boom and the vast 
amount of gas at our disposal.
    With the Sabine Pass facility already exporting LNG and 
with more export facilities under construction, new job 
opportunities have simultaneously emerged in my district, a 
part of the country that has been impoverished over a number of 
years.
    As pipeline infrastructure is laid, combined-cycle power 
plants are being built, while ethane crackers and ethane 
storage possibilities begin to take shape or are already under 
construction.
    In many cases, local budgets of counties and townships have 
also been saved from oil and gas tax revenues that have 
increased their coffers. In fact, the top six shale counties in 
my district have collected more than $43.7 million in real 
estate property taxes from 2010 to 2015. That is a lot of money 
for Appalachia. The median income within those counties has 
also risen over a similar period.
    So, Mr. Riedl, the Appalachian region has clearly benefited 
from the use of natural gas in various ways. Do you expect this 
trend to continue as more export facilities come online?
    Mr. Riedl. I think the short answer is, absolutely, we do. 
We would expect that, I think, if you look at sort of the 
number of jobs that the oil and gas industry already supports, 
10.3 million jobs, if you look at where we are projected to go. 
We have, like I said, one facility operational, one set to 
become operational very soon, and another four that are under 
construction. I would expect that there would be somewhere in 
the neighborhood of 10 facilities operational in the next 5 to 
7 years.
    And if you look at sort of the amount of opportunity that 
those facilities represent, roughly 10 BCF a day projection of 
exports, it only is going to mean that there is more 
opportunity for those States that are producing the gas and 
need to then get that gas to the facilities to have 
opportunities for additional demand.
    And as I mentioned in my testimony, it is all new 
production that is going to meet that demand from these LNG 
facilities, which means additional jobs, because there are 
going to be additional rigs running. And that ripple effect on 
down the line in the support opportunities, the jobs that would 
come out of that as well, is one that obviously becomes a 
multiplier pretty quickly.
    Mr. Johnson. OK. Well, thank you.
    Facing competition from other countries, and we know there 
is competition out there, I understand, as you mentioned, that 
our window of opportunity to export LNG is limited.
    What is a realistic outlook for global LNG demand over the 
next 20 years? And what does that outlook mean for companies 
wishing to build LNG export facilities here in the U.S.?
    Mr. Riedl. I think that that answer, if you look at sort of 
the current demand today, roughly 35 BCF a day is the current 
demand, there are projections that would show that doubling in 
the next 20 years. And if you look at sort of where we are from 
a production of LNG globally, we are expected to start having a 
shortfall pretty quickly with coming demand in the mid-20s, 
depending upon which academic study you would look at.
    But that means is the opportunity for U.S. natural gas, and 
LNG exports in particular, those long-term contracts that are 
going to start popping up here in the next few years, U.S. LNG 
is going to be competing on a global level for those contracts.
    And so if we look at potential doubling of LNG demand in 
the next 20 years, our opportunity to look at some of the 
projects that are currently awaiting approval, we don't have a 
lot of time to wait before they are going to need to start 
making investment decisions to build those facilities to meet 
that coming demand.
    Mr. Johnson. Do you think there is going to be any market 
pressure to allow only so many LNG facilities to be built?
    Mr. Riedl. Sure. So if you look at the projections of where 
total demand is, how contracts are already set up with other 
countries that are exporting LNG, yes, EIA projects that out 
through 2050 roughly 12 BCF of LNG exports, which account for a 
much smaller percentage of our overall production of close to 
40 BCF. So, absolutely, the market is going to limit how much 
export we will be able to capitalize on.
    Mr. Johnson. OK. One final question, and different experts 
give different opinions of this. But what is your realistic 
projection of what our U.S. natural gas supplies are? What do 
you think?
    Mr. Riedl. Well, I think that it depends upon--EIA is 
typically where I would point to as far as the potential 
opportunity, and a number that I continue to hear is somewhere 
in the neighborhood of 2 to 3 TCF.
