    [Senate Hearing 115-529]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-529

       THE ROLE OF U.S. LIQUEFIED NATURAL GAS IN MEETING EUROPEAN ENERGY
                                     DEMAND

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 13, 2018

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources

            Available via the World Wide Web: http://www.govinfo.gov

                                ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
     32-265               WASHINGTON : 2020

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       BERNARD SANDERS, Vermont
    JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
    STEVE DAINES, Montana                JOE MANCHIN III, West Virginia
    CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
    LAMAR ALEXANDER, Tennessee           MAZIE K. HIRONO, Hawaii
    JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
    BILL CASSIDY, Louisiana              TAMMY DUCKWORTH, Illinois
    ROB PORTMAN, Ohio                    CATHERINE CORTEZ MASTO, Nevada
    SHELLEY MOORE CAPITO, West Virginia  TINA SMITH, Minnesota

                          Brian Hughes, Staff Director
                         Kellie Donnelly, Chief Counsel
           Suzanne Cunningham, Senior Policy Advisor for Oil and Gas
                 Mary Louise Wagner, Democratic Staff Director
                    Sam E. Fowler, Democratic Chief Counsel
               Scott McKee, Democratic Professional Staff Member

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
    Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
      Washington.....................................................     2

                                   WITNESSES

    Winberg, Hon. Steven E., Assistant Secretary for Fossil Energy,
      U.S. Department of Energy......................................     4
    Book, Kevin, Managing Director, ClearView Energy Partners, LLC...    13
    Grigas, Dr. Agnia, Associate, Argonne National Laboratory, and
      Nonresident Senior Fellow, Atlantic Council....................    22
    Slocum, Tyson, Energy Program Director, Public Citizen...........    28
    Mills, Mark P., Senior Fellow, Manhattan Institute...............    41

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Book, Kevin:
        Opening Statement............................................    13
        Written Testimony............................................    15
        Responses to Questions for the Record........................    74
    Cantwell, Hon. Maria:
        Opening Statement............................................     2
    Grigas, Dr. Agnia:
        Opening Statement............................................    22
        Written Testimony............................................    24
        Responses to Questions for the Record........................    78
    Industrial Energy Consumers of America:
        Statement for the Record.....................................    86
    Mills, Mark P.:
        Opening Statement............................................    41
        Written Testimony............................................    43
        Responses to Questions for the Record........................    84
    Murkowski, Hon. Lisa:
        Opening Statement............................................     1
        Press Release dated September 13, 2018, from the Department
          of Energy titled ``U.S. Secretary of Energy Rick Perry
          Meets With Russian Minister of Energy, Alexander Novak''...    55
    Slocum, Tyson:
        Opening Statement............................................    28
        Written Testimony............................................    30
        Responses to Questions for the Record........................    81
    Winberg, Hon. Steven E.:
        Opening Statement............................................     4
        Written Testimony............................................     6
        Responses to Questions for the Record........................    68

       THE ROLE OF U.S. LIQUEFIED NATURAL GAS IN MEETING EUROPEAN ENERGY
                                     DEMAND

                                  ----------

                          THURSDAY, SEPTEMBER 13, 2018

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:11 a.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Lisa
    Murkowski, Chairman of the Committee, presiding.

               OPENING STATEMENT OF HON. LISA MURKOWSKI,
                        U.S. SENATOR FROM ALASKA

        The Chairman. Good morning, everyone. The Committee will
    come to order.
        As we meet here this morning, everyone is focused on
    weather and what is coming our way, concerned about the impact
    of Hurricane Florence on the East Coast, particularly North and
    South Carolina and closer to Virginia. We have watched very
    attentively over these past few days, it was characterized as a
    monster storm, the likes of which we have not experienced in 60
    years. It has since been downgraded to Category 2, but I think
    we all know that you still keep a very, very watchful eye,
    because a dangerous storm can cause significant damage. There
    is no doubt that we will see power outages resulting from
    downed transmission and distribution lines, as well as
    flooding. The question is how long will people be without power
    and how quickly will the grid system be back up and running?
        This Committee has spent a fair amount of time following
    this situation in the aftermath of the hurricanes in Puerto
    Rico and the U.S. Virgin Islands, and a year later, a year
    later, you still have some folks that are still struggling. So
    as Hurricane Florence proceeds, know that we are going to be
    monitoring the situation closely. The utility industry has
    already mobilized its mutual assistance program, deploying
    workers from other parts of the country in advance of the storm
    so that restoration work can start as quickly as possible. I
    understand that FEMA is also already standing ready to assist.
        Next Thursday, the Committee was planning to hold an
    oversight hearing on ``blackstart'' capabilities, which is the
    process for returning energy to the power grid after a system-
    wide blackout. Unfortunately, we have had to postpone this
    hearing due to our schedule here in the Senate. When it is
    rescheduled, we will be able to examine system restoration
    plans in the utility industry in the wake of Hurricane
    Florence.
        But today's hearing is not about hurricanes and it is not
    about blackouts, it is focused on the role of the United States
    in exporting LNG, Liquefied Natural Gas, in meeting Europe's
    growing energy demand.
        Europe is now the biggest importer of natural gas in the
    world. The continent consumes close to 15 percent of the
    world's gas, but holds only two percent of the reserves.
    Europe's reliance on the natural gas resource is increasing as
    its coal-fired power plants are phased out and nuclear plants
    are placed out of service.
        Russia, we know, continues to be the main supplier of much-
    needed natural gas to European nations. But as we have seen too
    often, Russia has used this energy resource as a geopolitical
    weapon, cutting off supplies to Ukraine in 2006 and 2009 and
    halting deliveries to Europe. Recent disputes between those two
    nations only highlight Europe's vulnerability given its
    dependence on Russian gas.
        But with the abundance of our domestic natural gas
    supplies, the United States is poised to change that equation.
    Through technological advancements, the U.S. has emerged as the
    largest gas-
    producing nation in the world and is fast becoming a global
    leader in LNG exports.
        According to the International Energy Agency (IEA), gas
    imports to Europe are expected to rise almost 20 percent by
    2040. Our nation is well-positioned to assist our allies in
    diversifying their energy supplies and achieving a level of
    energy security.
        As we examine these global issues today, we are joined by a
    very impressive panel of experts and we appreciate that. Our
    witnesses this morning are appearing on behalf of the
    Department of Energy, ClearView Energy Partners, the Atlantic
    Council, the Manhattan Institute and Public Citizen. I am
    interested in their thoughts on the economic and geopolitical
    implications of a stronger U.S.-EU energy relationship, as well
    as what actions may be needed to maximize the benefits of LNG
    exports to our nation and our allies.
        With that, I turn to Senator Cantwell for your opening
    remarks this morning.

                   STATEMENT OF HON. MARIA CANTWELL,
                      U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Well thank you, Madam Chair, and I, too,
    thank all those that are preparing for the storm that is
    hitting our coast for their hard work and diligence.
        I would point out as I watched the TV, I continued to see
    this information about the European model versus the U.S.
    model, and I hope that as we continue to move forward we will
    put more time into supercomputing information that allows us to
    have good information and modeling about our U.S. storm
    impacts. I think this is vitally important for us and for many
    parts of the United States.
        I would, if I could, as a point of privilege, say something
    good about a storm, which is that I want to congratulate the
    Seattle Storm on winning the Women's WNBA Championship last
    night and for all the good work that they did. We are very
    happy about that Storm. Congratulations to all of them and
    their hard work, and congratulations to Seattle.
        Well, Madam Chair, thank you for holding this hearing about
    the role that U.S. liquified natural gas can play in meeting
    European energy demand. While it is good to discuss ways to
    help our allies, I hope we do not lose focus on protecting U.S.
    consumers.
        Driven in large part by technologies developed through R&D
    by the Department of Energy, there has been a dramatic growth
    in domestic natural gas production. The growth in U.S.
    production has driven down natural gas prices for consumers and
    provided a key U.S. competitive advantage for manufacturers
    that use natural gas as an energy source and feedstock.
        As natural gas production has increased, the volume of
    natural gas exports has also increased, and the United States
    became a net natural gas exporter in 2017 for the first time in
    nearly 60 years. The U.S. LNG exports reached 25 destinations
    last year, and more than half of those LNG exports were shipped
    to three countries: Mexico, South Korea and China. Countries in
    Europe have accounted for the third largest share of U.S. LNG
    exports.
        Several more LNG export projects are expected to be
    completed in the coming years and, once completed, the U.S. LNG
    export capacity is expected to reach 9.6 billion cubic feet per
    day by the end of 2019.
        The Department of Energy has approved over 20 billion cubic
    feet per day in export capacity, with another 30 billion cubic
    feet per day pending in applications. So when the Department of
    Energy makes their public interest determination, they should
    prioritize domestic consumption before exports, and make sure
    that there are proper environmental mitigations in place when
    considering the benefits of using natural gas.
        The prospects of increased U.S. LNG exports and growing
    global LNG markets can create opportunities for countries to
    look to diversify their natural gas supply. For example,
    countries in Europe are heavily dependent, as the Chair said,
    on Russia for their natural gas supply, with Russian natural
    gas accounting for 37 percent of the European imports in 2017.
        However, other factors influence LNG cargo delivery and,
    although Europe has a large number of LNG import facilities,
    they are currently only operating at 20 to 30 percent of
    capacity. I am sure we will hear about this.
        The International Energy Agency projects that U.S. LNG
    suppliers will reach a market share of only about 10 percent of
    the LNG imports to Europe by 2025. So it is clear that the role
    of U.S. LNG can be particularly impactful, but will be driven
    by economics, infrastructure, and perhaps a little policy here.
    I look forward to exploring these topics and hearing from our
    witnesses today.
        Thank you for scheduling this hearing.
        The Chairman. Thank you, Senator.
        We will now move to our panel. As I mentioned, we have a
    good panel this morning. We appreciate you all being here.
        We will start off this morning with comments from Steven
    Winberg, who is the Assistant Secretary of Fossil Energy at the
    U.S. Department of Energy (DOE). We welcome you.
        Mr. Kevin Book has been before the Committee on numerous
    occasions. He is the Managing Director for ClearView Energy
    Partners.
        Dr. Agnia Grigas, who is the Associate at Argonne National
    Lab. She is a nonresident Senior Fellow with The Atlantic
    Council. Welcome.
        Mr. Mark Mills is at the end here, kind of out of order,
    according to my list, but Mr. Mills is a Senior Fellow at
    Manhattan Institute.
        And Mr. Tyson Slocum is the Energy Program Director for
    Public Citizen.
        We will go down the order in the way that you are seated,
    not in the way that I have introduced you there, so sorry for
    that little mix-up on the end.
        Again, we appreciate that you have made time in your busy
    day to help educate the Committee on these important and
    significant issues.
        We ask that you try to limit your comments to about five
    minutes. Your full statements will be incorporated as part of
    the record.
        Assistant Secretary Winberg, if you would like to lead off
    please?

