[Senate Hearing 116-328]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 116-328
 
                  EVOLVING GLOBAL NATURAL GAS MARKETS,
                   THE INCREASINGLY IMPORTANT ROLE OF
                      U.S. LIQUEFIED NATURAL GAS,
                      AND THE COMPETITIVE OUTLOOK

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 11, 2019

                               __________


                       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 
 37-810               WASHINGTON : 2021 
         
        
        
        
               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               JOE MANCHIN III, West Virginia
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       MARIA CANTWELL, Washington
STEVE DAINES, Montana                BERNARD SANDERS, Vermont
BILL CASSIDY, Louisiana              DEBBIE STABENOW, Michigan
CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
CINDY HYDE-SMITH, Mississippi        MAZIE K. HIRONO, Hawaii
MARTHA McSALLY, Arizona              ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee           CATHERINE CORTEZ MASTO, Nevada
JOHN HOEVEN, North Dakota

                      Brian Hughes, Staff Director
                     Kellie Donnelly, Chief Counsel
                     John Crowther, Senior Counsel
            Tristan Abbey, Senior Professional Staff Member
                Sarah Venuto, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                Renae Black, Democratic General Counsel
                
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
Manchin III, Hon. Joe, Ranking Member and a U.S. Senator from 
  West Virginia..................................................    10

                               WITNESSES

Winberg, Hon. Steven E., Assistant Secretary for Fossil Energy, 
  U.S. Department of Energy......................................    12
Arriola, Dennis V., Executive Vice President and Group President, 
  Sempra Energy..................................................    23
Hart, Dr. Melanie, Senior Fellow and Director for China Policy, 
  Center for American Progress...................................    36
Riedl, Charlie, Executive Director, Center for Liquefied Natural 
  Gas............................................................    90
Tsafos, Nikos, Senior Fellow, Energy and National Security 
  Program, Center for Strategic and International Studies........   102

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Arriola, Dennis V.:
    Opening Statement............................................    23
    Written Testimony............................................    25
    Responses to Questions for the Record........................   141
Hart, Dr. Melanie:
    Opening Statement............................................    36
    Written Testimony............................................    38
    Responses to Questions for the Record........................   142
Industrial Energy Consumers of America:
    Comments for the Record......................................   149
Manchin III, Hon. Joe:
    Opening Statement............................................    10
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
    White paper entitled `` `With Powers So Disposed': America 
      and the Global Strategic Energy Competition'' dated 7/11/19     3
Riedl, Charlie:
    Opening Statement............................................    90
    Written Testimony............................................    92
    Responses to Questions for the Record........................   145
Tsafos, Nikos:
    Opening Statement............................................   102
    Written Testimony............................................   104
    Responses to Questions for the Record........................   146
Winberg, Hon. Steven E.:
    Opening Statement............................................    12
    Written Testimony............................................    14
    Responses to Questions for the Record........................   137


EVOLVING GLOBAL NATURAL GAS MARKETS, THE INCREASINGLY IMPORTANT ROLE OF 
        U.S. LIQUEFIED NATURAL GAS, AND THE COMPETITIVE OUTLOOK

                              ----------                              


                        THURSDAY, JULY 11, 2019

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 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.
    We are meeting this morning to examine the evolving global 
natural gas markets, the increasingly important role of U.S. 
liquefied natural gas (LNG) as well as the competitive outlook 
for LNG.
    American natural gas production has literally changed the 
game. We say that a lot around here about that, but it has been 
a game changer. Our production has soared to levels that many 
never even thought possible, and that was just about a decade 
ago. This, in turn, is boosting our economy as well as our 
national security. It is providing a long-term, low-cost, low-
emission source of energy for our manufacturers and residential 
consumers alike, and we have such a massive resource base that 
we can send substantial volumes abroad.
    We are now leading the world in natural gas production. 
Hopefully soon we will also lead in exports. Global demand for 
LNG, we know, is increasing. More U.S. LNG export facilities 
are coming online and more of our friends and allies around the 
world are building import facilities.
    For the first time since the 1950s, we are now a net 
exporter of this abundant resource. Our production is driving 
the formation of a global spot market for natural gas. So 
again, the dynamic around natural gas, around LNG, is just 
extraordinary.
    The consensus among experts is that LNG will continue to be 
a major driver of demand growth well into the next decade, from 
developed countries in Europe to fast-growing economies like 
India. A few of those experts are with us on today's panel. 
They are here to tell us what is driving these trends, where 
they may be headed, and how U.S. LNG fits into the equation.
    We know that we are dealing with a very, very competitive 
global market, what I have referred to as a ``narrowing 
window'' of opportunity. I use this term quite frequently and 
it seems that I have been using it for a long period of time 
but it is, I believe, a ``narrow window'' of opportunity to 
establish leadership in the global gas trade. I hope we are 
going to hear ideas this morning on how to make our exports 
even more competitive.
    I am particularly excited, coming from Alaska, about the 
role that my state can play. The Federal Energy Regulatory 
Commission (FERC) has just released the draft EIS for the 
Alaska LNG project, a great opportunity to move some tremendous 
reserves of conventional gas on the North Slope to market. It 
is a pretty important milestone for us in the federal 
permitting process, and we continue to recognize that Alaska's 
gas is a remarkable resource that will add to the energy 
security of the U.S. and our allies.
    As we look at our growing exports, we should also look at 
the ways that the U.S. can support imports by other countries 
to advance both our economic and our security interests. I have 
started to do that. So today, members will see at their seats a 
new white paper that we are releasing this morning. We have 
entitled it, ``With Powers So Disposed.'' This references a 
quote from President George Washington's farewell address.
    [The white paper ``With Powers So Disposed'' follows:]
    
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    The Chairman. So quite a few years back, but you are at a 
point in time where certainly President Washington could never 
have envisioned super-cooled methane molecules being shipped 
around the globe in giant tankers, but he did foresee that the 
American Government would have to work to open up opportunities 
for its businesses with other nations in a way that promotes 
both market forces as well as our national interests.
    The paper effectively lays out a framework to strengthen 
America's geopolitical posture by sharpening our tools of 
economic statecraft. I think we are very uniquely positioned 
here in the Congress to provide a level of strategic direction 
to federal departments and agencies that are operating in this 
area.
    Just one example is the EXIM Bank, the Export-Import Bank 
of the United States. It is nearing the sunset of its current 
authorization in September. This framework that you have in 
front of you is certainly going to guide my participation in 
that discussion.
    For those who are sitting out there, the report is 
available on our Committee website, and I would be happy to 
refer you to energy.senate.gov. But stay tuned for more. I 
think as this conversation proceeds, we are going to have, kind 
of, an uptick in interest on these very important matters.
    I want to thank our witnesses for joining us here today. I 
look forward to your testimony, as well as your insight on this 
very, very important topic.
    With that, I turn to my Ranking Member, Senator Manchin.

              STATEMENT OF HON. JOE MANCHIN III, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Manchin. Thank you, Madam Chairman, and thank you 
for convening the Committee today to discuss U.S. LNG and its 
role in the global marketplace. And I want to thank each and 
every one of the panelists here for trying to help us through 
this.
    There has been an exponential growth in domestic natural 
gas production over the past decade, driven in large part by 
research and development from the Department of Energy (DOE). 
There is potential for more, including opportunities in my home 
State of West Virginia which sits on top of an ocean of energy, 
the Marcellus, Utica and now we find the Rogersville shales.
    Production has increased as has the volume of natural gas 
exports. In fact, the United States became a net natural gas 
exporter in 2017 for the first time in 60 years which is pretty 
special. That is important for our economy and for geopolitical 
balance around the world.
    Several more LNG export projects are expected to be 
completed in the coming years. Once completed, U.S. LNG export 
capacity is expected to reach nine billion cubic feet per day 
by the end of 2019, making our country the third largest 
exporter behind Australia and Qatar.
    The U.S. Energy Information Administration (EIA) points to 
a near doubling of exports over the year before. U.S. LNG 
exports were made to 33 countries in 2018. Nearly 60 percent of 
those exports were shipped to just four countries: South Korea, 
Mexico, Japan and China.
    The Department of Energy has approved over 20 billion cubic 
feet per day in export capacity with another 20 billion cubic 
feet per day in pending applications.
    The U.S. LNG industry is also growing and reshaping 
regional markets toward a global one through more flexible and 
shorter-term contracts championed by U.S. businesses. I am 
encouraged by this growth and the geopolitical and diplomatic 
benefits of increased LNG exports from the U.S., particularly 
to our allies and friends in Europe.
    But I also want to touch on a topic which concerns my 
colleagues and me deeply. That is the use of energy as a 
geopolitical weapon by countries such as China and Russia. 
Energy can be a tool for democracy, but it can also be a 
weapon.
    Russia has for years relied on their energy resources to 
exert influence and exact concessions. Central and Eastern 
Europe are relying on Russia for approximately 75 percent of 
their gas import needs. Russia, in turn, uses this reliance for 
political coercion and influence, and that is why I oppose the 
Nord Stream 2 pipeline. We have got to get back in the game and 
lead in order to promote American energy and independence and 
serve as a bulwark against Russia and Chinese aggression.
    I serve on the Armed Services Committee and previously 
served on the Intelligence Committee. I want to be very clear 
on the fact that nations have and, if allowed to, will continue 
to use their energy resources and infrastructure as 
geopolitical leverage in times of conflict and in times of 
peace to pressure our allies and try to divide us. It is 
unacceptable to me that our European allies can be held hostage 
by another nation because of its monopoly on natural gas.
    Fortunately, U.S. natural gas is abundant and it is much 
more attractive for our allies in Europe to buy from a 
democracy than it is from an authoritarian regime.
    Meanwhile, China is buying up energy and natural resources 
around the world from large parts of Africa, Latin America to 
Asia, to right here in the United States of America.
    For certain commodities, including the critical minerals 
vital to energy technology, China has become the price setter 
and exerts enormous influence on rare earth minerals. They have 
also moved strategically to vertically integrate manufacturing 
in certain energy sectors--such as solar panels--to capture the 
economic value before selling into U.S. and other markets.
    That is why I support the Appalachian Storage Hub, for 
example, to create industry and jobs around our natural gas 
liquids here at home rather than shipping them all to China. I 
just don't believe that we should be granting the Chinese 
government unfettered access to our natural resources when that 
access is not reciprocated. Both China and Russia use energy 
resources and show willingness to manipulate U.S. energy 
resources to advance their long-term strategic positions.
    In a time when all countries need to focus on solutions to 
the common threat of climate change, including the use of 
natural gas to lower greenhouse gas emissions, gaming the 
global energy economy only benefits our adversaries.
    With that, Madam Chairman, I look forward to hearing from 
our witnesses today and having a vital, important discussion.
    The Chairman. Thank you, Senator.
    We will now turn to our witnesses. Again, we appreciate 
that you have all joined us here this morning at our 
invitation.
    We will lead off the panel this morning with Steven 
Winberg, who is the Assistant Secretary for Fossil Energy at 
the Department of Energy. Nice to have you here, Mr. Winberg.
    Mr. Dennis Arriola is the Executive Vice President and the 
Group President for Sempra Energy. Thank you for being here.
    Dr. Melanie Hart is the Senior Fellow and Director of the 
China Program at the Center for American Progress. We look 
forward to your input this morning.
    Mr. Charlie Riedl is the Executive Director at the Center 
for LNG.
    And finally, Mr. Nikos Tsafos, who is the Senior Fellow for 
the Center for Strategic and International Studies, CSIS, as we 
know around here.
    We thank each of you for your participation here this 
morning.
    Just for your information, we are scheduled to have a 
series of three votes at about 11 o'clock this morning. Senate 
time is less than certain around here, so we will see how that 
goes.
    But what we would like to do is get your testimony here. We 
will have an opportunity to ask questions. I think you will see 
members coming and going. Don't take that as an indicator of 
lack of interest, just that there is a lot going on this 
morning. We will continue to move the Committee even through 
those votes, but we will give you more updates as those come.
    We will begin with you, Mr. Winberg, and ask that you try 
to keep your comments to about five minutes. Your full 
statements will be included as part of the record.
    Good morning.