    Mr. Johnson. OK.
    Mr. Chairman. I yield back. Thank you.
    Mr. Upton. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    And I don't know if you all were here earlier. I am kind of 
torn because I am from Texas. But I also have an area that has 
chemical plants, and we have seen just a huge number of 
expansion of those plants in east Harris County and along the 
Texas Gulf Coast.
    My colleague from Texas knows that we have some ice cream 
in Texas, Blue Bell ice cream, and their slogan is that we eat 
all we can and we sell the rest.
    That is where I come from. I want to be able to use that 
for relatively small, cheaper utilities, so we can bring 
manufacturing even more in. But also for, in our area, my 
manufacturing, refineries, and chemical plants. And I don't 
mind selling the rest. I just want to make sure we can still 
continue the growth in our area.
    Mr. Riedl, can you talk a little bit about how the LNG 
market is evolving from a potential market with facilities 
waiting for approval? And what are we learning now we are 
finally up and running some of those facilities?
    Mr. Riedl. Great question and I appreciate the opportunity 
to share some thoughts on that.
    I think the big thing that we continue to focus on is the 
long-term opportunity for LNG. And where we look at it here in 
the United States, as I was talking to Congressman Johnson's 
question, we are still talking about an excess of gas.
    So we are meeting all of our needs for gas. EIA has 
projected that we are going to meet all of our needs for gas in 
the future as well. And we are going to have a surplus of gas.
    And when you look at what EIA projects, dry gas production 
increasing year over year for the next few years, what that 
gives us is an opportunity, looking out to 2019, even, we are 
talking about 5.5 BCF a day of exports. And so when we talk 
about a total production number close to 80 BCF a day, we have 
an enormous opportunity to still capitalize and room to grow, 
as mentioned in the first panel.
    Mr. Green. OK. A question I have, and for are the entire 
panel, how big is our natural gas supply in the U.S., looking 
in that crystal ball in the future? Can we support both a huge 
domestic demand as coal plants continue to close and a large 
LNG export footprint?
    Why don't we start at this end of the table. Do you think 
those projections where we can have our ice cream and eat it 
and sell it too?
    Mr. Kavulla. You are putting me on the spot. But since 
PURPA is my MO, but I will say, in eastern Montana, western 
North Dakota, we have still had a big problem with flaring 
natural gas because we can't make productive use of it coming 
off of the oil patch.
    Mr. Green. I will respond. I go through south Texas a lot, 
and there is still a lot of flaring in Eagle Ford that, if I 
was a royalty owner there, I would be upset about that. You are 
putting that product into the air that we could sell to 
somebody.
    Mr. Sparks.
    Mr. Sparks. Yes. Part of my responsibility at Consumers 
Energy is fuel for generation, which includes natural gas. And 
everything that I have seen shows that there is an abundance of 
natural gas going forward. And I would say that probably the 
limiting thing more is pipeline capacity, to get it from the 
production to facilities, than it is the actual natural gas 
itself.
    Mr. Green. And a comment too. I know West Virginia and Ohio 
have trouble getting those pipelines up to the Northeast where 
they really do need the natural gas.
    Mr. Rabago. This is not my field of expertise, but living 
in the Northeast and looking at the reliability assessments 
that are produced by NERC for our region, I would share Mr. 
Sparks' statement that up there our issue is transport.
    We don't make a lot of it directly there. We are concerned 
about the pipes. And from Texas, you will remember once upon a 
time when Mr. Wyatt realized that, at a certain price, it is 
cheaper to send lawyers down the pipeline than gas.
    Mr. Green. Having known Oscar Wyatt for most of my life, I 
understand.
    Mr. Cicio. The only independent source of how much natural 
resources we have is EIA. And we have used their AEO 2017 
demand to 2050, 33 years away.