     STATEMENT OF HON. STEVEN E. WINBERG, ASSISTANT SECRETARY FOR
                FOSSIL ENERGY, U.S. DEPARTMENT OF ENERGY

        Mr. Winberg. Thank you, Chairman Murkowski, Ranking Member
    Cantwell and members, member, of the Committee.
        [Laughter.]
        I appreciate the opportunity to be here today.
        Increased supplies of U.S. natural gas in Europe help
    ensure competition in the energy markets, giving our allies a
    safe and reliable source of energy governed by market forces,
    not political win. That's exactly the message that Secretary
    Perry is delivering to his Russian counterparts right now as we
    speak.
        With the United States and Russia as two of the world's
    largest energy producers, Secretary Perry is re-opening a
    dialogue with the Russians to help ensure increased competition
    in the energy markets and to stand firm on U.S. sanctions which
    prohibit any U.S. participation in energy production and
    exploration projects in Russia's deepwater, Arctic offshore and
    shale energy projects. These sanctions are directly related to
    Russia's actions to undermine our democracy by meddling in our
    elections.
        Secretary Perry has stated that every molecule of energy
    that the United States exports is exporting freedom to the
    world. This Administration made a commitment to spreading
    American energy dominance throughout the world through exports,
    and we're delivering on that commitment.
        DOE has authorized exports of LNG at a rate of over 21
    billion cubic feet per day to anywhere in the world not
    prohibited by U.S. law or policy. These non-free trade
    agreement authorizations are primarily spread across ten large-
    scale export projects.
        Six of these projects are in various states of construction
    and operation in Texas, Louisiana, Georgia, and Maryland.
    Cheniere Energy's Sabine Pass facility in Louisiana has been
    exporting LNG since February 2016. Dominion Energy's Cove Point
    facility in Maryland began LNG exports in March 2018, and
    Secretary Perry had the opportunity recently to participate in
    the formal ribbon cutting for the facility along with officials
    from both the Japanese and Indian governments. Four additional
    export projects are expected to come online over the next two
    years.
        In support of the Administration's deregulation,
    deregulatory agenda, DOE proposed a rule to expedite approval
    of smaller volumes of natural gas exports to non-free trade
    agreement countries. We call this the Small-Scale Rule, and the
    final rule went into effect this past August.
        DOE's action to increase U.S. LNG exports are critical to
    ensuring that Europe pursues diversification of its energy
    supplies. The large-scale facilities currently operating and
    under construction in the U.S. have long-term authority to
    export LNG anywhere in the world, including Europe, except
    where otherwise prohibited by law, for example, if there are
    sanctions.
        As European Union (EU) member states decrease their
    reliance on electricity generation from coal to comply with EU
    emission goals, European countries are becoming more dependent
    on natural gas overall. As a consequence, due to a lack of
    supply routes and inefficient pipeline buildout, Europe is also
    becoming more, not less, dependent on Russian natural gas. This
    does not have to be the case.
        Our nation is endowed with vast supplies of natural gas and
    production is growing rapidly. The U.S. Energy Information
    Administration (EIA) projects that dry natural gas production
    will reach 110 billion cubic feet per day by the year 2040, up
    from the projected production of nearly 80 billion cubic feet
    per day this year. The EIA also projects U.S. LNG exports to
    ramp up from 2.8 billion cubic feet per day in 2018 to the rate
    of 14 billion cubic feet per day in 2040.
        The United States has the natural gas supplies to spread
    freedom throughout the world by giving our allies a safe and
    reliable energy supply, and we look forward to working with our
    European allies to bring more U.S. natural gas to the continent
    moving forward.
        I thank you for your attention, and I look forward to your
    questions.
        [The prepared statement of Mr. Winberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        Mr. Book, welcome.

     STATEMENT OF KEVIN BOOK, MANAGING DIRECTOR, CLEARVIEW ENERGY
                             PARTNERS, LLC

        Mr. Book. Thank you.
        Good morning, Chairman Murkowski, Ranking Member Cantwell,
    distinguished members of this Committee. My name is Kevin Book.
    I head the research team at ClearView Energy Partners, an
    independent firm that examines macro energy trends for
    institutional investors and corporate strategists. Thank you
    for inviting me to contribute to your discussion of U.S. LNG
    exports to Europe.
        Our nation is on track to play a major role in global gas
    markets by the early years of the next decade. Getting there
    will require much investment, not just financial but also the
    intellectual investment, in sound energy policy that this
    Committee continues to make. I'm grateful for the important
    work you are doing.
        I would like to start with a small word that tells a big
    story. That word is ``net.''
        The Energy Information Administration, or EIA, reported
    0.34 billion cubic feet of net natural gas exports in 2017,
    0.34. It may not sound that big compared to EIA's latest
    production forecast. The agency sees 84.1 billion cubic feet
    per day in 2019, up 14 percent from 2017. But before last year
    one must go all the way back to 1957 to find another year of
    net exports. During the six intervening decades, the U.S. was
    the net importer.
        The star of the story is LNG. U.S. LNG exports, year-to-
    date through June, were up 58 percent over the same interval
    last year. The U.S. exports natural gas by pipeline too, but
    LNG has gone from essentially zero percent of the export mix in
    2016 to an average of more than 25 percent over the 12 months
    through June of this year.
        Worldwide LNG supplies a growing share of gas demand. The
    International Energy Agency projects that LNG will account for
    about 12 percent of global gas demand by 2020.
        We are on our way to becoming a decisive player in these
    global markets and perhaps even a dominant one. U.S.
    liquefaction capacity is on track to be third behind Qatar and
    Australia by 2020. If project sponsors end up building every
    facility that DOE and the FERC have approved so far, our
    capacity could exceed 18 billion cubic feet per day which would
    make the U.S. the world's largest LNG exporter.
        Today, however, only about eight percent of U.S. LNG goes
    to Europe. Most of the rest goes to Asia and Latin America. On
    the other side of the pond, the numbers are similar. Only about
    four percent of European LNG comes from the U.S. Most of the
    rest comes from Africa and Qatar.
        The reasons for this stand, as the Ranking Member said,
    from economics, infrastructure and policy.
        Economics first. Europe doesn't import that much LNG from
    anywhere, only about 15.5 percent of net European gas imports
    came in as LNG last year according to BP data. The rest came in
    by pipe and much of that, yes, from Russia. Russia supplied
    about 56 percent of Europe's net pipeline imports, about 47
    percent of all net imports and about 36 percent of European
    consumption.
        Second, infrastructure. The International Gas Union
    estimated last year's worldwide average re-gasification
    terminal utilization rate at about somewhere between 34 and 41
    percent. By contrast, data from Gas Infrastructure Europe show
    utilization of about 20 percent. This could reflect limited
    exporter interest in selling cargoes to Europe that could
    command higher prices elsewhere.
        In addition, European re-gas utilization rates vary widely
    with geography. This could suggest infrastructure gaps,
    regulatory barriers or both. It also could reflect country
    specific consumption differentials.
        To policy. U.S. supply additions that alleviate LNG
    imbalances worldwide could narrow price disparities across
    markets. That has potential to increase LNG imports into
    Europe. Faster throughput by the FERC which handles federal
    environmental reviews of LNG export facilities on behalf of the
    DOE could help. The environmental review schedules FERC
    released last Friday imply a target average window between
    draft and final environmental statements of about four months.
    That would be about one month faster than the average my
    colleagues have compiled for all comparable projects since
    2010. The burden does not fall exclusively on the Commission.
    Some project sponsors respond faster than others. Under FERC's
    process, better prepared applicants can move more quickly. This
    merit-based approach seems appropriate.
        To close. The world wants more natural gas and U.S.
    exporters have LNG to sell. European importers make their own
    choices, but every additional cargo of LNG that the U.S. puts
    on the water can give them better choices.
        Madam Chairman, this concludes my prepared testimony. I
    will look forward to any questions you or your colleagues may
    have at the appropriate time.
        [The prepared statement of Mr. Book follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Book.
        Dr. Grigas.