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

    Mr. Winberg. Good morning.
    Thank you, Chairman Murkowski, Ranking Member Manchin. It's 
always good to be here to be with you. And it's my pleasure to 
appear before you today to discuss the status of the natural 
gas market and the work being done by the Office of Fossil 
Energy to support record-setting, U.S. natural gas production.
    I had the opportunity this morning, Senator Murkowski, to 
read ``With Power So Disposed,'' and the Department of Energy 
stands ready to assist in whatever way we can.
    As Senator Manchin said, the United States is now the 
world's largest producer of both natural gas and crude oil. 
Each month we're setting new record levels of production. The 
surge in natural gas production amounts to an increase of over 
60 percent from 2009, and this year's production is on pace to 
exceed last year's by nearly 10 percent.
    The LNG exports, we are now in our third consecutive year 
as a net exporter of natural gas and the EIA estimates that the 
United States will be an overall net exporter of energy next 
year. These exports are reducing our trade deficit by billions 
of dollars each year and increasing our national security.
    U.S. LNG cargos have landed in Europe, Asia, Africa, the 
Middle East, South America, North America and the Caribbean, 36 
countries in total. And U.S. LNG, so far in 2019, has exceeded 
55 cargos through April of this year. Asia has been the top 
importing region of U.S. LNG over the last three years, but 
much of the LNG this year has been going to Europe.
    At the same time, natural gas has become the primary fuel 
used in electricity generation responsible for fuel in over 35 
percent of the power generated in the United States in 2018. 
The increased use of natural gas has helped lower energy-
related carbon emissions to levels not seen since the late 
1980s. According to EIA, U.S. energy-related carbon dioxide 
emissions will be four percent below 2018 levels in 2050 as the 
use of natural gas in the United States continues to increase.
    The Office of Fossil Energy works on both the research and 
development of natural gas technologies as well as the 
regulatory space. For R&D, we strive to enhance U.S. economic 
and energy security by managing and performing research that 
maximizes the efficient and environmentally sound production in 
the use of natural gas and other fossil fuels. In our 
regulatory program, we support the development of policy 
options that benefit the U.S. public by ensuring access to 
adequate supplies of affordable and clean energy.
    The Administration and DOE have also made it a top priority 
to highlight the economic benefits of the Appalachian 
petrochemical industry made possible by the surge in natural 
gas production in the region. Industry has estimated that an 
Appalachian petrochemical industry can support a total of five 
ethane crackers, 100,000 jobs and contribute to the 
revitalization of the region.
    These petrochemical plants would also bring in tax revenues 
to communities, provide opportunities for hard working 
Americans to fundamentally transform their lives and give our 
nation the opportunity to diversify its energy and 
petrochemical production.
    DOE remains committed to working with stakeholders at all 
levels of government, industry and academia to promote these 
developments.
    There's no doubt that natural gas has transformed our 
nation and the world for the better. It has grown our economy. 
It has created countless American jobs and made our air 
cleaner. Further, increased LNG exports also have given our 
allies a secure source of energy. Natural gas has proven to be 
and will continue to be a vital part of the Trump 
Administration's commitment to an all-of-the-above approach to 
energy.
    So I thank you for the opportunity to appear before you 
today. I look forward to your questions.
    And finally, I want to thank my wife, Ann Winberg, and our 
daughter, Rebecca Burns, for being here with me today. It's 
always good to have family backing you up.
    Thank you.
    [The prepared statement of Mr. Winberg follows:]
    
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    The Chairman. That is great. Thank you, Assistant 
Secretary, and we welcome your family as well.
    Mr. Arriola, welcome.

 STATEMENT OF DENNIS V. ARRIOLA, EXECUTIVE VICE PRESIDENT AND 
                 GROUP PRESIDENT, SEMPRA ENERGY

    Mr. Arriola. Well, good morning. Thank you, Chairman 
Murkowski and Ranking Member Manchin and Senators that are 
here, part of the Committee. Again, I'm Dennis Arriola. I'm the 
Executive Vice President and Group President for Sempra Energy.
    Sempra is based in San Diego. We've been in the natural gas 
business for over 150 years, and we're the largest utility 
holding company in the United States with nearly 20,000 
employees and serving more than 40 million customers worldwide. 
Sempra is a leader in North America's growing LNG export 
market, and we're pursuing five strategic LNG export 
opportunities in North America with access to both the Atlantic 
and the Pacific Basins. Our projects include two in Louisiana, 
one in Texas and two on the West Coast of Mexico that together 
could export 45 million tons of American LNG in the future.
    And so, this morning what I'd like to do is just spend a 
couple minutes on the U.S. natural gas supply and how we see 
its impact to the American economy, how LNG exports can reduce 
our trade deficits and benefit our foreign relations and the 
environmental benefits of LNG.
    As mentioned, the U.S. became a net exporter of natural gas 
in 2017 for the first time since 1957. And that's really, it's 
thanks to American ingenuity and to the shale gas revolution. 
The supply of inexpensive natural gas is expected to increase 
to 90 billion cubic feet per day in 2020, which is a 30 percent 
increase from 2017. And this growth in natural gas is good for 
American consumers, our industries, for electric generation, 
but also for international buyers of LNG. And today, the U.S. 
accounts for about 22 percent of the global gas production and 
is on track to be the largest exporter of LNG by 2024, maybe 
sooner.
    Growing natural gas production and LNG exports are having a 
strong, positive impact on our country and have the potential 
to add millions of jobs throughout the entire value stream to 
the U.S. economy. And we've seen this firsthand with the 
economic benefits at our Cameron LNG export facility in 
Hackberry, Louisiana. On May 14th, we produced our first LNG at 
our Cameron facility and we had the honor of being joined by 
the President of the United States, diplomats from the EU and 
Japan as well as by some of your colleagues. Senator Cassidy 
was able to attend as well. And then on May 31st, the first 
tanker departed Cameron with American LNG for the world market. 
So we're really proud of that moment.
    The U.S. economic impact from Cameron LNG is estimated to 
be $336 billion over the life of the project and should 
generate about 53,000 direct and indirect jobs annually over 20 
years which is equal to about 1.1 million job years.
    At our Port Arthur LNG project in Texas, which we're 
developing, we estimate the economic contribution at nearly 
$290 billion, or slightly over $11 billion annually over 25 
years, with an average of nearly 5,700 direct and indirect jobs 
in Texas and about 41,000 nationally through 2043.
    So it's clear, LNG exports create a lot of jobs, good 
paying jobs, here in our country.
    Now today, Asia accounts for about 70 to 75 percent of LNG 
demand and Europe about 15 percent. And while most, not all, 
but most of the U.S. export capacity exists today or is being 
developed in the Gulf Coast region, it takes an LNG tanker 
about 21 days to travel to Asia through the Panama Canal. That 
is impacting our competitiveness.
    However, Sempra expects to cut that to 12 days or even less 
by developing two projects at our import facility in Baja, 
California, and Mexico. And when they are completed they will 
connect with pipelines from Texas to form, what we're calling, 
the Permian to Pacific Highway, and American LNG will be more 
competitive in Asia as a result.
    Now, ten Asian countries account for over 80 percent of our 
trade deficit, and they happen to be countries that also need 
LNG. So exporting LNG, not just to China, which is the largest 
importer in the world, but to countries like Japan, South 
Korea, Vietnam, India and others, could be a true game changer 
for our trade deficit and since they all buy LNG, why not buy 
from the United States, as long as we're competitive?
    Now at the same time, LNG trade can strengthen our 
relationships with foreign governments by providing 
alternatives to Russian gas. And so, Sempra has signed a 20-
year LNG agreement with a Polish oil and gas company and we 
have preliminary agreements with several major natural gas 
companies in Europe and Asia. As a result of these contracts, 
the U.S. is going to benefit and the LNG exports will benefit 
our partners as well.
    More than half of the countries in Asia have air quality 
challenges and need cleaner natural gas from LNG to displace 
less clean resources and combat climate change. So, the trend, 
obviously, is to phase out coal-fired power. Natural gas is a 
logical substitute because it's a comparatively low cost and 
environmental benefits and it emits 50 percent of the carbon 
dioxide of coal. And it also complements the growth of 
renewable resources like wind and solar. So as part of an 
overall portfolio, natural gas makes sense.
    In conclusion, the role of LNG exports in the U.S.' global 
energy leadership, I think it's larger than any of us can 
actually imagine and it's going to continue to grow. Sempra 
Energy is focused on helping our country realize its full 
energy potential by being a leader in the LNG energy export 
market.
    I appreciate the opportunity to be here and look forward to 
your questions.
    [The prepared statement of Mr. Arriola follows:]
    
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    The Chairman. Thank you, Mr. Arriola.
    Dr. Hart, welcome.