    And when we look at domestic consumption, LNG exports that 
they have forecasted and pipeline exports that they have 
forecasted to Mexico on a net basis, so it is fair, it consumes 
56 percent of all of our lower 48 natural gas technically 
recoverable resources. Technically recoverable does not mean 
than it is economically recoverable. So 56 percent.
    If we put in that scenario, and it is in my testimony, that 
we can assume that all that has been approved is in that 33 
years, you use up 80 percent of all the natural gas resources.
    Mr. Green. Mr. Riedl.
    Mr. Riedl. So I think that I would say, the short answer 
is, yes, we can. We are not necessarily supply constrained. We 
are demand constrained. That is, we are needing to find markets 
for this gas, which is why we are talking about LNG exports, 
which is why, 10 years ago, we were talking about imports and 
now talking about exports, because we found so much gas.
    Mr. Green. Mr. Chairman, thank you.
    I have a concern, no crystal ball, because when we put 
something in the law and take away oversight, I would be more 
concerned, not maybe a hard hand of oversight, but somebody 
minding the store to make sure that we are not raising our 
utility costs. Because I remember when the price of natural gas 
in the North Sea was cheaper than it was from Louisiana and 
Texas, and we lost chemical jobs over to Rotterdam. And I don't 
want to get to that point.
    So that is why I think the bill we need to look at, to see 
somebody can go in, whether it be Department of Energy, and say 
this is a national security issue.
    So, Mr. Chairman, I thank you for the time.
    Mr. Upton. Mr. Flores.
    Mr. Flores. Thank you, Mr. Chairman.
    I want to assure my friend from Texas on the other side 
that, as a former member of the oil and gas business for years, 
we have got plenty to eat what we want and sell the rest for 
decades, if not centuries.
    Let's talk about PURPA first, if we can.
    Mr. Kavulla, you heard from your neighbor there at the 
table the impact that these PURPA contracts are having on their 
company. My local community is powered by a muni. And so we 
have smaller electricity utilities out there, munis, co-ops, 
and so forth.
    What is the impact on those folks? They don't have a 
shareholder base, if you will, to spread the economic damage of 
these PURPA contracts. What happens to the munis and the co-
ops?
    Mr. Kavulla. In my view, the smaller the consumer base of 
the utility, the greater the potential magnitude of erroneous 
price forecasting from the regulator would be. In the case of a 
municipality, they are likely, I assume in Texas, self-
regulated by their city council. These are people who are 
probably even in less of a good position than I am to try to 
guess about the future market prices of energy for the purpose 
of establishing a rate that should be----
    Mr. Flores. Well, kind of let's cut right to the chase. Who 
gets hurt?
    Mr. Kavulla. The consumers.
    Mr. Flores. Exactly. Yes. There we go. OK. And I am sorry. 
I wasn't trying to cut you off. I have just got some other 
things that we need to talk about.
    Mr. Riedl, I appreciate your testimony today. And I have 
been fascinated by your neighbor at the table and some of the 
things he said. And as somebody who is an expert in this field, 
I do have a good feel for the supply of natural gas in this 
country and the huge impact it has had not only on our economy, 
but also geopolitically.
    How do you respond to his claim that our energy abundance 
is a myth?
    Mr. Riedl. It is a great question, and I appreciate the 
opportunity to talk a little bit about that.
    I think that there are a couple of points that I would 
point to. One, if you look at--Congressman Johnson stepped 
away--but the State of Ohio alone in 2016 added 5 TCF of 
natural gas proven reserves.
    So I think that there is some miscommunication here or mix-
up here in what we are talking about with proved reserves and 
technically recoverable reserves. And how the market will 
actually dictate demand will dictate how we recover those 
reserves and at what price point we recover them.
    So when we talk about a supply situation, it is driven by 
market demand. And so as market demand continues to increase, 
we are able to respond to that with supply. And we have seen it 
happen time and time again since the discovery of the shale gas 
in the early 2000s.