      STATEMENT OF DR. AGNIA GRIGAS, ASSOCIATE, ARGONNE NATIONAL
      LABORATORY, AND NONRESIDENT SENIOR FELLOW, ATLANTIC COUNCIL

        Dr. Grigas. Good morning, Chairman Murkowski, distinguished
    members of this Committee. My name is Dr. Agnia Grigas, and I'm
    an Associate at the Argonne National Laboratories and a non-
    resident Senior Fellow at The Atlantic Council. I'm also the
    author of this new book, The New Geopolitics of Natural Gas.
        American LNG exports to Europe are relatively new. However,
    they have significant, positive national security, economic,
    political and geopolitical implications for the United States
    and its allies.
        In terms of national security, the United States, as the
    largest NATO power and a key security guarantor for a number of
    European states of alliance, is directly implicated in the
    security repercussions of Europe's energy dependence on Russia.
    We well know that Russia and its national gas company, Gazprom,
    uses gas exports as a means of political influence, coercion
    and even as an energy weapon, thus directly threatening the
    national security of European gas importing states.
        In terms of the economic implications, LNG exports,
    American LNG exports to Europe will be of economic benefit to
    the United States energy sector, trade balance and the economy
    overall.
        In contrast, however, Russian gas weaponry has been highly
    detrimental to the welfare of our European states, European
    ally states. We have seen this from the numerous gas cuts
    Russia has pursued in Europe in 2005, 2008 and 2014. For
    instance, in the very cold winter of 2008-2009 when Gazprom cut
    supplies to Ukraine, they impacted the supplies of six European
    Union states and, in fact, Poland even experienced ten
    casualties as citizens froze to death when there was no gas
    supply in this very cold winter.
        Moreover, if U.S. LNG is not exported to Europe, those
    economic benefits will instead accrue to the Kremlin regime
    which is very well known for its export of corruption, money
    laundering and trying to spread the worst types of business
    practices.
        When it comes to the political implications, make no
    mistake, Russia certainly has used and continues to use the gas
    exports as a means to form political alliances and to spread
    its political influence in Europe. If we look at the German-
    Russian gas relationship that has been ongoing since the late
    1960s, as a result today, we see that German companies with
    strong business ties to Russia have been among the most vocal
    critics of western sanctions against Russia since 2014.
        We've also seen Russia try to enlist some of the most high-
    profile European politicians via their gas business. For
    example, ex-German Chancellor, Gerhard Schroeder, who joined as
    the Chairman of Nord Stream as subsequently as the Chairman of
    the largest Russian oil company, Rosneft. He's also pursued an
    anti-American campaign of German politics.
        In Italy, a country that has also been increasingly
    dependent on Russian gas imports, we also see an effort to
    create a similar type of alliance between the Italian energy
    company, ENI and Gazprom.
        A NATO strategic member, Turkey, has also been increasingly
    reliant on Russian gas and we've seen the Kremlin try to use
    its gas relationship as a forum, as a means of creating a
    closer relationship with Turkey's President Erdogan.
        When it comes to the geopolitical implications, the exports
    of American LNG would serve to strengthen Washington's global
    leadership and serve as a source of leverage in the currently
    emerging geopolitical competition between America's rival
    powers such as China and other revisionist states, such as
    Russia.
        Also, whoever will supply the European continent will have
    the degree of political and economic influence in key European
    industrial states and in the politically and economically
    contested regions of Eastern Europe.
        In summary, American LNG exports to Europe would bring
    strategic, economic and geopolitical benefits to the United
    States and its European allies.
        Thank you, Chairman Murkowski. This concludes my prepared
    testimony. I look forward to questions.
        [The prepared statement of Dr. Grigas follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Dr. Grigas.
        Mr. Slocum, welcome.

      STATEMENT OF TYSON SLOCUM, ENERGY PROGRAM DIRECTOR, PUBLIC
                                CITIZEN

        Mr. Slocum. Thank you very much, Chairman Murkowski,
    members of the Committee. I'm Tyson Slocum. I'm the Energy
    Program Director with Public Citizen. We're one of America's
    largest research and advocacy groups, representing the
    interests of household consumers across the United States.
        The main reason that we're talking about LNG exports is
    because natural gas producers are demanding that we accelerate
    the ability for them to export their product. And that's
    because for natural gas producers, they've been mired in an era
    of low prices, right?
        Gas prices domestically are stubbornly stuck at around
    $3.00 per million BTU. What this means is that it's limiting
    the ability of natural gas producers to earn bigger profits. So
    what their strategy is, is to come up with new markets to sell
    their U.S. product abroad at higher prices. Understanding that
    exporting LNG is all about domestic producers getting access to
    higher prices abroad helps us understand some of the
    implications for household consumers and for domestic
    manufacturers. And what that means is, it's going to expose
    American consumers to higher prices.
        That's what the Department of Energy Macroeconomic Study
    concluded this summer. It predicted that domestic natural gas
    prices are going to double as a result of increasing LNG
    exports. They try to claim that that's going to be offset
    because Americans are going to enjoy the benefits of higher
    share prices from natural gas producers and LNG exporters, but
    you have to remember that the ownership of shares in those
    companies are highly concentrated among the wealthiest
    Americans. The most people are going to be subjected to the
    higher prices that we're going to see at the retail level and
    at the end user level.
        The public interest standard as interpreted by the Supreme
    Court over the years has insisted that exports have to take
    into account the impact on supply and prices. I think if we're
    going to be approving a significant increase in export
    capacity, it's going to conflict with the traditional public
    interest standard of ensuring that consumers have access to
    fairly priced commodities.
        I think all we have to do is look at the problems going on
    in Australia today which Australia has embarked on a very
    aggressive LNG export strategy with disastrous results,
    especially for the more heavily populated eastern part of that
    country. We've seen threats of supply shortages and
    skyrocketing prices for Australia that have been impacted by
    the significant growth in LNG exports to the point where now
    Australia is talking about trying to reduce the amount of those
    exports.
        So this whole concept of trying to counter Russian
    influence in Europe is an admirable one, but I think that there
    are limits to so-called commodity diplomacy and those limits
    are market forces. The fact is, is that the U.S. Secretary of
    State does not dictate where exports go. Markets decide. And
    Europe, according to the International Energy Agency, is a
    constricting market over the next five years. In fact, they
    term Europe the market of last resort.
        Where sales are going is China. Over the next five years,
    one third of new natural gas demand is going to be from China.
    Already 45 percent of U.S. LNG exports are going there, and
    that's only going to accelerate as China's demand continues to
    increase and because of pricing changes in the way that LNG
    markets work.
        Traditionally, LNG has been financed through the assumption
    of long-term, typically 20-year contracts. We're seeing a
    radical change in that financing model, a move toward spot and
    short-term contracts. That only exacerbates the movement of
    supplies toward where the demand is and the demand is all going
    to Asia. And when you look at where the demand growth is in
    China, it primarily is in the industrial and manufacturing
    sectors. So exporting LNG from the United States to China is
    going to be assisting their manufacturing industry at the
    expense of our own. If we're talking about revitalizing
    American manufacturing, we have to have access to those raw
    materials.
        I think that exporting unrefined raw materials is a
    Nigerian model of economic growth. The United States has
    consistently led because we focus on value added manufacturing
    and high tech, and that's what LNG exports threaten to
    undermine.
        And I think, finally, and this is a very important point,
    that we shouldn't be talking about significantly expanding LNG
    exports at the same time that we are eviscerating regulations
    to deal with methane emissions from the oil and gas sector and
    our lack of federal regulations to deal with climate change.
        Gas does have a favorable emissions profile compared to
    coal, but the fact of the matter is, is that it is a fossil
    fuel and we have a duty and an obligation to ensure that we
    have proper regulation. We shouldn't be exporting this product
    which is going to result in large domestic production increases
    without having corresponding methane and greenhouse gas
    emission regulations.
        Thank you very much for your time. I look forward to any
    questions you have.
        [The prepared statement of Mr. Slocum follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Slocum.
        Mr. Mills, welcome.