 STATEMENT OF DR. MELANIE HART, SENIOR FELLOW AND DIRECTOR FOR 
           CHINA POLICY, CENTER FOR AMERICAN PROGRESS

    Dr. Hart. Thank you, Chairman Murkowski, Ranking Member 
Manchin, Senator Stabenow, thank you for the opportunity to 
testify here today.
    I've worked as a China analyst for nearly two decades, and 
I am here to weigh in on China's role as a potential export 
destination for U.S. LNG.
    As you know, China is a growing importer and there is 
tremendous speculation about the potential for large volume, 
U.S. LNG exports to China. Some analysts argue that exporting 
U.S. LNG to China will help rebalance the U.S.-China trade 
deficit, generate American jobs and help China transition away 
from coal. I'm here today to share a different view.
    Arguments calling for the U.S. to export large volumes of 
LNG to China, unfortunately, reflect some deep 
misunderstandings about the way global LNG markets work and 
very deep understandings about China's national interests and 
how Beijing intends to pursue those interests.
    I would like to focus my opening remarks on four key 
points.
    First, transporting U.S. LNG to China is prohibitively 
expensive. There is currently not a strong commercial business 
case to do so in large volumes.
    China does not desperately need U.S. LNG. They're already 
importing LNG from 17 different nations and the shipments they 
receive from the U.S. are among the most expensive in their 
supply chain. That is simply because the Gulf Coast is located 
far away from China's import locations, farther than China's 
other major suppliers.
    It takes a tanker, when transporting natural gas to 
Shanghai, a tanker from the U.S. Gulf Coast must sail 10 days 
longer than one from Qatar and 15 days longer than one from 
Western Australia. As a result, shipping costs from the U.S. 
Gulf Coast to China are twice those from Qatar and almost three 
times those from Australia.
    What we have to understand is that if China chooses to buy 
large volumes of U.S. natural gas, they are paying a price 
premium to do so. For that reason, we have to question what 
their intentions are in paying that price premium when they do 
have 17 different suppliers to choose from.
    Secondly, the most bullish analysis of U.S.-China LNG trade 
potential are hoping that long-term infrastructure investment 
projects will make the trade economically feasible. Those are 
projects where a Chinese investor would come in, invest 
billions in a U.S. natural gas project and gain access to the 
gas it produces for a 10 to 20 year time horizon. 
Unfortunately, those deals are simply out of step with current 
market trends. The market is shifting toward short-term 
contracts, particularly in Asia and particularly with the 
Chinese purchases.
    Also, technical innovations are making it possible to use 
floating gasification and floating liquefaction and floating 
re-gasification terminals so that we don't have to spend $50 
billion to develop a natural gas export facility. And anyone 
assessing the feasibility of those high-dollar, long-term, 
Chinese projects that require Chinese investment should 
question why we aren't considering some of the more flexible, 
cheaper alternatives that are emerging on the market.
    Third, at best, U.S. LNG would be a short-term fix for 
China. Chinese leaders do not intend for their nation to be 
dependent on the United States for its energy supplies. In 
fact, the U.S. Energy Information Administration estimates that 
China may have more shale gas reserves than the United States. 
China is not doing a very good job at developing and exporting 
those reserves, but Beijing is determined to turn that around 
and to follow the U.S. example. We should not underestimate the 
probability that that determination will become reality given 
the amount of money that they're willing to invest in doing so. 
China is already the third largest global shale producer behind 
the United States and Canada. We should not put all of our eggs 
in the basket of expecting China to be a massive importer of 
LNG for decades to come.
    Fourth, if Chinese leaders use state funds to pay a price 
premium for U.S. LNG that they do not need and do not intend to 
utilize over the longer term, they will expect something in 
return and we need to understand exactly what that is.
    At a minimum, even if Beijing's intentions are completely 
pure, large export deals would increase U.S. economic 
dependence on China at a time when it could not be more clear 
that that dependence brings growing risks. U.S. states, 
companies, workers and families whose livelihoods depend on LNG 
shipments to China or continued Chinese investments in large 
development projects, could one day find themselves in the 
exact same situation that our soybean farmers are in today.
    The United States should think twice before needlessly 
deepening our economic dependence on our biggest competitor. If 
China agrees to purchase U.S. LNG in large volumes or invest 
hundreds of billions of dollars in U.S. natural gas projects in 
exchange for the U.S. agreeing to back down on core trade 
complaints or any other critical U.S. national interests, a 
deal of that nature could undermine U.S. economic security for 
decades to come.
    Thank you again and I look forward to your questions.
    [The prepared statement of Dr. Hart follows:]
    
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    The Chairman. Thank you, Dr. Hart.
    Mr. Riedl.

  STATEMENT OF CHARLIE RIEDL, EXECUTIVE DIRECTOR, CENTER FOR 
                     LIQUEFIED NATURAL GAS

    Mr. Riedl. Good morning, Chairman Murkowski, Ranking Member 
Manchin, Senator Stabenow. Thank you for allowing me the 
opportunity to testify this morning. My name is Charlie Riedl, 
and I am the Executive Director at the Center for Liquefied 
Natural Gas, or CLNG.
    CLNG represents the full LNG value chain providing us with 
unique insight on the benefits LNG brings to the U.S and global 
economies. CLNG operates within the Natural Gas Supply 
Association, a national trade association that's represented 
U.S. gas industry for more than 50 years. This gives us a deep 
understanding of the entire U.S. natural gas supply portfolio.
    I appreciate the opportunity to address the Committee about 
the evolving global natural gas market and the many 
environmental and economic benefits of U.S. LNG exports. 
America's abundance of natural gas has led to our emergence as 
a world-class exporter of energy, creating U.S. jobs, growing 
our economy and significantly strengthening global energy 
security, all while reducing emissions and pollution.
    The United States' vast supply of natural gas is the very 
reason we're here this morning and able to have this 
conversation about LNG exports. Without it, we would likely be 
having a conversation this morning focused on LNG imports.
    It is this supply, growing by the year, that underpins the 
benefits we can achieve with exports. Technological 
breakthroughs in the oil and natural gas industry have 
unleashed an energy renaissance establishing the United States 
as the world's largest natural gas producer.
    As I speak today, the U.S. natural gas resource has reached 
an all-time high according to the U.S. Potential Gas Committee. 
Amazingly, those increases are up 69 percent since 2005 
according to EIA, all while prices of natural gas have fallen 
64 percent over that same time period. So new domestic supplies 
of affordable natural gas have created this competitive 
advantage for U.S. manufacturers as well, leading to greater 
investment, industry growth and new jobs. And exports forecast 
that an additional industrial investment of roughly $135 
billion to build 59 new projects and 11 expansions between now 
and 2022.
    According to studies from the Department of Energy, the 
exports will not compete with the manufacturing sector here in 
the United States. And it's important to understand that any 
new LNG exports will be met by new natural gas production.
    So to better illustrate how quickly the U.S. has moved 
being a net exporter of natural gas, we really only need to 
look back 11 years. In 2008, the EIA's Annual Energy Outlook 
forecasted that by 2030 the United States would need to import 
roughly 8 billion cubic feet of LNG per day. Fast forward to 
the 2019 Annual Energy Outlook and the forecast is vastly 
different. We will be exporting by 2030, 13.5 BCF of LNG per 
day. That's a swing of 21.5 BCF without having any material 
impact on the net price of natural gas here domestically.
    So what we're finding is that LNG exports can and will 
react to the global marketplace. Worldwide demand for LNG 
export today is approximately 37 billion cubic feet and it's 
projected to increase to around 67 billion cubic feet per day 
by 2035.
    U.S. LNG exports create numerous environmental and economic 
benefits for the United States and global consumers. I'd like 
to focus the remainder of my remarks this morning focused on 
those two areas.
    A 2014 study conducted by the Department of Energy found 
that LNG exports could reduce global greenhouse gas emissions 
by displacing more carbon intensive fuels for importing 
nations. Those further studies have also shown how natural gas 
and renewables are ideal partners for improving air quality and 
emissions.
    A prime example of where that's taking place is in India 
where it's believed some 400 million people lack access to 
reliable electricity. So to date, we've sent 36 cargos to India 
which is roughly 120 BCF of gas, and what we've seen in that 
time period, since 2016, the Cove Point facility has served 
that market and what we're seeing is greater adoption of 
natural gas for electricity generation there cleaning up the 
air.
    In-depth research by the Department of Energy in 2015 and 
again in 2018, found that exports are a net benefit to the U.S. 
economy. That study by the Department of Energy found that 
results--the increase in the U.S. household incomes and their 
welfare. The Department study determined that increased 
production will drive investment to revitalize economically 
depressed regions that bring thousands of jobs to the area.
    The promise of more LNG facilities in the United States 
also brings the promise of a new era benefiting the U.S. 
economy and our environment. Our enormous natural gas resource 
base is ideally positioned to help the United States compete on 
a global level for the LNG market share and still providing an 
environmentally and economically affordable, advantageous fuel 
source for the U.S. customers.
    U.S. LNG exports benefit everyone with billions of dollars 
in investments and thousands of dollars of good paying jobs 
here at home while creating a cleaner future for our world.
    In closing, I commend Chairman Murkowski and the Committee 
for their leadership and steadfastness in championing LNG. 
We're committed to helping find solutions to address our energy 
needs and I look forward to your questions.
    Thank you for the opportunity this morning.
    [The prepared statement of Mr. Riedl follows:]
    
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    The Chairman. Thank you, Mr. Riedl.
    Mr. Tsafos, welcome.