    Mr. Flores. Well, the other thing that fascinating too is 
that technology continues to change the paradigm, and it is 
happening at an incredibly rapid rate. If you could have told 
me you would get oil and gas out of some things we are getting 
it out of today, if you had told me that 15 years ago, I would 
have thought you were smoking some bad dope. But it is really 
interesting. I guess I got to be careful of my record here, 
don't I?
    I want to talk about the impact on jobs and economy a 
little bit. The oil and gas industry was one of the bright 
spots at a time when our labor markets were struggling. 
Particularly if you look at the 2008-2016 time period, there 
were some times during that time period, if we hadn't had the 
increase in oil and gas jobs, that that job growth would have 
been negative.
    And so it has been a hugely positive factor for economic 
opportunity for what I would consider the working class 
Americans in this country, stable jobs, great incomes, great 
benefits.
    And so I want to drill in on a more of a micro basis. How 
many jobs are typically created by the construction, first, and 
then the operation of an LNG facility?
    Mr. Riedl. So construction, and if you look at the sort of 
timeframe of construction projects, one of the fastest moving 
projects that we have going right now is the Cove Point 
project, which is set to begin operation. And that is somewhere 
in the neighbor of 40 months of construction time.
    And that creates somewhere between the neighborhood of 
4,000 to 7,000 job at each one of these facilities. And so if 
you talk about we are building four more, you can pretty 
quickly do the math on how many construction jobs that that 
supports over a number of years.
    And then if you think about sort of from an operational 
standpoint directly at a facility, it is not an enormous number 
of jobs, but we are still talking about adding real wages and 
real jobs to each one of those facilities in the neighborhood 
of a few thousand employees for each one of those facilities.
    Mr. Flores. OK. And those jobs are not paid in crumbs, 
right? They are good, well-paying jobs.
    Mr. Riedl. No. The average salary is well over six figures 
in those jobs.
    Mr. Flores. OK. Well, six figures, right?
    Mr. Riedl. Yes, sir.
    Mr. Flores. OK. Great.
    Thank you, Mr. Chairman. I yield back.
    Mr. Olson [presiding]. The gentleman yields back.
    The Chair now calls upon the pastor, Mr. Walberg from 
Michigan, for 5 minutes.
    Mr. Walberg. Thank you, my son.
    Mr. Olson. Amen.
    Mr. Walberg. Go, Cubs.
    Thank you to each of the panel for being here.
    And in relationship to PURPA, our design is to make sure 
that the consumer is benefited. And we are certainly open, we 
are open to discussing better ways of doing things. But in the 
end, we want the consumer to be king and have utilities that 
can succeed in such a way to make the consumer king.
    So I appreciate you being here today.
    Mr. Sparks, before I get to my question, I want to thank 
you for being here. I am greatly appreciative of what CMS does 
in my district, being headquartered there, and all of the 
impact.
    And the fact that--you know, we have talked about a lot of 
things, and it is an absolute truth that you are ahead of the 
curve and ahead of the game of even what our State is mandating 
as far as renewables. And you are leading the way on those 
things. And it comes not because you are being forced, but it 
is a better way when it works. And so I appreciate that.
    You gave your comments early on, and I am sure you have 
listened as other things have been said. So I want to give, 
before I ask my questions, an opportunity for you to comment on 
any things that you heard and would like to add to the mix 
here.
    Mr. Sparks. Yes. Thank you, Mr. Walberg, for that.
    Two things I would say. One is, at least for Michigan 
anyway, Michigan has a very robust IRP process. We have been 
going through stakeholder meetings over the last year, we are 
now having public meetings, to talk about the whole process of 
integrated resource planning.
    All of the utilities in Michigan have to file integrated 
resource plans by, I believe, it is April of 2019. Our company 
will be filing one before June of 2018.
    So I would just say that lots of opportunity for all 
stakeholders to participate in that process in Michigan.