     STATEMENT OF MARK P. MILLS, SENIOR FELLOW, MANHATTAN INSTITUTE

        Mr. Mills. Madam Chairman, thank you for inviting me back.
    Members of the Committee, thank you for the opportunity to
    testify.
        As the Committee is well aware, in recent months the
    President has elevated the issue of Europe's dependency on
    Russia for natural gas and, collaterally, elevated the
    opportunity and the discussion about the role of the United
    States in taking a larger role for European supplies. But a
    number of European officials, as you know, have said that they
    believe this is all about, and I quote, ``American self-
    interest.'' I think we can be honest. Of course, it is. It's
    also in Europe's self-interest.
        And these--so let me outline very quickly, three underlying
    facts that illustrate the opportunities that are inherent in
    mutual self-interests because that's when allegiances and good
    relationships can be established, when we have mutual self-
    interests.
        First, Europe, as has been said here earlier, is becoming
    increasingly dependent on imports for natural gas. Its own
    production is in rapid and, in fact, faster than forecast,
    decline. And at the same time, Europe's needs domestically for
    natural gas are rising, in fact, as a direct consequence of its
    policies to promote wind and solar. So, as you know, modern
    digital economies are very dependent on reliable power, and
    that combined with the push to electrify the transportation
    sector will accelerate the need for what can only be called, 24
    by 7 power which wind and solar cannot deliver. It's simply a
    fact and indisputable that completion of Gazprom's
    controversial Nord Stream II will increase Europe's reliance on
    Russia to about 40 percent of its gas imports.
        Which leads me to my second point which is, interestingly,
    a recent Pew Global Survey found that 78 percent of Europeans
    don't trust Russia to do the right thing. And the quote is,
    ``to do the right thing when it comes to world affairs.'' As
    the European Council on Foreign Relations recently put it, the
    EU is, and I quote, ``in open battle with Russia over the norms
    of international conduct'' which, the Council cautioned, won't
    be won by ``countering Russia'' but rather from ``improving
    Europe's resilience.''
        So my third point then is that Europe has a remarkably easy
    path, of course, for increasing its resilience, in particular,
    in critical energy markets. This has been noted earlier by the
    Secretary, the EU's existing--and by you, Madam Chairman--the
    existing LNG import capacity is operating at about 27 percent
    utilization. Putting those terminals to work at full capacity
    would provide nearly threefold more gas than the Nord Stream II
    pipeline will deliver if it's completed. Some European
    officials which have indicated receptivity to buying more
    American LNG, they say so at what they call, ``competitive
    prices'' but it bears noting that EU policymakers have
    demonstrated an appetite and willingness to embrace other
    energy policies for important non-price attributes and security
    and resilience, I would submit, are such attributes.
        The current price, it's interesting to note, that the
    current price premium between U.S. LNG and, of course, low cost
    Gazprom gas, if Europe were to use all of its idle import
    capacity to buy American LNG, that would raise the cost of
    Europe's overall energy imports, but it would only do it by a
    total of 10 percent, probably less, more like 6 percent. That
    could be the cheapest resilience hedge that the European
    policymakers could buy.
        However, as you know, LNG and energy policy, both, are
    long-term issues and long-term gains. And LNG, in particular,
    involves infrastructure when it comes to exports that require
    long-term, major capital commitments from patient and risk-
    taking investors.
        In order to reduce uncertainty and market friction and
    encourage the necessary long-term investments, there is one
    specific feature of U.S. LNG export policy that, I think,
    Congress could address and that is the requirement that
    American businesses seek permission in the first place from the
    Department of Energy to export gas. This is an antiquated
    legislative artifact that stipulates that it has to be, ``in
    the national interest,'' as you know, but I think it's
    demonstratively the case that it is de facto in the national
    interest for any and all businesses willing to invest in such
    exports.
        Insofar as adequacy of American supply to fuel those
    increased LNG terminals, I would just want to note for the
    record that there is no forecast for domestic demand uptake for
    any use of natural gas, including accelerating CNG vehicles
    that could come close to absorbing half of the expected
    increase in domestic gas production from the productive shale
    fields. We just are going to have too much gas production
    capacity.
        Now I know there are legislative efforts underway to
    require that DOE expeditiously consider and grant such
    permissions, but I don't think that approach is enforceable
    over the long-term, nor does it solve the core issue of
    potential future capriciousness and I don't think it's
    responsive to the new energy realities that exist both in
    America on the supply side and Europe on the demand side.
        So I'm suggesting it's time that Congress consider removing
    what could only be called sand in the gears of commerce and
    eliminate these kind of political uncertainties in the long-
    term with respect to export policies. And I think Congress
    should, in fact, repurpose DOE's role here from one of
    permission granting to export assistance which is what we do
    with agriculture, at the Department of Agriculture. I think
    those actions would be powerful and productively impact both
    domestic markets and send a very powerful signal of the
    geopolitical status quo.
        Let me conclude that by noting that the President of the EU
    just last month also cited the importance of, in his words,
    ``eliminating the red tape restrictions'' around the
    uncertainties about U.S. LNG exports.
        Thank you, Madam Chairman.
        [The prepared statement of Mr. Mills follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Mills, and thank you to each
    of you for your comments, your testimony, this morning. We
    greatly appreciate it.
        As I sit here listening, you mention the new energy
    reality. We have just come so far. I have been privileged to be
    on this Committee now for 15 years and to think how this
    country has changed in terms of our position as an energy
    supplier, not only to meet our needs, but to be in the position
    and in that role where other can actually look to us.
        It was not too many years ago we were working the
    initiative to remove the 40-year policy that prohibited oil
    exports outside of the State of Alaska and our opportunity to
    export oil, and we were basically sitting in the back seat. It
    has been interesting because when that debate was going on
    there was a great deal of discussion about well, if we are
    allowed to move forward with oil exports, the price of oil is
    going to go sky high.
        The question I would like to start off with today, Mr.
    Slocum, you have shared a view with the Committee that is,
    perhaps, not endorsed by the rest of the panel here in stating
    the position that domestic and natural gas prices will double
    because of exports.
        I do not know who wants to jump in here on this, but I
    would appreciate a rebuttal or a response to that. Obviously,
    there has been discussion here about the national interest
    finding that has to, at this point in time, move forward to
    make sure that the determination to allow for additional
    exports does not unduly impact prices.
        Assistant Secretary, would you like to speak to this as an
    issue that is under consideration today?
        Mr. Winberg. Sure, I'd be happy to and thank you.
        I think there's several facets here that we need to
    consider, and let me start with the first one, which is the
    technology. We're still climbing the learning curve on
    producing both oil and natural gas from unconventional
    resources, often called shale plays. And there's, as we climb
    that learning curve, as the producers understand how to get
    more of the resource out of a frack zone and we're going to
    make some pretty significant strides as we move forward on
    that, as we climb the learning curve.
        The second thing that the Department is doing, the Fossil
    Energy Office and Senator Cantwell raised the issue of
    supercomputers or high-performance computing. We're now, we
    have about a decade worth of data that we have amassed from the
    producing community in unconventional oil and gas and that
    data, combined with our, the Department's high-performance
    computing capability at our national labs, combined with
    physics-based modeling, we believe that we're going to be able
    to increase production. So we're going to be able to go beyond
    what they currently produce which is only about 10 percent, by
    the way, within the frack zone. So that's one point.
        The second point is that EIA projects that we're going to
    be at 110 billion cubic feet per day by 2040, but only 14
    billion cubic feet per day in LNG exports. And just to put this
    into perspective--right now, we're at about 3.5 billion cubic
    feet. We have four projects coming on in the next two years
    that will take us to about 11 billion cubic feet, and we've
    approved 21 billion cubic feet. So there is an enormous amount
    of head room here. And when you combine the learning that's
    going on in the fields in the unconventional gas space along
    with the build out of these terminals, there is sufficient gas
    for us to send to our allies and friends over in Europe.
        The Chairman. Other comments?
        Dr. Grigas.
        Dr. Grigas. So, regarding--I'd like to follow up on the
    price issue because the figures I have, actually, are
    different.
        So the DOE did a series of studies on the impact of exports
    on gas pricing, and the figures I have is that they anticipate
    a gas price increase of somewhere between 4 to 12 percent. And
    the conclusion of that study, not doubling, and the conclusion
    was that an increase in production, overall, should balance the
    market effect of exports and, in fact, that GDP growth will
    offset any negative effects of these gas price increases for
    the U.S. economy.
        The Chairman. Thank you.
        Mr. Mills, and then we will go to Senator Cassidy here. Go
    ahead.
        Mr. Mills. Just to add, I take the technology perspective,
    if I might, Madam Chairman.
        The interesting thing about natural gas markets is that I
    was on the front lines because of our, my involvement, in a
    technology venture fund that's working with the shale producers
    and midstream folks.
        The cost of natural gas in parts of the Permian these days
    in West Texas is negative, which is kind of interesting. There
    aren't many critical commodities that are produced in a high
    volume. I mean, they produce tremendous quantities of it, for
    which, in effect, you're being, it's not leaking methane. This
    is, natural gas, you're effectively paying somebody to take
    away.
        It's clear that that's not an aberration. That's a
    consequence of the nature of this particular resource. So as
    demand for oil, and you're an oil producer, you co-produce
    natural gas and you're not interested, particularly, in the
    fact that it's not generating a profit for you. So you have
    these odd negative prices.
        The other thing is in the Marcellus in the Pennsylvania
    region, the production of gas, like Alaska, is astonishing. I
    mean, the quantities of gas that can be produced, technically,
    technologically, are utterly astonishing. The only question
    that you have as a technologist is, you know, the technologies
    around this domain getting better fast enough to keep driving
    the cost curve down, the cost of producing it?
        Every engineer I talk to on the front lines answers, yes,
    not even close to an acid tone. What that refers to is, with
    all due respect to my friends at DOE who make forecasts at EIA,
    they have consistently demonstrated an inability to understand