 STATEMENT OF NIKOS TSAFOS, SENIOR FELLOW, ENERGY AND NATIONAL 
   SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL 
                            STUDIES

    Mr. Tsafos. Thank you, Chairman Murkowski, Ranking Member 
Manchin, members of the Committee. Thank you for the 
opportunity to speak to you today.
    As everyone has attested to, we're living in a 
transformational moment in global gas markets and the United 
States is at the center of that transformation. And so, the 
first thing I want to do is actually commend this Committee 
because its leadership and the actions that have taken place in 
this town over the past few years have made that possible.
    What I want to leave you with is four things.
    Number one, the global gas market is changing. There's no 
doubt about that. But that change is sometimes caricatured. The 
headlines don't quite do justice to the complexity of this 
system. So in my view I wanted to share four profound shifts 
that are taking place in the global gas market that, I think, 
should guide our thinking and our decisions.
    The first shift is complexity. Twenty years ago, this used 
to be a simple system, a handful of producers, handful of 
consumers. Today we live in a world where about 20 countries 
export LNG and about 40 countries import it. This is an 
immensely more complicated system.
    The second shift is in structure. We have more transactions 
that take place in the short-term and spot market, and that is 
a very encouraging trajectory. At the same time, the long-term 
market still dominates and if you look at the spot market for 
LNG it's about four percent of all the gas used in the world. 
So it's important to focus on that market, but it's also 
important to understand the broader context in which that 
market exists.
    The third shift is in pricing. Even in 2018, less than half 
of the world's gas was priced according to market principles, 
what we call gas on gas competition. Regulated pricing, oil 
indexation are still very important. The price that Asian 
consumers pay for LNG still tracks the price of oil very well. 
It's important, whenever we talk about pricing, to look at the 
details, to look at the nuance because the headline stories 
sometimes don't do justice to what's really happening.
    The fourth shift is in geography. We have a monumental 
shift where Qatar, Australia and the United States are going to 
be the top three suppliers with Russia emerging as a clear 
fourth. China has become the largest source of incremental LNG 
in the world. It's overtaken South Korea. In a few years, it 
will overtake Japan. So what happens in China is going to have 
a profound impact on this market, and we have to think about 
what that means. My point from these shifts is relatively 
clear. Change is taking place. That change is sometimes 
evolutionary, not revolutionary and we should understand and 
embrace the complexity of the system.
    The second observation I want to make is about the current 
moment that we are at. We have a lot of gas on the market. 
Prices are really down for spot LNG in Asia, in Europe.
    At the same time, companies are investing for the new wave 
of supply. But this new wave is going to be a lot more 
competitive. It's going to be a lot more diverse. It's going to 
be Qatar. It's going to be Russia. It's going to be Canada. 
It's going to be East Africa. It's going to be Southeast Asia. 
One of the key challenges will be to find a role for the United 
States to compete in that marketplace. Companies will change 
business models. They'll turn to states for support. We'll have 
geopolitical drivers for decisions. And so, this is going to be 
a very competitive market.
    The third observation I want to leave you with is about 
institutions. We desperately need a common basis from which to 
talk. This means data, better data, publicly accessible data, 
data that everyone can rely upon to have a good conversation 
about what's happening in natural gas. We have questions from 
oil. When we talk about oil, we all can look at a certain 
number of reports and have a common foundation for discussion. 
We don't have the same thing for global gas. We really need it.
    The second aspect of institutions is a conversation on gas 
and energy security. Different regions have different 
understandings of gas security, and I think it's incumbent upon 
the United States, through its partners and the International 
Energy Agency, to revitalize the conversation on how to measure 
gas security and also how to enhance it altogether.
    My final observation is about enhancing and supporting U.S. 
LNG exports and my observation has been that if you want to 
build LNG anywhere else in the world, you can probably get the 
U.S. Government to help you. If you try to buy U.S. LNG you're, 
kind of, out of luck.
    And so, I think we really need to have a better 
conversation about sharpening the tools that the U.S. 
Government already has--the BUILD Act, the EXIM Bank--and 
trying to figure out ways to get countries that want to import 
LNG, U.S. LNG, or just gas more broadly, give them the tools 
and the resources they want and need to make that possible.
    Thank you very much for your time, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Tsafos follows:]
    