    The other thing I think I would just mention is that I 
believe that H.R. 4476 actually promotes competition. I don't 
understand how forcing customers to buy from renewable 
resources that are priced higher than other renewable 
opportunities, or other generation resources for that matter, 
could ever promote competition. So by lowering that threshold, 
in my view, it actually promotes competition.
    Mr. Walberg. Well, add to that a bit. One of my questions 
was going to be, is it fair to say that Consumers Energy is 
being forced to purchase power they don't need at above-market 
prices?
    Mr. Sparks. Absolutely. Our company right now has 650 
megawatts of wind resources that we either own or we contract 
for. We just brought online 44 megawatts of wind this past 
December, $45 per megawatt hour. Another third party that we 
contract with brought on 100 megawatts of wind this past 
November, less than $45 per megawatt hour that our customers 
are paying.
    So when we look at the avoided costs that have been 
established for Consumers Energy for renewables, it is much 
higher than that, sometimes twice the cost of what I just 
quoted. And we have plans to put more megawatts from wind on 
our system, again in that mid-$40 range.
    Mr. Walberg. Drilling down a little bit further. If H.R. 
4476 were signed into law, would it save your customers money? 
And if not, what will they overpay?
    Mr. Sparks. It absolutely would save our customers money. 
Dollar for dollar, our power supply costs are a direct pass-
through to our customers. So any dollar that we can save in 
power supply costs will go directly to our customers.
    In my opening remarks, I commented about customers paying 
about $35 million, we predict, more than what they otherwise 
would pay from other options from all of the PURPA contracts 
that we have been asked to sign. That was as of last week when 
I was preparing my materials. I looked yesterday. We are up to 
about $53 million now.
    Mr. Walberg. OK.
    Finally, I understand Consumers is taking steps to expand 
your renewable generation portfolio, as you mentioned. This is 
an effort I applaud, but want to know if PURPA is actually 
hindering consumers from building more renewable generation at 
lower cost to your customers.
    Mr. Sparks. It certainly could in the future if enough 
PURPA generators come onto our system. We obviously have to 
look at that supply-demand balance. And we wouldn't want to 
have more generation available than what our constituents, our 
customers, would consume. So is could affect that, yes.
    Mr. Walberg. Mr. Chairman, without objection, I would like 
to submit letters from 17 different entities in support of this 
for the record.
    Mr. Olson. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Walberg. Thank you. I yield back.
    Mr. Olson. The gentleman yields back.
    It appears that we have no further Members seeking to ask 
some questions. So on behalf of the entire subcommittee, thank 
you, thank you, thank you for your patience.
    I will remind you all Members have 10 days to submit 
questions for the record, legislative days, and our guests have 
10 days to respond to those questions after receiving them.
    Before we close, I would like to enter 21 letters for the 
record.
    A letter from Alliant Energy. A letter from American Public 
Power Association. A letter from the Arizona Public Service. A 
letter from the Basin Electric Power. A letter from Berkshire 
Hathaway Energy. A letter from Consumers Energy. A letter from 
Covanta. A letter from DTE Energy. A letter from Duke Energy. A 
letter from Edison Electric Institute. A letter from 
Electricity Consumers Resource Council.
    Whoa, boy.
    A letter from the Environmental Law Policy Center, Natural 
Resources Defense Council, Solar Energy Industries Association, 
Southern Environmental Law Center, and Vote Solar, all 
collectively.
    A letter from the Idaho Power Corporation. A letter from 
the Independent Power Producers Coalition of Michigan. A letter 
from the Industrial Energy Consumers of America. A letter from 
ITC Holdings Corporation. A letter from National Association of 
Regulatory Utility Commissioners. A letter from the National 
Rural Electric Cooperative Association. A letter from OG 
Electrical Corporation. A letter from Portland General Electric 
Company. A letter from Xcel Energy.
    Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Olson. Again, thank you, thank you. This hearing is 
adjourned.
    [Whereupon, at 1:04 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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