    the price dynamics of these markets. And it's not a criticism
    that's an insult. It's because it's very difficult.
        One thing we do know is the productive capacity is
    astonishing which benefits American consumers. Domestic
    consumers will benefit from global competition because LNG
    can't be exported unless it's cheap when it goes onto the train
    that liquifies it. It has to be very, very cheap. It's always
    going to be cheaper to buy in America which is why there's
    something like $100 billion of capital construction, private
    money, building chemical processing plants and plastic plants
    to use the cheap domestic gas. They're making these bets on the
    assumption that gas will be cheap in America for a very long
    time.
        The Chairman. Let's go to Senator Cassidy.
        Thank you.
        Senator Cassidy. Thank you, Madam Chair.
        Thank you all for your testimony.
        I will just tell you. My observation in our study is that
    LNG and increased natural gas production is good for the
    economy, good to decrease greenhouse gas emissions and good for
    international trade.
        We actually have a White Paper about the release that hits
    this, among other things, showing that our greenhouse gas
    emissions have declined precipitously because of natural gas
    replacing coal and, frankly, elsewhere where they have used
    natural gas instead of coal, you have seen that same
    precipitous drop. Not only does it cause it by direct
    substitution but also by enabling the deployment of renewables
    which, as you say, Mr. Mills, do not have a certain volatility.
    When you deploy one unit of natural gas, studies show that you
    end up deploying about 0.88 units of renewables. So it enables
    the renewable, if you will.
        With that said, I kind of lost who said this, but the point
    was, and I think you said, Mr. Slocum, on this point that most
    of our gas is going to China because you have a better price in
    the spot market there than in the EU.
        Now I get that, but let me ask. There's a lot of pipeline
    gas coming from Kazakhstan, from Azerbaijan and potentially
    from Israel going over to the Mediterranean coast of Europe.
    Will that supplant the potential for a market of LNG? Let me
    first ask that, when all that is fully online, and will it
    diversify their energy source away from the Russian
    preponderance right now? Anybody want to take that? Anyone?
        Dr. Grigas. So the southern gas corridor which is coming
    online which will bring about 25 BCM of Caspian gas into
    Europe, this is a new development. But this is still a very
    small amount, given Europe's overall gas demand. I mean, again,
    Europe today is the largest gas importer in the world. Its
    total gas demand is about 550 BCM.
        So I think there's still a lot of appetite for American LNG
    in Europe. And we can see that already from the fact that----
        Senator Cassidy. Even despite, even if the Israelis and the
    Caspian come over, they will still be----
        Dr. Grigas. Well, the Caspian is certainly coming online.
    The Israeli, that's something that's a work in progress.
        Another element to consider here is that I think the U.S.
    could really use right now and take advantage of its leading
    position and its, you know, first mover position as a shale
    producer and LNG exporter, rather than leave these markets to
    competitors. Again, since 2016 American LNG has gone to a wide
    variety of countries all across the European continent and I'll
    give you the list. Some of these countries----
        Senator Cassidy. Well then, hang on. Let me hold off on
    that just because I have such limited time, although I do
    suspect I could have a second round.
        [Laughter.]
        But if the price point is better in South America and Asia,
    there is going to be, just from the way markets work, it is
    going to disproportionally go there as opposed to Europe even
    though that potential market is there.
        Yes sir, Mr. Book.
        Mr. Book. If, Senator, I may offer? Yes, of course the
    market that has the greatest scarcity and commands the greatest
    price premium will be the most attractive, but it's not the
    only market at all times.
        One of the ways to think about it is that the differentials
    that exist today are a function of an undersupplied, global
    inventory of LNG to satisfy the demand that's being----
        Senator Cassidy. So the point you made, the more supply
    there is, the more those price differentials would----
        Mr. Book. They will start to narrow, yeah.
        Senator Cassidy. So then, let me ask. Is the amount that is
    coming on both from the Caspian as well as from our XL, our
    production, will that be adequate to decrease that differential
    between Asia and in the EU?
        Mr. Book. I think it would be premature to expect that the
    amount that we're bringing on now will do all of the work. It
    will do some of the work, and it's not the only work being
    done.
        Senator Cassidy. Yes, the Aussies are doing it. The
    Canadians are doing it.
        Mr. Book. As you add to the global supply, those
    differentials will start to tighten.
        Senator Cassidy. One more thing. One thing I have heard,
    but I do not know it to be true. And ma'am, this might be your
    answer. When the Germans are bringing that gas in and selling
    it to the rest of the EU, are they putting a premium on that or
    will say France get it at the same price as the Germans
    purchase? Mr. Mills, you are kind of laughing. Do you know the
    answer to that?
        Mr. Mills. I apologize. I don't know the intricacies of the
    German market, but I appreciate the motivation in the question.
        Senator Cassidy. Yes.
        [Laughter.]
        Dr. Grigas. Well, I'll say here, Germany has an incentive
    to become a gas hub of Europe. So basically, directly receiving
    gas from Russia via Nord Stream I and Nord Stream II and
    subsequently using its pipeline system, its infrastructure to
    distribute that gas to the rest of Europe. So, for Germany they
    have, you know, domestic, economic incentives to eliminate
    other transit states and become, again, the gas hub.
        Senator Cassidy. That would suggest that they would not put
    a premium because they would want to become the hub. On the
    other hand, unless they put a premium there is really no
    advantage to being the hub.
        Dr. Grigas. I think their industry and their energy sector
    will be making money from being the distributor of gas for the
    rest of Europe.
        Senator Cassidy. Gotcha, which may end up creating a market
    opportunity for others if the Germans charge too much a
    premium, I would think.
        I yield.
        The Chairman. Senator Daines.
        Senator Daines. Chair Murkowski and Ranking Member
    Cantwell, thank you for holding this hearing today. This is a
    topic that I am very interested in.
        In fact, I want to thank the Chair for inviting me for
    visit that we made at the Hammerfest LNG facility in Norway a
    year ago. In fact, very helpful. We were able to discuss some
    of these issues on the ground there regarding LNG.
        I think this is very important. It is important for the
    U.S. to continue to grow as a global energy leader in order to
    strengthen our allies in Europe as well as our national
    security. When I think about energy, I am not sure there is a
    more important geopolitical issue on the table than energy. I
    have said it before. I will say it again. The less the U.S. and
    Europe rely on oil and gas from hostile or volatile countries,
    the safer and stronger they are.
        The U.S. has the unique ability to play a larger role in
    the global energy economy. I just saw the news that came out in
    the last 24 hours, and we are now officially the world's
    largest producer of oil. I believe we need to make this final
    push to really, truly move, as has been said by the Trump
    Administration, move us from independence to global dominance
    as it relates to energy.
        Dr. Grigas, I recently sent a letter to Secretary Mattis
    with some of my colleagues on this Committee, including
    Senators Manchin and Sullivan, discussing the importance of
    lessening the United States Armed Forces in Europe dependence
    on Russian sourced energy. We also recently passed legislation
    that is part of the NDAA directing the Secretary to do just
    this. At the very least, the U.S. should be supplying our own
    troops and not relying on a country that is known for playing
    political games with energy.
        My question is, what do you see as the geopolitical
    concerns with relying too heavily on foreign, especially
    Russian, sourced energy for our troops as well as our NATO
    allies?
        Dr. Grigas. This is an excellent point you bring up. I
    think this is absolutely detrimental and dangerous for the U.S.
    military to rely on foreign sourced energy, especially energy
    from hostile countries.
        We know what Russia does with their energy supplies in
    peace time, so we can only imagine what type of tactics they
    could rely on during times of conflict.
        And it's certainly a paradox for NATO which, you know,
    seeks to defend European country states from hostile countries
    to then at the same time, you know, send revenues to Gazprom
    and other such Russian energy companies.
        I think there should be more work done in this area and I'd
    like to highlight that there is an institution, a NATO Center
    of Excellence for Energy Security, located in Lithuania that
    has done some work on this question, essentially ensuring the
    energy security supply of NATO military troops. And I think
    they should be tasked to doing more work on this subject.
        Senator Daines. Thank you.
        I want to shift gears here, Assistant Secretary Winberg.
        I just read this morning the good news that the Department
    of Energy recently authorized 2.14 billion cubic feet per day
    of LNG exports from the Freeport project in Texas. I am excited
    to see multiple other LNG projects ramping up in the next few
    years. I believe there are four more projects currently under
    construction.
        A question is, are these projects on track for approval by
    DOE and how much LNG exports would that represent?
        Mr. Winberg. Well, the Freeport project we announced
    yesterday, and they have an authorization for 2.14 billion
    cubic feet per day. That will get them to their startup and
    also for short-term sales.
        The total four projects that will be coming on will take us
    from 3.4 billion cubic feet per day which is what we have with
    Cove Point and Sabine Pass, and it will take us up to 11
    billion cubic feet per day.
        I should mention that those are, all of those projects, so
    all six of those, the two operating and the four coming online
    here in the next couple of years, can deliver LNG to both free
    trade and non-free trade agreement countries. And so, moving
    gas into Europe, moving gas into Asia is available to all of
    those six----
        Senator Daines. Do you anticipate and foresee a large
    portion of those exports headed to Europe?
        Mr. Winberg. I think that's difficult to say.
        Right now, we have sent some 50 or 43 cargos to nine
    countries in Europe. I expect some of that will continue, but I
    don't know that that majority of the LNG will be going into the
    European market. These are private companies, and so they're
    free to move that gas where they want.
        Senator Daines. I am a big believer in Milton Friedman and
    free to choose, so I understand.
        Mr. Book, one last question. Your written testimony spoke a
    lot about the increase in U.S. exports. Exports are increasing
    sharply. We are building more terminals. We are producing more
    natural gas with this shift. Can the U.S. meet Europe's demand
    for LNG?
        Mr. Book. Well, Europe's demand for LNG, arguably, is met
    when Europe buys the LNG it needs. The question, I guess, is
    what they need it for.
        As a substitute for all of their imported gas, no. The U.S.
    isn't going to be able to do that with LNG, nor would it
    necessarily be in Europe's interest to make an undiversified
    commitment to another single supplier. But can we help close
    the gap?
        Senator Daines. Right.
        Mr. Book. In growth? Yes.
        Senator Daines. So, let me ask you this. What is that gap
    back to, you said we cannot replace all of it. What is the gap