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    The Chairman. Thank you, Mr. Tsafos.
    Great perspectives here this morning, so we will begin with 
our questions. As I mentioned, when votes start we will just, 
kind of, figure it out from there.
    I want to start my questioning by focusing on Alaska, 
because none of you have talked about it. We recognize that 
when we think about the strength of our natural gas in this 
country, we have extraordinary resources down there in the 
Gulf. We talk about how that is poised to move out in a 
significant way.
    Mr. Tsafos, you recognized the good work of the Committee 
here in moving forward with an expedited process to help 
facilitate some of these exports.
    Alaska is sitting up there. We have not been able to move 
out on our natural gas pipeline or a way to get our gas to 
market. But the recognition is that we have an opportunity to 
be a serious and a substantive contributor in this more global 
discussion because our market is not in the Lower 48. Our 
market is Asia.
    Dr. Hart, you mentioned that one of the challenges when we 
think about United States' natural gas, LNG, going over to 
China is that it is expensive to move it from the Gulf. The 
time involved is more considerable than bringing it up from 
Qatar. If you are bringing it down from Alaska, it is seven to 
nine days, I am told. One of the advertising points that we 
have coming out of Alaska is we don't have any chokepoints, and 
we don't have pirates. There is no Strait of Hormuz that we 
need to worry about. But as Dr. Hart has pointed out, our gas 
is going to be more expensive, at least right now, given the 
design of our project, because of the geographic realities that 
we are dealing with in advancing, whether a gas line or some 
alternative to move.
    So I want to talk about ways that Alaska LNG can be more 
competitive, and I would ask your views on that, Mr. Tsafos. 
And more specific, what do you think about the potential 
Chinese investment in the project?
    Then I would like to go to you, Dr. Hart, for your views on 
this. It doesn't sound like you are necessarily advocating a 
ban on LNG imports to China, but you are certainly urging great 
caution. I would like your very specific views on the potential 
Alaska LNG project because of the agreement that our state 
signed with China, a Memorandum of Agreement to buy Alaskan 
gas.
    So Mr. Tsafos and then Dr. Hart.
    Mr. Tsafos. Thank you, Senator.
    When I think about Alaska I think about two challenges. One 
is getting the permits, and the second is getting the math to 
work.
    The Chairman. Right.
    Mr. Tsafos. So----
    The Chairman. We are working on the permit part.
    Mr. Tsafos. I'm very heartened on the permits, and I think 
there's a tremendous amount of work that has happened on that 
front.
    I think the economics, in reality, are very difficult. In 
2012, when the oil companies proposed to the state to jointly 
develop this project, this was a very different LNG market. The 
market has changed.
    I think there is a, sort of, very narrow, commercial window 
in which this project can be successful.
    I expect to see----
    The Chairman. How narrow do you define?
    I won't hold you to it, but I am curious to know how much 
time you think, given all that is happening globally.
    Mr. Tsafos. I apologize. I don't mean time.
    The Chairman. Okay.
    Mr. Tsafos. The window of time always moves. So, that's----
    The Chairman. Fair enough.
    Mr. Tsafos. The window that I'm talking about is the 
commercial margin. Can you make money delivering this gas to 
Asia?
    And as you know very well, Alaska's challenges are in part 
the gas has a lot of CO2 and a very long pipeline 
and those are the two main things that shadows the 
competitiveness of the project. So I look forward to see what 
the new governor, kind of, puts forward in terms of how to 
structure this project. I think there's a structure that can 
work.
    My view, having worked on the Alaska project in a previous 
capacity, has been that there's a role for the state to take a 
leadership position as long as the risk and the reward are 
appropriately distributed.
    Which brings me to my comment on China. The concerns that 
I've had in the past about a possible Chinese involvement in 
the project has been that the structures that were discussed 
put a lot of risk on the state maybe and the Chinese weren't 
bearing as much of the risk. So I think a successful model has 
to find a way for everyone to bear their fair share of risk and 
not for the project to have been made possible by one party 
taking a disproportionate lot of risk.
    The Chairman. Dr. Hart.
    Dr. Hart. Thank you very much for the question.
    As I understand the Alaska project, there is a preliminary 
agreement between the State of Alaska and three Chinese state-
owned enterprises, that would be Sinopec, China Investment Corp 
and Bank of China. As I understand the project, the Chinese 
firms would, in theory, bankroll the pipeline infrastructure in 
Alaska in exchange for guaranteed access to 75 percent of the 
gas produced over the lifetime of the project.
    I have a few concerns. I'll outline some of my concerns 
about that.
    The first is that these are state-owned enterprises. They 
answer to the Chinese Communist Party. They answer to China's 
national interests. Right now, as part of the U.S.-China trade 
war, we see how the Chinese Communist Party is leveraging 
American business, American state, American worker dependence 
on the Chinese economy, on Chinese market access in a bid to 
bring the U.S. to heel and pressure the U.S. to back off.
    Personally, I do not agree with the way that the United 
States is pursuing its trade interests right now, but it is an 
opportunity to watch China use the levers that it perceives it 
has over the United States and it clearly uses those levers 
strongly. And so, we should be very cautious about allowing a 
Chinese state-owned enterprise to control that degree of 
decision-making and financial resources in an American project.
    Currently, the United States, the U.S. Congress--CFIUS--has 
allowed Chinese state-owned enterprises to have a minority 
stake in natural gas projects and oil projects. We have never 
allowed a state-owned enterprise to have a majority stake in a 
U.S. natural gas project. So that is something to think about 
very carefully.
    Second, my understanding is that multiple commercial oil 
and gas firms have walked away from that particular project 
because of the costs required to bring it online. I would 
question why is it that a Chinese state-owned company is 
willing to pursue a project that individual, commercial 
companies viewed as not commercially feasible? We should have a 
lot of oversight over--ideally, we would have an open bidding 
process for all development projects in the United States and 
those would go to the best commercial bidder. If it wasn't 
something that was feasible commercially, but it's something 
that the Chinese Communist Party is willing to invest in, that, 
to me, speaks of more interest than commercial ones being 
involved in the deal. And so, that is something that would 
require a very serious U.S. Congressional oversight, in my 
opinion, to make sure that we aren't making a deal that would 
be bad for the United States over the longer-term.
    Third----
    The Chairman. I am going to have to ask you to wrap here.
    Dr. Hart. Sure.
    Third, the finances. We would need a lot of oversight over 
that. We have examples from Sri Lanka and other countries about 
the risks of being in debt to China for infrastructure 
projects.
    And then fourth, because of those risks I think we cannot 
have too much oversight for investments of that nature.
    The Chairman. Well, we probably have some differences here 
in terms of the role that China would play outside of the 
financing, but I appreciate your views on it and I would like 
to talk to you a little bit more about it.
    Let me turn to Senator Manchin.
    Senator Manchin. Thank you, Madam Chairman, and thank all 
of you for being here. Again, I have tremendous concerns about 
China and Russia and their roles, geopolitical roles. Real 
quick, just a yes or no, and then I am going to go directly, 
Ms. Hart, to you, but do you all have the same concerns? Do you 
have doubt about what Russia and China are trying to do in the 
geopolitical arena with this energy they have? Do you all 
believe China is a threat?
    Mr. Winberg.
    Mr. Winberg. Certainly Russia is a threat with the Nord 
Stream Pipeline you mentioned, Nord Stream 2.
    Senator Manchin. Yes.
    How about China?
    Mr. Winberg. I think with respect to China the Trump 
Administration is addressing a lot of the issues that were just 
talked about with respect to structural, fundamental structural 
changes that need to happen between our two countries and how 
we do business, things like force technology transfer.
    I was on the negotiating team over there in November and 
again in January, and they are very interested in U.S. LNG, but 
we do need to fix the structural challenges that we have.
    Senator Manchin. Let me go right into this, if I can then.
    Are we, as Americans, allowed to go into Russia and buy 
their resources, develop their resources and control the flow 
of their resources back to the U.S.?
    Dr. Hart?
    Dr. Hart. I can't speak to Russia but we are definitely 
not----
    Senator Manchin. China, I mean China.
    Dr. Hart. ----allowed to do so in China.
    In fact, China's information about their shale gas 
resources is classified. So our companies are also not even 
allowed to fully assess what they have in the ground to 
understand how they might weigh in as a potential exporter over 
time.
    Senator Manchin. You would think that in reciprocation, we 
would reciprocate.
    You know, China is coming, and I wonder if you all know 
about this deal that they want to make with West Virginia, my 
State. They said they are going to invest $83 billion over 20 
years. You can imagine that type of carrot being swung out 
there, tremendous for a small state. Our budget is only $4 
billion a year. They are going to invest $83 billion.
    What would be their interest? We cannot find out one iota 
what the MOU is. I have asked them directly, their energy 
company, but we cannot get a direct answer about their 
investments. My gut tells me they want the LNG. They want 
propane, ethane, and butane, which we do not have CFIUS review 
on, to take away our building stock, you know, for our 
manufacturing. And I can't believe that this Administration 
would allow in any way, shape or form, that type of project to 
go on.
    There is another problem, American Ethane. American Ethane 
is owned by a Russian oligarch and what they are doing here in 
America to take out our building stock. I don't know why we 
haven't stepped up and just absolutely slapped a stop and 
decease order on this. Do you have any comments on this, Doctor 
and anybody else?
    Dr. Hart. Well, on the issue of U.S. access in China, I 
would like to remind the Committee that President Obama 
actually signed a shale gas cooperation agreement with China in 
2009, and that agreement was intended to give U.S. companies 
access to China's shale sector. Unfortunately, that access 
wasn't exactly forthcoming. So there is an agreement on the 
books and it was not fully honored by the Chinese side. Their 
geological data is still classified. We do not have anything 
like reciprocal access in the Chinese market.
    And regarding the project with American--with the project 
in Beaumont, Texas, you know, I actually come from that town so 
I have a lot of personal and professional concern in the 
project.
    Senator Manchin. Is that with American Ethane?
    Dr. Hart. Yes.
    I would very much like to know many more details than have 
been released publicly. For example, they're counting on the 
Chinese counterpart to build cracker facilities in China to 
take the ethane.
    Senator Manchin. They are not going to build the crackers 
in Texas or West Virginia to store here, no interest?
    Dr. Hart. They have no interest to do that, indeed. And I'm 
not clear that they have even received the permits to build 
those facilities in China. So even that may not be feasible.
    Senator Manchin. Mr. Winberg, do you--I am sorry, Mr. 
Arriola?
    Mr. Arriola. Sir, I wanted to address your point on Russia, 
specifically.
    You know, we did sign a contract with Poland. Poland didn't 
want to solely rely on Russia.
    Senator Manchin. Correct.
    Mr. Arriola. And what we're finding is other countries, 
like Germany, like Croatia and Greece, are building LNG import 
terminals because they don't want to just deal with that one 
country.
    So we think having U.S. LNG available to Europe is giving 
them optionality that's good from a competitive standpoint, but 
it's also good from an energy independence standpoint for those 
countries.
    Senator Manchin. Mr. Tsafos, do you have any input on this 
whatsoever since you are looking at the market from a little 
different view?
    Mr. Tsafos. Yeah, I don't see it the same way. I mean, I 
think if you look at the European energy system, there's a lot 
of things happening----
    Senator Manchin. Do you not see the threat from China and 
Russia, with their intent, especially China?
    Mr. Tsafos. I have a lot of concerns about China, 
absolutely.
    Russia, I have some concerns. I think sometimes we 
overstate the concerns and I think there's, maybe, easier ways 
to neutralize those concerns. That's the very brief.
    Senator Manchin. Mr. Riedl, real quick, anything?
    Mr. Riedl. Sure.
    So I think from a standpoint from Russia I think what we're 
seeing with the projects from Nord Stream 2, as you referenced 
earlier in your opening remarks, there is, you have to look at, 
sort of, the broader European market and the decline in gas 
supply and their fields that they've historically relied on.
    And to follow up on what Mr. Arriola was saying, the idea 
that U.S. LNG provides an alternative or a different outlet for 
these buyers in Europe really decreases the opportunity for 
Russia to behave in a manner that they have in the past. So 
it's, sort of, it creates an accountability issue for Russia to 
behave accordingly.
    Senator Manchin. Your concern with China?
    Mr. Riedl. From a Chinese perspective, I think that when we 
look at what's happening, as Mr. Winberg, or Secretary Winberg, 
was saying, the issue with China that we continue to, sort of, 
be aware of is how they want to participate in these projects, 
right? And their participation in these projects thus far has 
been purely from a buy side. So as we look at what they're 
looking to buy, LNG from the United States or other 
competitors, really the only opportunity that we would look at 
is how competitive can U.S. gas be into those markets?
    Senator Manchin. You are not concerned about the security 
of our nation or basically what their intent is?
    Mr. Riedl. So, I look at that from a----
    Senator Manchin. Basically dollar and cents?
    Mr. Riedl. For now, we get it from an LNG perspective only 
which is why we're here to talk about it. I look at it from 
that standpoint.
    Senator Manchin. Thank you.
    The Chairman. Senator Lee.
    Senator Lee. Thank you, Madam Chair. Thanks to each of you 
for being here.
    Anytime we are having an inquiry, as we are today, into 
evolving global natural gas markets or the role that the United 
States might play in those markets, I think, we have to 
evaluate honestly what domestic laws we might have on our books 
that might have an impact on global LNG markets.
    We have a lot of testimony that we have heard today and, 
Mr. Riedl, I appreciate that you referenced the fact that, in 
your testimony, the United States has an abundant supply of 
natural gas.
    Unfortunately, and as MARAD has noted, the United States 
has no U.S.-flagged, LNG-specialty carriers that are, 
themselves, compliant with the Jones Act. As a result, there 
are some severe limitations in how LNG can be transported 
between U.S. ports. This ends up having a very significant 
impact, not only on our domestic supply and our domestic 
markets but also on international markets as well.
    Mr. Riedl, is it true that the lack of LNG-specialty 
carriers has forced some states and U.S. territories to have to 
import gas from other countries, even in--including Russia, to 
meet their energy needs, notwithstanding our abundant supply of 
natural gas?
    Mr. Riedl. That is accurate, Senator.
    There is a concern as it relates to the Jones Act that does 
not allow gas to leave from, say, Cheniere's facility in Sabine 
Pass and travel to other destinations within the United States.
    Senator Lee. In addition, it seems that these requirements 
are forcing us to consider more expensive solutions. Solutions 
that in many cases threaten to inhibit our own energy needs 
domestically. Does this end up affecting the price for 
consumers?
    Mr. Riedl. Ultimately you look at a region like the 
Northeast where they are constrained from a pipeline issue of 
natural gas, yes, that could be an impact on the price of gas 
there.
    Senator Lee. Alright.
    Because natural gas is very valuable to us. We have it in 
great supply. We consume a lot of it. We produce even more of 
it, and we are slight net exporters of it.
    But in order for it to benefit American consumers in the 
way that it should and for us to be able to develop this 
resource, we have to be able to get it from Point A to Point B. 
Sometimes our own domestic laws interfere with our ability to 
do that.
    Given these circumstances, do you think we should reform 
our 100-plus-year-old cabotage laws, especially the Jones Act, 
so as to give us more flexibility, the kind of flexibility that 
we need for LNG transport?
    Mr. Riedl. Absolutely. I think that if you look at 
scenarios, as you're outlining, of the ability to move gas, 
especially into areas that are either pipeline-constrained but 
are heavily reliant on natural gas, especially for heating or 
electricity generation, the ability to do so--we've got a 
facility here in Maryland, just down the street in Cove Point, 
that I think would be a very logical opportunity to move LNG 
that is coming out of the Marcellus in that large play, move 
gas from the Marcellus into the Northeast where they are 
pipeline-constrained. And it is an alternative until pipelines 
and infrastructure are developed in the United States to reach 
those markets.
    Senator Lee. In fact, what would be the argument against 
doing that? In other words, why, on what planet, in what 
universe would it make sense for us to keep those laws and to 
not even amend them so as to allow for a commodity that 
Americans produce in great abundance and rely on in great 
abundance to be transported from one U.S. port to another 
without a Jones Act-compliant ship that doesn't even exist? 
What could be the plausible public policy justification for 
keeping such a law and not creating an exception to a law like 
that?
    Mr. Riedl. That's a great question and one that I think is 
probably one, as we look at it from trying to answer that 
question. I don't know but I've got a real good one for you as 
I think about the opportunity that exists and the cost 
associated.
    The GAO actually took a look at this and the cost of 
building an LNG carrier in a U.S. shipyard was so cost 
prohibitive that delivering gas, to your point, it's cheaper to 
bring it from other countries than our flag vessels. So when 
you think about that from the point that you were making, a 
security standpoint, it doesn't make good sense.
    Senator Lee. International trade is important in energy and 
in so many other areas. We believe in international trade. 
Sometimes it makes sense to import certain things from another 
country.
    One thing, Mr. Riedl, and Madam Chairman and to all my 
colleagues who are here, that makes no sense is for us to be 
importing gas from Russia to New England simply because of a 
100-plus-year-old law that makes no sense. That law needs to be 
reformed. I would prefer that it be repealed altogether. At a 
minimum, it needs to be amended so that we can send natural gas 
from one U.S. port to another without a U.S.-flagged, Jones 
Act-compliant ship, capable of transporting such shipments, 
that today does not exist.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Lee.
    We will turn to Senator Stabenow. I am going to run off and 
go vote. When Senator Stabenow has concluded, Senator Gardner, 
you will have an opportunity to ask your questions. But I 
should be back in a couple minutes.
    Senator Stabenow.
    Senator Stabenow. Well, thank you, Madam Chair, and thank 
you for the hearing and to all of our witnesses.
    I want to talk about something else that I have concern 
about, whether or not it makes a lot of sense and this is from 
the standpoint of the State of Michigan, a great manufacturing 
state and, specifically, I want to ask a few questions that 
build on what Senator Manchin talked about in terms of ethane 
which is a critical feedstock for American manufacturers.
    In November 2017, President Trump presided over a series of 
trade agreements with Chinese companies. One of the biggest was 
a $26 billion deal to supply liquid ethane to China, a critical 
feedstock for American manufacturers that we certainly don't 
want to go up in price in terms of American jobs.
    There is no question that China is interested in access to 
U.S. ethane and is intent on increasing its ownership stakes in 
this critical feedstock as a way to bolster its own 
manufacturing sector and attract new manufacturing investments 
in their country, of course, being able to do finished products 
and then sell them back to the United States.
    This is a relatively new dynamic. U.S. exports of ethane 
have increased 37 percent over just the last two years. It 
strikes me that before we continue this trend, now is the time 
for us to think hard about how further increasing exports of 
this critical feedstock for American jobs and manufacturers is 
done and the significant investments in the United States that 
have been made by our manufacturers because of affordable 
access to ethane.
    I have three questions I would like to ask Dr. Hart and Mr. 
Tsafos. I am curious to hear your thoughts on several 
questions.
    First, what is the importance of stable and affordable 
supplies of ethane to U.S. manufacturers? Second, are countries 
like China interested in having a firmer grasp on this U.S. 
feedstock and are they beginning, are we beginning, to see the 
critical resource to foreign powers that don't always have our 
best interests in mind? And then lastly, do you believe that 
this is an area where all of our agencies--Commerce, Energy, 
Defense, State--should be carefully looking at how we go 
forward to ensure our manufacturing interests, American 
manufacturing interests, and jobs are sufficiently considered 
as exports rise?
    Dr. Hart.
    Dr. Hart. Thank you for the question.
    You know, China is developing its petrochemical industry 
and one trend that we see across the industry is that they are 
interested to import the feedstock and do the refining, do the 
manufacturing within the Chinese market. And this fits that 
pattern.
    Now, I'll leave it to my experts on the domestic U.S. 
energy sector to comment on what that might mean for the United 
States both from a jobs, from an environment, from a 
manufacturing industry perspective for us to be playing that 
role in China's value chain.
    But in particular, the deal that is proposed, been proposed 
so far, based in Beaumont, Texas, where they are building, 
proposing three export terminals along the Neches River to 
export ethane to China.
    As a China analyst, I'm unable to find many details about 
that deal myself. And therefore, as an analyst who comes from 
that area and has an interest in knowing whether it's a good 
deal for my home town and for the country, I don't have the 
access to that information to make that assessment.
    And therefore, I would ask you, as Members of Congress, to 
please help American citizens understand what we're giving 
away, what we're getting and what we're risking, particularly 
deals that, as this one does, involve not only China but also 
Russia, two countries that are not exactly proven to be our 
best partners in the economic sphere.
    Senator Stabenow. Well, I can just say that on behalf of 
manufacturers I talked to that the idea of us giving up that 
critical feedstock is something people are very concerned about 
in terms of American manufacturing jobs.
    Mr. Tsafos.
    Mr. Tsafos. Senator, ethane is something I don't follow 
quite as much that will be, add too much substance, so I'll 
pass.
    Senator Stabenow. Alright, thank you.
    One final thing and that is, Dr. Hart, you talked about 
U.S. LNG exports to China in a parallel to our situation with 
our soybean farmers. I have a lot of soybean farmers who are 
deeply, deeply concerned and having tremendous problems and are 
sacrificing tremendously given what's happening. Could you lay 
out, sort of, what we are talking about here in terms of our 
dependence, reliance more on China on those things?
    Dr. Hart. Thank you for the question.
    In the soybean sector, China is a massive source of demand. 
They have 1.4 billion people, so that demand market is really 
hard to replicate anywhere else. So for a soybean farmer or a 
corn farmer, you can have big sales into the China market that 
you just can't replicate anywhere else in the world.
    In LNG, we don't have that situation right now, you know?
    Senator Stabenow. Right now.
    Dr. Hart. Right now.
    There's a broad, diverse global market. There are new 
importers coming online all the time that are using floating 
terminals to re-gasify LNG and create new sources of demand.
    I am particularly concerned about the United States 
creating a false dependence on China that would risk putting 
some of our LNG companies, workers and communities in the same 
situation that our soybean farmers are in today.
    I hate seeing what is happening to the families that depend 
on the Chinese agriculture market. We should think twice before 
extending that to other industries if we don't have to do so.
    Senator Stabenow. Thank you very much.
    Senator Gardner. Thank you, Madam Chairman, for the 
opportunity to be here with all of you today. We are leaderless 
right now, so I was not sure who is yielding to us.
    But thanks very much to the witnesses for being here today.
    Mr. Arriola, I wanted to start with you, if I could, 
talking about your testimony where you talk about the benefits 
of a West Coast LNG export facility for Asian markets.
    Congress passed last year and the President signed into law 
on December 31st legislation that Senator Markey and I 
introduced called the Asia Reassurance Initiative Act that 
created a U.S.-Asia energy partnership with the goal being to 
find ways to work with countries across Asia to export U.S. 
energy products and LNG, working with people in Taiwan for 
renewable energy, working with South Korea on LNG and others.
    Obviously, with Colorado being in the Rockies in the West, 
we have a lot of competition for our natural gas and we have a 
lot of, sort of, barriers to Midwest markets because there is 
so much production taking place there and pipeline capacity 
already getting there. So we need a Western outlet. That is 
what we look for in the Rockies. How do we get our gas out and 
to the West and to Asian markets?
    So by placing this facility that you are talking about and 
have talked about on the West Coast, that would reduce shipping 
time by about 40 percent, you said. Would it make U.S. LNG 
exports more competitive with other exporting countries, it 
obviously would, that are closer to home, so to speak?
    Mr. Arriola. Yeah, it definitely would.
    I think, you know, one of the things that does make the 
Gulf Coast gas not as competitive as it could be in Asia is the 
travel time. But it's not just the travel time, it's having to 