    and what could we do with that gap?
        Mr. Book. Think about this. Europe net imports about 39
    billion cubic feet per day, roughly 36 percent, 37 percent,
    come from Russia. So, 14 billion cubic feet per day of gas.
        Start with one. Every single one you add diversifies and
    provides more opportunity for Europe. They may not choose to
    buy U.S. gas. All that matters is that U.S. gas goes into the
    world and that other LNG, wherever it might be found, that the
    U.S. gas might displace----
        Senator Daines. Right.
        Mr. Book. Can go to Europe.
        Senator Daines. Maybe the better question is, do you think
    the U.S. has the ability to replace Russia as the largest
    supplier of LNG to Europe?
        Mr. Book. Well certainly as the largest supplier of LNG,
    we've got them beat cold because they're not sending much LNG
    to Europe.
        As gas goes, Senator, I think we're a long way from
    displacing all 14 BCF a day, but we can cut it down.
        Senator Daines. Okay, thank you.
        The Chairman. Senator Gardner.
        Senator Gardner. Thank you, Chairman Murkowski. Thanks to
    all of you for your testimony today.
        On Tuesday I had the opportunity to hold a roundtable in
    Grand Junction, Colorado, which is on the Western Slope. We
    were joined by county commissioners from across Western
    Colorado as well as a county commissioner from Oregon. We also
    were joined by Assistant Secretary of State, Frank Fannon from
    the Department of State who handles energy issues at the
    Department of State and Assistant Secretary Joe Balash who is
    in charge of the mineral department over at Department of the
    Interior.
        We discussed the issue of Jordan Cove, the opportunity to
    have a West Coast outlet for Rocky's natural gas and the
    importance of Asia as an expanding market, a region of the
    world that will soon have 50 percent global population, 50
    percent global GDP. And Jordan Cove represents an opportunity
    for us to have an access to those markets, countries that look
    toward the United States for energy security because they know
    our rules, our transparency, our environmental standards, are
    far higher than turning to China or other nations for those gas
    supplies.
        We also talked about Russia and the possibility that if a
    state like Colorado, I will give you an example, the Mancos
    Shale in the Piceance Basin. In 2003, USGS estimated that there
    were 1.3 trillion cubic feet of natural gas, shale natural gas,
    in the Mancos formation. In 2016, they revised the estimate, 66
    trillion cubic feet in the Mancos Shale in Colorado in the
    Piceance Basin. In just 13 years from 1.3 trillion to 66
    trillion cubic feet, the opportunity for us to play a part,
    Colorado's role in geopolitics is pretty incredible.
        When it came to Russia though, I believe it was the
    Assistant Secretary of State who said, ``Russia uses its
    natural gas for power and it uses its oil for money.'' I mean,
    he is certainly not talking about electrical power. He is
    talking about state power. Would you agree with that statement,
    Mr. Winberg?
        Mr. Winberg. Well, I think they gain quite a bit of money
    on both oil and gas but I think, certainly, the ability to turn
    the valve off in the middle of winter into the European market
    gives them a certain amount of power and as we've talked about
    here this morning, the LNG, the opportunity to export LNG out
    of the United States and out of the great State of Colorado
    into other markets helps alleviate that ability of Russia to
    utilize that power.
        Senator Gardner. Does anyone on the panel disagree that
    Russia is using its natural gas as a political tool?
        [No response from panel members.]
        No one disagrees. Let the record reflect that no one
    disagrees with that statement.
        If we see policies in the United States that lessen our
    ability to produce natural gas or to export natural gas--Mr.
    Book, you talked about the fact while natural gas may not be
    going directly to Europe, if it displaces a Russian sale
    somewhere that means somebody is freed up to sell to a European
    nation, Germany as an example.
        If we pursue policies that lessen our ability to enter the
    world market, lessen production here, that empowers Russia.
    Would you agree with that, Mr. Winberg?
        Mr. Winberg. Absolutely.
        Senator Gardner. Dr. Grigas?
        Dr. Grigas. Absolutely, and I would also like to highlight
    that Russia is also aggressively looking to enter the LNG
    markets. So if we don't move now, we can expect more
    competition from Russia in the future.
        Senator Gardner. There was a 2014 New York Times article
    about Russia funding anti-hydraulic fracturing efforts in
    Europe. There have been studies and concerns in the United
    States that the same activity has been used here.
        Russia's continued use of information/disinformation
    campaign hybrid warfare to fund division of the United States
    has been used to help depress, destroy and divide Americans on
    our energy production.
        Are you familiar with these efforts, Dr. Grigas?
        Dr. Grigas. Yes, absolutely.
        Senator Gardner. And they have occurred? This is a real
    thing?
        Dr. Grigas. Yes.
        Senator Gardner. There is an initiative in Colorado,
    Proposition 112 I believe it is, that would essentially take 85
    percent of land off of production potential, out of production
    potential, banning, essentially, energy production on 85
    percent of state and private land in Colorado.
        Colorado is one of the highest natural gas producers in the
    country. If something like that were to pass, we know that
    money has been used by Russians to fund anti-energy initiatives
    in the United States and around the globe. Does it empower
    Vladimir Putin when he is able to shut down energy production
    or, if we pass initiatives that shut down production in the
    United States, does that give him greater leverage over world
    markets and energy manipulation?
        Mr. Winberg?
        Mr. Winberg. Absolutely, the less natural gas that we can
    produce in the United States means less natural gas we can
    export over to Europe or other places around the globe.
        Senator Gardner. Dr. Grigas?
        Dr. Grigas. Yes, absolutely.
        Senator Gardner. Thank you.
        I am very concerned that while we are rightfully focused on
    Russia and the activities Russia is pursuing, their malign
    activity around the globe, that states could unwittingly fall
    into a trap of allowing its initiative processes to be used to
    further the power and grip of Vladimir Putin over global energy
    supplies.
        Thank you, Madam Chair.
        The Chairman. Senator Gardner, I will share with you a copy
    of a press release that was released this morning from the U.S.
    Department of Energy on Secretary Perry's visit with the
    Russian Minister of Energy. It states that Secretary Perry made
    clear that while the U.S. welcomes competition with Russia in
    energy markets across Europe, Asia and elsewhere, Moscow can no
    longer use energy as an economic weapon. The United States is
    now in a position to offer these nations an alternative source
    of supply.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. It goes on, indicating that we all look
    forward to continuing this previously dormant energy dialogue
    and searching for ways to work together. I think it has been
    clear that the relationship has been less than stellar for a
    host of different reasons for far too long. But the use of
    energy, particularly LNG, as a political tool when you cut
    nations off, when you cut communities off from their power
    source in the middle of the winter to gain their political
    attention, that is absolutely unacceptable.
        Where we have an opportunity to make a difference, when we
    can weigh in--I think we recognize that this is not only an
    opportunity, but to use your term, Mr. Mills, it is mutual
    self-interest here and so, how we are able to advance that.
        I wanted to ask about infrastructure in Europe right now.
    Obviously there is a great deal of discussion and focus on Nord
    Stream, on the pipeline side and pipeline capacity, but I am
    more curious now as to the import terminals. We can talk a lot
    about what we need to do to work with the FERC to advance more
    export opportunities here, but if you do not have the ability
    to receive things on the other end, it doesn't pair up.
        I don't know who wants to field this question, but it is
    pretty broad. Is there sufficient capacity right now in Europe?
    If not, what LNG import projects are being considered at this
    point in time? How do we make sure that dovetails with what we
    are doing here with increased production, with their ability to
    receive on the other continent there?
        So, I throw that out. We will go to the Assistant
    Secretary, and then we will go to you, Mr. Mills.
        Mr. Winberg. Thank you.
        Europe is constrained on their ability to import LNG.
    Currently, they're limited to about 20 BCF per day. They're
    only using about 20 percent of that capacity that they have.
        I think there are three challenges with Europe. Number one
    is limited distribution, pipeline distribution capacity. Number
    two, there is resistance to pipeline build out, similar to what
    we see in the United States, in different parts of the United
    States. It's fairly prevalent across Europe. And then number
    three, they're lacking storage facilities. And so, the
    Department of Energy is working with our European allies on
    those issues. As you mentioned, Secretary Perry is over in
    Russia, but also Deputy Secretary Dan Brouillette is in Berlin.
    And so, we're working with Europeans to create ways to reduce
    some of those constraints.
        I think there's an investment opportunity on that side of
    the Atlantic Ocean for U.S. companies to come in and invest in
    the very much needed infrastructure.
        The Chairman. Mr. Mills?
        Mr. Mills. Well Madam Chairman, I think the Secretary is
    absolutely right. I mean, the pipeline distribution system, to
    my understanding, is the critical impediment to expanding the
    use of the existing LNG terminals. Although they do face some
    challenges there, they're far less challenging in terms of
    capital formation than building an LNG facility, obviously. And
    as you know, there are quite a few under construction. Even
    Germany has now announced its--plans for its first LNG import
    facility.
        I would just make the high-level point of the
    transformation back to what you said at the outset and what you
    said at the World Gas Conference. There's been a transformation
    of the fundamental structure of this market, and we need to
    participate in unleashing that full transformation so that
    private capital takes the private risks, by and large, for
    these kinds of projects.
        Obviously, there are government permissions involved with
    building pipelines pretty much everywhere in the world. But the
    market price for gas collapsed before our first LNG exports
    happened. It was in anticipation in markets that this was
    coming. There was a glut coming.
        If we recognize that this glut is such a permanent, then
    what we need to do is figure out ways to let capital markets
    function efficiently. That was my main point is that we put
    impediments here at the state level or federal level to the
    U.S. really fully functioning in this new commodity market the
    way we do with many other markets will depress the appetite to
    build what's required in Europe and the rest of the world.
        The Chairman. Let me ask on the capital investment side,
    because we all recognize that it is substantial. How do the LNG
    contracts play into that?
        We have moved from a situation where about 10 years ago the
    average LNG contract for large volumes was 18 years. This year
    the average contract has dropped to 5 years. Is that having any
    play or any influence in terms of ability to secure the capital
    necessary to make these long-term investments in this
    infrastructure?
        Mr. Mills and then Mr. Book.
        Mr. Mills. So, just to finish the point. Of course it does,
    because these are very expensive, as you know, capital
    projects. So that's essentially what's driving my proposition