go through the Panama Canal, the congestion points, the 
reliability.
    And I think that having some sites on the West Coast, on 
the Pacific, getting access, not just to Permian gas in Texas 
but also to Colorado and others, since we do have the 
infrastructure and the pipeline system to be able to draw the 
gas together----
    Senator Gardner. Right.
    Mr. Arriola. ----I think provides a lot of optionality, not 
just for U.S. producers, but also for Asian buyers.
    Senator Gardner. Did your company consider building a 
facility in the United States? I noticed you talked about, in 
your testimony, the facility in Mexico, but what issues did you 
consider when you were looking at siting in the U.S.?
    Mr. Arriola. We, over time, have looked at different 
opportunities, say, on the West Coast of the United States, but 
we found that there were other parts of the country and of 
North America that were much more amenable to getting these 
projects done.
    Senator Gardner. Is that because of a hostile regulatory 
environment on the West Coast?
    Mr. Arriola. Yes.
    Senator Gardner. See, and I think that is something that is 
a huge concern, that you have production jobs and economic 
opportunity you can develop in states like Colorado, Wyoming, 
Utah that is basically being held up by anti-energy regulations 
on the West Coast that prevent us from reaching our full 
potential.
    It is not just the full potential of jobs and opportunity 
in Colorado, but it is the opportunity to provide South Korea, 
Japan, Taiwan and beyond, with U.S. energy opportunities, 
affordable, abundant U.S. energy, creating U.S. jobs and wealth 
that we can't get out of this country because you have states 
like California or others that don't allow these to be built. 
That is a significant problem.
    Mr. Arriola. Well, what I would tell you is we tend to 
focus on those parts of the country, like where Senator Cassidy 
comes from, that welcome these opportunities, that understand 
the economic impact, the positive economic impact it can have 
and where these can get permitted and approved in a 
satisfactory manner.
    Senator Gardner. Thank you.
    Obviously, Jordan Cove is a facility in Northwestern United 
States that I am very interested in and strongly supportive of, 
because of its potential to help Colorado producers and to help 
our Asia energy partners have access to U.S. produced energy.
    Mr. Riedl, you described a limited window of opportunity 
because of competition the U.S. faces from other energy 
producing countries. Could you talk a little bit about the 
importance of a Jordan Cove and other facilities in that 
competition?
    Mr. Riedl. Sure, happy to, and I appreciate the question, 
Senator.
    So when we think about a project like Jordan Cove on the 
West Coast in Coos Bay, that's a project that has had numerous 
challenges from the regulatory permitting process. And if we 
look at, sort of, the window of opportunity, you hear testimony 
today talking about the efforts from other countries that are 
producing LNG and Mr. Tsafos talking about it. But Qatar making 
commitments to increase their production by 20 percent. 
Australia increasing their production. So when we talk about 
these markets that a project like Jordan Cove, for instance, 
would be competing against, these projects from other 
countries, large producing countries of LNG, like Qatar and 
like Australia, that are already in the process of building and 
expanding their LNG infrastructure. And so, when we talk about 
a project like Jordan Cove, they are absolutely competing 
directly against those projects and will continue to compete 
against those projects. Any delay that they suffer in the 
regulatory process will obviously slow their opportunity to 
market and their opportunity to let them create contracts.
    Senator Gardner. Secretary Winberg, I am out of time but I 
would like to follow up with you on just personnel issues, 
coordinating issues with FERC and the work that you do there, 
making sure that we have the personnel necessary to get the job 
done and to carry out the analysis and the cooperating status 
that you have.
    Jordan Cove, we mentioned. Do you have a timeline on Jordan 
Cove or know the rough estimate of when we could be looking at 
Jordan Cove?
    Mr. Winberg. Yes, according to FERC's schedule which they 
put out last year, about the middle of October of this year, 
they'll come out with their EIS, and then their final order 
will come out in mid-January of next year. And as the 
Department of Energy has done on the last several 
authorizations, we will expedite it, move it out. We're 
prepared and ready to move as quickly as we possibly can.
    I would tell you the last couple that we have done, we've 
done in two weeks. Can't promise you that on Jordan Cove, but 
we will expedite it and move it through as quickly as we can.
    Senator Gardner. Expedite Jordan Cove, thank you very much.
    Thank you.
    The Chairman. Thank you, Senator.
    Senator Cortez Masto is next.
    Senator Cortez Masto. Thank you, Madam Chair. Thank you for 
this conversation. I really appreciate the opportunity to have 
this hearing today.
    Let me ask you this, since becoming a net exporter of LNG 
in 2017, have U.S. consumers experienced fluctuations in costs? 
In other words, are consumers experiencing increases in energy 
costs as the U.S. grows in the global LNG market? I am curious 
if we are seeing that or if there are concerns about that, and 
I am going to open it up to the panel. Let's start here.
    Mr. Tsafos. Senator, U.S. gas prices are about as low and 
as non-volatile as they've been in recent memory, so 10, 15 
years. So, they're----
    Senator Cortez Masto. But what about the impact to the 
consumer? What is the consumer seeing as a result of this? That 
is my question. Are there fluctuations in costs or the concerns 
that energy costs are going to increase when it comes to the 
actual consumer, the ratepayer, at the end of the day?
    Mr. Tsafos. I'm talking about the wholesale price of gas, 
so Henry Hub, the reference price is quite low, has been quite 
low in recent years. And that we have not seen any substantial 
increase as----
    Senator Cortez Masto. So, no fluctuations to the consumer? 
No impact to the consumer is what you are telling me?
    Mr. Tsafos. Not yet at least, yeah.
    Senator Cortez Masto. Okay. Anyone else?
    Mr. Riedl. Yeah, and so the Henry Hub price closed 
yesterday at $2.46 which is lower than it's been in the last 
eight months. So, when we look at, sort of, the price of 
natural gas since we've had LNG exports come online, the cost 
for consumers has actually gone down.
    Senator Cortez Masto. Okay.
    Do we have any concerns that as we continue to export and 
grow that there will be a negative impact to the consumer at 
some point in time in the future that it would grow?
    Mr. Riedl. So there's two points to make there.
    The first is when you look at, sort of, the forecast that 
EIA puts out on a yearly basis, their Annual Energy Outlook 
that currently looks out through 2050, they project natural gas 
to be stable at $5.00 per MBTU at the Henry Hub price. You will 
see a slight increase but that will, obviously, be tied to 
inflation and costs of operation. When you look at that, sort 
of, the window, you'll see big, sort of, fluctuations in 
percentages, but small fluctuations in the actual cost of gas.
    Senator Cortez Masto. Anybody else?
    Mr. Winberg. Yeah.
    Senator Cortez Masto. Yes?
    Mr. Winberg. With respect to natural gas, we've had--April 
2019 of this year marks the 24th consecutive month that dry 
natural gas production increased from last year. We had a 12 
percent increase this year over last year, and the EIA expects 
that we will be up at about 111 billion cubic feet per day. 
Currently, we're at about 91 billion cubic feet per day.
    The other piece of this that we don't often talk about is 
we have not yet climbed the learning curve in this 
unconventional oil and gas in terms of productivity. And the 
Department of Energy has a number of projects and efforts 
underway in our R&D to increase that productivity. I'm quite 
sure that as we move forward in time we're going to see 
productivity increases.
    Then finally, we also have the issue of stranded gas 
coming, primarily coming out of the Permian Basin. As we get 
that infrastructure built out to move that gas out of the Basin 
into the markets, I believe we're going to see long-term 
stabilized prices of natural gas.
    The only issue that we have with respect to the consumer 
probably is up in the New England area, because we have a lack 
of infrastructure to get gas from the Marcellus area--
Pennsylvania, Ohio and West Virginia--up into the New York, New 
England markets.
    Senator Cortez Masto. Thank you.
    Let me ask Dr. Hart, jumping back to--thank you all for 
your written testimony.
    I noted in your written testimony, your testimony today, 
you state if Chinese entities import large quantities of LNG 
from the United States, they will be paying a premium price to 
do so. That raises questions about the potential political 
intentions behind those purchases, and you say long-term 
Chinese investments in U.S. natural gas projects are out of 
step with the global LNG market and risk undermining U.S. 
national security. Can you address that for me?
    I think we have all had this discussion where concerns 
about the United States' economic advantage over China and what 
we see with their Belt and Road Initiative and their massive 
investments around the world, including some now here in the 
United States, the impact.
    So can you address that a little bit more for me? And if 
you would, touch on more flexible floating import/export 
terminals as that plays into this as well as Chinese state-
owned enterprises that are actually making investments here in 
the United States.
    Dr. Hart. Absolutely, thank you for the questions.
    So, because of the transport distance between the U.S. Gulf 
Coast and China, the shipments of LNG that China receives from 
the United States are more expensive than about 70 percent of 
its overall, the rest of its LNG supply chain. That can make 
sense to do for short, for small shipments from Cheniere Energy 
to meet times when the Chinese energy market is up and high. It 
doesn't make sense to do commercially in very large volumes. 
They would have to give up cheaper gas in exchange for more 
expensive gas, and a company isn't going to do that just for 
commercial reasons but they might do so if the Chinese 
Communist Party is supporting them with cash to do that for 
political reasons. So that would be a non-commercial decision 
that we should, we would, I would appreciate Congressional 
oversight over to make sure that there are not political 
considerations in that deal that are bad for U.S. national 
security.
    The same thing applies when China is coming in to make 
investments in the United States. There's the proposed 
investment in Alaska. There's a proposed long-term investment 
in West Virginia. There's a proposed investment in Beaumont, 
Texas. And one angle that we should look at with those 
investments is, do the long-term investments actually make 
sense in today's market? The market is moving toward more 
short-term contracts instead of long-term ones. Short-term 
trading currently accounts for about one-third of natural gas 
trading, and it's particularly prevalent in Asia and 
particularly in China. So if the market is moving toward short-
term anyways, is it a good choice for the United States to lock 
in long-term gas purchase agreements to make us dependent on 
our biggest economic competitor?
    Senator Cortez Masto. Thank you, I appreciate that.
    The Chairman. Senator Cassidy.
    Senator Cassidy. Thank you.
    First, Mr. Arriola, great event with President Trump down 
in Cameron Parish.
    Mr. Arriola. Thank you.
    Senator Cassidy. And Senator Gardner was speaking about the 
jobs and those three folks that spoke, the one with breast 
cancer, I think, the woman who had been unemployed, her husband 
was unemployed and went back to work and the third felt equally 
compelling and how the job opportunity at that LNG terminal 
changed their lives.
    The Scripture says the sins of our parents can go down 
through generations. I say in this case the virtue of a great 
job with great opportunity and better opportunity for the 
children pays benefits throughout generations too. I just 
wanted to, kind of, stress that part of what both of you were 
referring to and what Senator Gardner was alluding to.
    Perhaps related to that, Mr. Arriola, what would be, if you 
were able to send, or Dr. Hart, if you were able to send gas 
from Alaska or from the West Coast to Asia, what would be the 
price differential relative to coming out of the Gulf Coast? 
Any sense of that? Mr. Tsafos.
    Mr. Tsafos. If I can give a slightly different answer, 
Senator.
    When you look at west from Canada coming from, sort of, 
north of British Columbia, because it's slightly cheaper gas 
but they have more infrastructure and they have to build a new 
facility, those things, sort of, offset the shorter 
transportation costs. So it's not a straightforward answer.
    Senator Cassidy. Well, it is green fields, but sooner or 
later you make the investment, right? And after you make the 
investment you then, basically, have the cost of production.
    Mr. Tsafos. So, operating costs would be lower because 
the----
    Senator Cassidy. And transportation costs.
    Any sense of how much? If 70 percent of the gas the Chinese 
are buying is cheaper than that which is from the U.S. because 
of transportation from Australia?
    Mr. Tsafos. You would probably save about $1.00 to $1.50 in 
terms of the price, of cost, of shipping cost, if you didn't 
have to go through, sort of, Panama Canal and that long route.
    Senator Cassidy. And that is quite significant on something 
of that magnitude?
    Yes, ma'am.
    Dr. Hart. If I can respond as well.
    It is important to note that the cost to develop the gas is 