    that we need to find ways to take whatever other risks exist in
    the market. We've added a new risk to an LNG facility, instead
    of 18-year contracts, 5-year contracts and even spot markets.
        So, when you look at broad capital markets at the level of
    abstraction which is realized in practice, people make
    decisions based on what they think the risks are. If there's a
    risk we can remove, which is what I've coined the ``permissions
    risk,'' and if America were not involved in permissioning but
    encouraging and facilitating actively over a long time, it's
    signaling that today is a permanent change, that can be a
    countervailing factor to offset these kinds of decisions and
    encourage investment for these shorter cycles.
        The Chairman. Mr. Book.
        Mr. Book. Well, I absolutely agree that the faster that you
    can get things approved, the sooner you can get them on the
    water. That's a compelling case for investors who are looking
    at committing capital to a project.
        The infrastructure challenges in terms of raising money
    because of contract life are part of this story. Shorter
    contract life means there's less cash to take to the bank to
    get the loan, basically, in colloquial terms because you don't
    have as long to guarantee. On the other hand, low prices were a
    factor too in making some of the financing issues more
    challenging.
        The nature of energy infrastructure is very much like the
    nature of upstream production, comes in booms and busts and
    more or less for the same reason. You have a, sort of,
    inelastic supply and long lead times to projects. And so,
    things overshoot and undershoot and then periodically balance.
        But the world can move very quickly from surplus to
    scarcity. And in those opportune moments, financing opens back
    up. So contract life won't be the only constraint because price
    was part of the story and price won't stay the constraint for
    long because when a higher price comes, financing will come
    back.
        The Chairman. Okay, thank you.
        Mr. Slocum, did you want to weigh in?
        Mr. Slocum. I did.
        I don't think that the move toward short-term or spot
    contracts is any detriment to financing. It's the market that
    is moving this direction. And in fact, right now if you've got
    a long-term supply commitment contract, that might be an
    impediment because that might be locking you in at prices below
    what the spot market can provide you.
        There is a reason that LNG terminals in the United States
    are moving, aggressively, toward spot market because that is
    where the market is moving. And they are simply following where
    the market is. And so, in terms of developing these, that is
    absolutely a benefit. And I think that the long-term
    contracting model is not going to provide any assistance.
        And getting to the issue of siting that was touched on. It
    was commented that it's tougher to site pipelines, maybe, in
    the United States and Europe. Nobody talks about how tough it
    is to site pipelines in China because in China no one has any
    rights.
        I am extremely proud to live in a country where we've got a
    variety of different constitutional protections that ensure
    that landowners have lots of ability to have a say in what goes
    on in their community. And so, I don't think that we should be
    negatively talking about constitutional due process rights of
    American citizens to have a say in potentially sited
    infrastructure projects on their property or in their
    communities.
        The Chairman. Thank you.
        Senator Cassidy, we are at round two.
        Senator Cassidy. Oh, great, thank you.
        Mr. Slocum, I was intrigued by your testimony so I had my
    staff go pull a Department of Energy study and let me just,
    kind of, go through some highlights, and then I will try and
    address some of the other issues you raised.
        Mr. Winberg, I am probably stealing your thunder.
        But that said, the DOE study is all about exporting natural
    gas and, by the way, in Louisiana there is so much prosperity
    that has come from developing natural gas resources, down to
    the parish level where DeSoto Parish has more money for its
    police department and for its school board because it gets one-
    sixteenth of the royalties.
        Let me just say, I have seen that prosperity. A prosperity
    that has filtered out to the working family who over the last
    eight years really suffered but now, because of high-paying
    energy jobs, actually has a better life, a better future. So it
    is with that perspective, the empiric perspective, I say this.
        But here is the Department of Energy study.
        [The information referred to is available at:
    https://www.energy.gov/sites/prod/files/2018/06/f52/
    Macroeconomic%20LNG%20Export%20Study%202018.pdf]
        Households will benefit from the additional wealth
    transferred into the U.S., all related to LNG exports, which
    increases the value of the dollar and reduces cost of imported
    goods.
        Next, the consumer. As increased demand pull due to changes
    in international market induces more LNG exports, consumer
    welfare measured in dollars also increases.
        Next, under these export scenarios, they did low,
    intermediate and high exports. As U.S. LNG exports increase,
    U.S. households receive additional income, et cetera, et
    cetera.
        Overall, GDP improves as LNG exports increase. There is
    greater gain in GDP as LNG export volume increases.
        Obviously, I am excerpting.
        Restrictions on LNG exports would forego the additional GDP
    to be gained by allowing exports to respond to market
    conditions.
        And to your point about it doubling, the reference they
    have here to price increases, the slightly higher price of
    natural gas with higher levels of LNG exports is, you know, go
    along, but that is the phrase to emphasize.
        And then lastly, the conclusion. The results from this
    analysis suggest that there is no support for the concern that
    LNG exports would come at the expense of domestic natural gas
    consumption. In fact, a large share of the increase in LNG
    exports is supported by an increase in domestic natural gas
    production leading to a modest increase in natural gas prices
    and additional income from export revenues.
        The other thing you mentioned is about the methane leakage
    issue and whether or not this Administration is addressing the
    methane rule is affecting that. Again, our White Paper which we
    have, we have been looking at this. I am going to quote from
    that. Let's see if I, shoot--you live by technology, you die by
    technology. Here we have--in ours we show that from 2005 to
    2014 that our methane life-cycle from well head to use that the
    methane leakage has decreased an absolute amount while the
    amount of gas has improved dramatically.
        I had it pulled up and I lost it. Let me just go there real
    quickly. Jack Cramton, who is sitting in that back row,
    actually helped write it--I should have him quote it.
        Our current methane leakage in the United States is 1.4
    percent and over various timelines that has to be less than 3
    or 5.5 percent. We're at 1.4 percent. And so, the U.S. is
    dramatically lower than the threshold. That is according to the
    International Energy Agency. And since 2005, natural gas
    production has increased 49 percent while the absolute amount
    of methane emissions from natural gas systems has decreased by
    3.3. Now that is, frankly, without the methane leakage rule
    because all this pre-dated methane leakage.
        And then if you say okay, absolute amounts were down this
    much leakage and we are up that much gas, there is an inverse
    relationship between the amount of gas being produced and the
    amount being leaked.
        Lastly, I will say that if you look at charts, because you
    mentioned it all going to Asia, if you look at charts of SOx
    and NOx and greenhouse gases blowing on to our Pacific Coast,
    it comes from coal-fired energy in the Pacific Coast of China
    blowing over.
        I think it is a good thing that China is substituting out
    their coal with our gas. It is a good thing for our economy,
    for our workers, but also for our environment because the SOx
    and NOx in Washington, Oregon and California is coming from
    China. If we replace that with clean burning gas which does not
    have SOx or NOx and has a lower carbon footprint, then the air
    quality in those states will be far cleaner. And that is all
    from the academic literature. There is no questioning that.
        But there is a lot of stuff from the objective literature
    that, I think, needed to be used in this discussion.
        Thank you, Madam Chair.
        I yield.
        The Chairman. Thank you, Senator Cassidy.
        Senator Barrasso has joined us. Welcome.
        Senator Barrasso. Thank you, Madam Chairman. Thank you for
    bringing together this august group to have this discussion.
        Russia continues to undermine peace and security in Europe
    as we have talked through a variety of mechanisms including its
    use of energy as a weapon. It uses its energy sector as a
    weapon to intimidate, to influence and to coerce other nations,
    and Russia continues to be Europe's main energy supplier. It
    also has significant ownership in Europe's energy
    infrastructure, including pipelines, distribution and storage
    facilities.
        I believe it is in the national security interest of the
    United States to help our allies reduce their dependence on
    Russian energy. If America does not step up to the plate now,
    then Russian influence is only going to grow and continue to
    grow and they will continue to use energy as a weapon.
        There was a story in the Economist last week, Madam
    Chairman, about Russia and its nuclear dominance. It is a
    nuclear power and they are exporting that technology and
    keeping countries connected to Russia as a result of all sorts
    of different energy.
        Due to technological advances and a newfound abundance of
    natural gas, the United States really now has capability and
    capacity to be a strategic energy supplier to Europe. The
    United States can help Europeans meet their energy demands and
    diversify their energy imports away from countries that use
    energy as a weapon against them.
        So I think our LNG exports create jobs across America, they
    assist in reducing our nation's trade deficit, they help our
    allies and strategic partners across the globe and we have
    plenty of natural gas to meet our own needs while helping our
    country's allies.
        There are a couple of export facilities right now in the
    United States able to ship natural gas overseas, one in
    Maryland, one in Louisiana. Three more are due to be
    operational by the end of the year and at least 20 additional
    projects are awaiting federal permits. I think we have to
    expedite these approvals to give our allies alternatives to
    Russian energy.
        On July 18th of this year I introduced what is called the
    ESCAPE Act. It stands for Energy Security Cooperation with
    Allied Partners in Europe Act. It is going to improve energy
    security and help end the political manipulations by Russia
    through its energy resources. It does require the State
    Department, USAID, and the Department of Energy to create a
    transatlantic energy strategy focused on enhancing the energy
    security of our NATO allies and increasing American energy
    exports to these countries. The bill also requires the
    Secretary of Energy to expedite approvals of natural gas
    exports to NATO allies and other foreign countries where
    exports to that country would promote our national security
    interests.
        I think it is time for Congress to clear away regulatory
    hurdles and make the changes necessary to give Americans, as
    well as our European allies, a better energy option.
        So, Dr. Grigas, I would like to start with you because I
    thought your testimony, the written testimony, was very
    compelling. The United States natural gas infrastructure, to
    me, is still inadequate. There are groups and members of
    Congress wanting it to stay that way to prevent our resources
    from ever being developed. But is it appropriate to keep this
    incredible resource locked in the ground and what do you think
    we should be doing?
        Dr. Grigas. I think the United States today has an
    incredible resource at its disposal, a resource that could be
    used for America's economic gains, its geopolitical gains. It's
    an incredible resource that should be used.
        And as we discussed with the panel, the global gas markets
    are currently transforming. There's a lot more supply coming
    online. There are a lot more competing countries.
        The U.S. is a leading player right now in the gas markets,
    the largest gas producer, and it should maintain that position
    and it should actually improve its position. It should really
    emerge as one of the leading LNG exporters so it cannot only
    secure a lot of allied countries which happen to be dependent
    on energy imports. Both in Europe our allies are dependent on
    energy imports and in Asia our allies such as Japan, South
    Korea and others are also dependent on energy imports. So, this
    is, you know, an economic and geopolitical benefit for the
    United States.
        Senator Barrasso. Okay.
        Mr. Book, anything you would like to add to that?
        Mr. Book. Well, I think that one of the issues that came
    up, Senator, while you were out is the question of whether or
    not we're imperiling other economic sectors in the United
    States. And I think Mr. Slocum's comments are reasonable. We
    should be concerned. We are Americans. We're all here. And he
    brought up the example of Australia. But look, you can wrap
    Crocodile Dundee in American flag pajamas, but it doesn't make
    him the President. That is a very different circumstance. If
    you have infrastructure on the West and East Coast connected
    together, you have a different situation in Australia.
        Here in the U.S., our problem is that we have too much gas,
    not too little infrastructure. And the goal is to try to get it
    to market to make value for the American people. And so, if
    that produces dividends in the form of freedom and
    international benefits with our allies, even better. There's a
    lot to be had all around but very different situation, not--
    it's a very flat supply curve here in the U.S.
        Senator Barrasso. Mr. Mills, anything you would like to
    add?
        Mr. Mills. Well, no. I think the--I would echo again, I
    mean, with Mr. Slocum and Mr. Book, the domestic features are
    critical. They obviously are.
        We are, all of us, sensitive to economic, domestic economic
    impacts are negative because it's not, economics, as you know,
    it's like the proverbial analogy to the balloon. You squeeze
    one part, it inflates other places. But that's life.
        However, the technological fundamentals that I study and
    have for years with respect to the underlying resource bases
    are so remarkable, so different than what anybody imagined
    before, that we are literally gushing gas. We need to find
    places to use it.
        The part that I would like to emphasize. We've talked a lot
    about Russia's overt negative behaviors. The issue is actually,
    I think, more subtle than that. We all know this. The nature of
    international relations that attend to what's called ``soft
    power'' have to do with the postures of all the counter
    parties. When you're in a weak position, it profoundly affects
    the nature of a negotiation or a treaty.
        For the United States to be in a profoundly powerful
    position has benefits that are difficult to categorize in ways
    that somebody might turn off the gas. We don't have to make
    overt threats when you have such dominant positions in Europe
    as Russia now has.
        Senator Barrasso. Well, it is interesting because we had a
    Foreign Relations Committee hearing specifically on this and
    talked about Russia. Russia has basically three sources of
    power. They have energy, they have a military, and they have
    the cyber. And other than that, not at all.
        So thank you very much.
        Thank you, Madam Chairman.
        The Chairman. Thank you, Senator Barrasso.
        I have one final question here. It was somewhat hinted to,
    Dr. Grigas, when you talked about, you know, we have this
    global supply that is coming on. In Alaska, obviously, we are
    very keenly interested in the opportunities to be able to
    export our enormous volumes of natural gas.
        We are not looking to the European market. We are looking
    to the Asian market. I believe there is considerable
    opportunity there, but as we know, if you supply one corner of
    the globe over here it frees up supply in other areas.
        But as Alaska has been working through our process, over
    decades, to advance our natural gas opportunities, we have seen
    windows open and we have seen windows close. There was a time
    when our focus was on supplying the Lower 48. That was a
    limited window.
        As I have mentioned, this is a new world when it comes to
    domestic energy supply and what technology has allowed us to
    do. You mentioned the Permian, Mr. Mills. But our reality is
    that Alaska's gas is probably further away from the Lower 48
    than it is from our partners in the Asian market. So we look to
    that. But we are very acutely aware that windows come and
    windows go.
        So, the question is, are we looking at that here in the
    United States when it comes to this window of opportunity with
    Europe? Is this a situation where you will have others that
    will be able to fill this need which is clearly a demonstrated
    need in a way that not only provides them with the supply that
    they need but the political stability that they are also
    seeking? Are we in a race with others to gain this market share
    in Europe?
        I will start with you, Dr. Grigas.
        Dr. Grigas. We certainly are in a race. And if we look at
    the actions today of Gazprom, we see that they're trying to see
    the competition that they see. They're trying to secure their
    European markets. Specifically, they're trying to secure
    Germany which is their largest natural gas market by building
    the second line of the Nord Stream II pipeline which would
    bring additional 55 BCM, billion cubic meters, of Russian gas
    to Germany.
        And they're also trying to secure the markets of Southeast
    Europe, essentially through their plans of TurkStream, a
    pipeline that would bring Russian gas directly to Turkey which
    is their second largest, the second largest Gazprom market in
    Europe.
        So, again, this is a race. They're trying to secure these
    markets before American LNG, I think, really comes online with
    full force.
        The Chairman. Let me, if I can interrupt there though and
    just ask, outside of Russia. Let's just say that Europe
    rejects, they say, we do not want to be partnering with Russia.
    We have seen this resource used as a political weapon in the
    past. We reject that.
        Now I am not suggesting that that is actually going to
    happen, but let's just consider it for discussion sake here.
    Who else in this global market could be that supplier?
        Mr. Book and Mr. Winberg?
        Mr. Book. Well, Senator, today the world's largest supplier
    is Qatar and Australia is right behind. And Qatar has talked
    about expanding capacity during the conflict they had with
    Saudi Arabia, that was one of the plans they outlined. They
    have not yet developed or released additional information to
    suggest that they would expand capacity, but they have very
    low-cost gas, very, very cheap gas. So expanding capacity and
    entering into the world market they would have some of the
    advantages that adhere to the Permian associated gas Mr. Mills
    mentioned and the advantages here in the U.S. of exporting it.
        To the extent that there's a time window or there's a time
    horizon, the spot market is still 30 percent of LNG today, give
    or take. And so, there is actually a contract opportunity to be
    had in a world that is still predominantly a contracted market.
    If you think about it that way, then yes, there is a time
    window because of contracts. If you think about the shorter
    contract life then it's not necessarily that the window stays
    closed forever. We'll get a second bid at some of that same
    market either in next contract or more spot future.
        The Chairman. Assistant Secretary.
        Mr. Winberg. Just to expand a little bit on what Mr. Book
    said. Qatar does about 39 billion cubic feet a day. Australia
    about 11. I said earlier that within the next year and a half
    we're going to be up to that 11 billion cubic feet. That means
    that we are going to be surpassing Indonesia, Nigeria, and
    Malaysia and, in fact, we probably already have passed at least
    a couple of them. So we're moving up that chain very quickly.
    Qatar at 39 billion. It will take a while to eclipse them, but
    we can get right behind them.
        And as LNG becomes more liquid it becomes very much a
    commodity play out there. And so, there are opportunities as
    there is more liquidity built into the market because of
    supply. There are market--there are opportunities for short-
    term, mid-term and long-term contracts to meet whatever market
    need the customer has. So I think we're not behind. We're,
    well, maybe we are a little behind, but we're catching up very
    quickly.
        And as I mentioned, once we get beyond the 11 billion cubic
    feet that's coming on in the next year and a half, we still
    have another 10 billion cubic feet that the DOE has authorized.
    So, that gives us a lot of head room to play in this global
    market.
        The Chairman. Mr. Slocum.
        Mr. Slocum. Yeah, I think, in thinking about just about how
    quickly things have changed that you alluded to there were very
    few that predicted the fracking boom in the United States. And
    we're in the middle of a number of disruptive changes within
    the energy sector and particularly in the electric power
    sector.
        And so, I think when you talk about a window of
    opportunity, we have to keep in mind that things are moving
    very quickly. And what I'm talking about is renewables actively
    displacing gas in the electric power sector.
        In two big U.S. power markets, Texas and California, we
    have seen owners of natural gas generators make formal requests
    to change market rules because they are claiming that there is
    so much abundant, inexpensive renewable energy in the
    California and Texas markets that it's rendering
    superefficient, combined cycle natural gas power plants to
    become uneconomic. And that's not even with energy storage
    advancements that are being predicted in the next couple of
    years.
        And so, if it's happening in big disparate markets in the
    United States, it's going to be happening in Europe and China.
    And I think we have to think long and hard before we make legal
    changes to public interest standards, before we commit to
    significant capital investment for natural gas exports. Are we
    already missing that window of looking into what role
    renewables are going to have in displacing gas in the next
    several years in electric power markets?
        Thank you.
        The Chairman. It is a dynamic world out there, isn't it? It
    just is. Wow. Which is why this is so great. These are
    extraordinary opportunities for our country right now. And
    there is so much in flux. I think we recognize that.
        But to be in a position to be a player, to be in a position
    to wield some influence for good. I think back to several years
    back when a first initial shipment of LNG came into, I believe,
    was it Lithuania?
        Dr. Grigas. Lithuania.
        The Chairman. Lithuania. And they dubbed the LNG tanker the
    Freedom because they said this represented, to them, freedom
    from reliance on, not necessarily reliance, but that first step
    toward having a more secure, more friendly supply of a resource
    that they desperately needed.
        So it is an interesting time, an important time for the
    United States when it comes to recognizing our energy abundance
    and how that can be used for the good, for the good of those
    here in this country and our friends and our allies, the good
    of our environment and that is why it is good to be part of the
    Energy Committee.
        I appreciate the time that you have given us all this
    morning, and I will continue this conversation later, but we
    now stand adjourned.
        [Whereupon, at 11:43 a.m. the hearing was adjourned.]

                          APPENDIX MATERIAL SUBMITTED

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