higher as well. And so, at the end of the day, based on a pure 
commercial transaction, you're paying less to ship it but more 
to pull it out of the ground. And that is why multiple 
commercial companies have walked away from that particular 
project.
    The Chinese Communist Party appears to be interested. I 
have questions about why China, the Chinese Communist Party, is 
interested in a project that non-Chinese commercial companies 
view as potentially not feasible.
    Senator Cassidy. Well, one thing I have read is that, or 
have been told, and I know what I am told, not what I know, is 
the Chinese would be interested in building a terminal off the 
Panama Canal that they would ship gas to South America through 
that terminal. So, indeed, they would be purchasing it but they 
would be cannibalizing a market that presumably U.S. companies 
already had access to. Knowing that there is gas within South 
America, I don't know what they are doing in Argentina if that 
is only oil or if it is also gas, but that could be a purchase 
that would offset the negative balance of trade we have with 
them--but on the other hand, it would still, again, not be to 
our net ability. Do any of you know of such a project or is 
that just an urban myth that I was told?
    Mr. Tsafos.
    Mr. Tsafos. It doesn't sound like something that the 
Chinese companies would do.
    Senator Cassidy. Okay.
    I was told that by a government agency but that is not to 
say that it is necessarily true. No offense to you, Mr. 
Winberg.
    I am also struck that one of the problems of selling more 
of our gas overseas with all the economic benefits for us and 
the environmental advantages for the world, if you are 
replacing coal as energy feedstock, there is a lack of 
infrastructure in other countries.
    Is there some role for the EXIM Bank to contribute to 
building the infrastructure that might be used in Pakistan, for 
example, or someplace else?
    Mr. Tsafos.
    Mr. Tsafos. Yes, Senator, very briefly.
    Import infrastructure has historically been, sort of, paid 
for by the countries that do it. In recent years we've seen 
multilateral institutions, in particular, the International 
Finance Corporation, the IFC, as part of the World Bank, step 
in and finance. We've seen the Japanese and the Koreans 
starting to take a role in this financing the import projects 
and power plants. So I think there's absolutely a case to be 
made that the United States should be looking to do the same, 
and it has not really done so yet.
    Senator Cassidy. It seems to make sense. I do read where 
Pakistan basically brings up a boat that has both power 
generation as well as LNG upon it, and it uses that as a 
platform.
    So there are imaginative solutions but still, it does seem 
as if that would be something that would be very good for our 
economy. And again, if you are replacing coal as feedstock, 
very good for the global greenhouse gas emissions.
    I am out of time. I will yield.
    Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Senator King.
    Senator King. Madam Chair, there's an Alice in Wonderland 
quality to this hearing.
    Have you guys ever heard of Australia? Australia's natural 
gas has a vast capacity. They started exporting in a big way 
about ten years ago. Their prices doubled for their consumers 
between 2015 and 2018.
    The one law that this Congress cannot repeal is the law of 
supply and demand. The number of LNG terminal applications now 
approaches 50 or 60 percent of the total production in this 
country. And you are telling me it is not going to affect 
domestic prices, that doesn't pass the straight face test. You 
cannot argue that a dramatic increase in demand caused by LNG 
exports is not going to affect domestic prices.
    You said it was $2.50 in Henry Hub the other day. In 
Australia ten years ago, it was about $3.00 a million BTUs. 
Today, it's $8.00, $9.00 and $10.00. And they are talking about 
looming shortages of natural gas in one of the countries that 
has one of the great natural gas resources on Earth.
    For the Department of Energy to continue issuing these 
permits which under the law are supposed to take into 
consideration the public interest without even doing, as I 
understand it, a recent study of what the elasticity of demand 
is and what the effect of prices, I think, is utterly 
irresponsible.
    I am not opposed to all exports of natural gas. All I want 
is some analysis of what the effect would be on domestic prices 
and not warm, fuzzy assurances, don't worry, we are always 
going to make more. That has not happened in Australia and I 
realize there are some differences about West and East Coast, 
but the bottom line is you cannot tell me we are going to 
drastically increase the demand for a product and its price to 
local consumers is not going to increase. And if we get to a 
place where natural gas prices are internationally set as a 
commodity like oil, we are sunk.
    Natural gas prices in this country right now are one of our 
major competitive advantages, if not our most major competitive 
advantage in terms of our industry, in terms of our consumers. 
To give that away to any country in the world, it just strikes 
me as totally outside the idea of what is in the public 
interest. Can you assure me that the Department of Energy is 
going to take seriously its public interest responsibility in 
making this kind of analysis?
    Mr. Winberg. Yes, Senator, I can assure you of that and we 
have.
    Senator King. When was the most recent time you did a study 
of the implications of exports of natural gas?
    Mr. Winberg. We did a study last year. It was the fifth 
study that was done. The preceding four studies were done in 
the previous Administration. All of those studies, all five of 
those studies, concluded that the overall economic benefit to 
the United States was a net positive, that the price of natural 
gas was not going to increase.
    When you talk about Australia and you referenced it, to a 
large degree, that's an infrastructure issue, getting the 
natural gas from the producing centers to the demand centers.
    With respect to----
    Senator King. Where are we now in terms of approved LNG 
projects vis-a-vis total natural gas production?
    Mr. Winberg. Right now we have, we're exporting about 4 
billion cubic feet a day of natural gas. We are producing about 
90 billion cubic feet a day. We have total capacity of about 
6.5 billion cubic feet a day. So 6.5 out of 90 is, you know, 
six percent, seven percent.
    Senator King. If you can assure me or will accept an 
amendment or a law that says we won't go above 6.5 percent or 7 
or 8 or I remember hearing where we said 9, I am happy. But 
that doesn't seem to be the direction we are headed in because 
the number of LNG terminal applications that are in the queue 
go way beyond 6.5, right?
    Mr. Winberg. Well, we have approved 33 billion cubic feet 
right now.
    Senator King. So, you have approved 33 billion feet so we 
are already five times where the six that you just mentioned.
    Mr. Winberg. Well, most of that has not reached final 
investment decision. So we have----
    Senator King. Yes, but we have to look beyond next week.
    If you have approved 33, total production is 90. So you 
have now approved LNG exports of 30 percent of the total 
production in the country.
    Mr. Winberg. But we don't stop at 90. EIA projects that by 
2040 we're going to be up at 111 billion cubic feet per day. 
And as I talked about earlier, we're just climbing the learning 
curve on unconventional oil and gas production in the United 
States.
    Senator King. How many million BTU per day are in the 
queue? You say 33 have been approved. How many are in the 
queue?
    Mr. Winberg. Right now, we have 14 BCF a day that is either 
in operation or under construction.
    Senator King. How many applications are pending?
    Mr. Winberg. There are 11 billion cubic feet of 
applications at FERC.
    Senator King. So, 33, plus 15, plus 11.
    Mr. Winberg. No, I'm sorry, no.
    It would be in total right now there are 44 billion cubic 
feet of in construction that we have approved and FERC. That's 
a grand total, 44.
    Senator King. I have a hard time accepting that you are 
going to go to almost 50 percent of production in a new market, 
and it is going to have no substantial effect on consumer 
prices.
    I hope that we can continue this discussion, but this is of 
grave concern to me. I think we are making a historic, historic 
mistake unless we put some control, some limit, based upon 
science and data, on this trend toward, what appears to me to 
be, unlimited export of natural gas.
    Thank you, Madam Chair.
    Mr. Winberg. Happy to send the report to you.
    Senator King. Thank you.
    The Chairman. Thank you, Senator King.
    This is a subject of discussion that we have had here 
around this Committee, kind of the cumulative impact that we 
have with additional volumes that are being exported, what does 
that mean for pricing?
    We have heard here that in terms of the pricing, we really 
haven't seen that bump, that jump and I think it is because, as 
you have pointed out, Secretary Winberg, our production is 
increasing.
    At some point in time, maybe that production curve starts 
to go down a little bit, but we are certainly not seeing that 
at this point in time. It is something that we want. We want a 
level of vigilance. We want to understand all the market 
conditions and forces out there, not only domestically, but 
what is happening with our global position out there.
    But I think one thing that has been just so remarkable 
about the discussion of natural gas and LNG is we keep 
producing more, we keep finding more. Our technologies are 
allowing us to access more.
    Senator King. Which is great. I am just worried about the 
relative----
    The Chairman. Fair enough. You know, at some point in time 
things cross, and we want to make sure that we are ahead of 
that, that we don't allow that to cross.
    Senator King. At some point in time demand starts to put 
pressure on supply, and prices go up. I remember that from 
Economics 101.
    The Chairman. As you say, it is basic law of supply and 
demand and I think part of our role here as a Committee is to 
maintain a level of vigilance and understanding as to what is 
actually happening in that vein with the number of exports that 
have been approved.
    As you have indicated, Mr. Winberg, you have some that have 
come before you but those projects haven't advanced because--
Mr. Arriola, how expensive are these? These are not cheap 
propositions?
    Mr. Arriola. These, depending on the size, are $10 to $11 
billion----
    The Chairman. Yes, so this is not a light investment.
    Mr. Arriola. ----and no one is going to start construction 
until they have contracts.
    So, you know, although the numbers that Secretary Winberg 
talked about are a lot, potentially, I don't believe you're 
going to see that much capacity come onto the market without 
contracts.
    The Chairman. Yes----
    Senator King. ``Trust, but verify'' is my motto.
    Mr. Arriola. Understand.
    The Chairman. These are fair, these are good conversations 
to have. But again, I think, some of these economic drivers out 
there can also be a limiting factor to what you might be able 
to get the permit, but if you can't get that financing there, 
then nothing happens.
    I want to ask one quick question, and then I will turn to 
Senator Hoeven, who has joined us.
    This is back to you, Secretary Winberg.
    Early in the Administration, the Department proposed a rule 
to increase the volume allowed for de minimis exceptions for 
the permitting requirements, and this was looking specifically 
to the opportunities to increase product to Caribbean and Latin 
American markets there. Has it opened up the opportunities that 
we were hopeful that it would do? Is this working?
    Mr. Winberg. Thank you, it's a good question.
    We have not seen an uptick in small-scale LNG exports yet. 
We do have one facility, which is American LNG, out of Florida. 
They've done 278 shipments to Barbados, Bahamas, Haiti and 
Puerto Rico, and Haiti only, I think, within the last couple of 
months. So we are seeing shipments.
    We have had one additional, potential, small-scale 
developer that has come to us. They have not made a decision 
yet.
    Senator, I think the issue here is, perhaps, a chicken and 
an egg issue. And there was discussion earlier about EXIM 
Bank's role----
    The Chairman. Right.
    Mr. Winberg. ----in developing import facilities and 
regasification facilities on these, in the small island 
communities and Central America, and a developer of LNG exports 
from the United States is not going to develop a facility if 
they don't have a customer.
    And so, I think we've got a bit of chicken and an egg but I 
do think there is a role for the EXIM Bank and other U.S. 
entities to assist with that and then, I think, we will start 
to see more small-scale exports either in smaller ships or ISO 
containers.
    The Chairman. Well, that was certainly the thought when we 
advanced that. So, understanding, kind of, where we are with 
that is appreciated.
    Let me turn to Senator Hoeven.
    Senator Hoeven. Thank you, Madam Chairman.
    Secretary Winberg, in North Dakota we are producing an 
incredible amount of natural gas. We don't drill for natural 
gas. We drill for oil in the Bakken shale and produce huge 
amounts of natural gas as a byproduct of that drilling.
    But the challenge we have is monetizing it, getting it to 
markets and monetizing it.
    How do we get more pipelines? How do we get more capacity, 
not only to move that natural gas around the country, but also 
to send it overseas, whether it is to the Pacific Rim or to 
Europe, which not only is a monetary or economic win for the 
United States but it is a national security win by supplying 
energy to our allies rather than having them get their energy 
from Russia or some other adversary?
    Mr. Winberg. Yes, sir, absolutely agree. It's an 
imperative.
    We have no shortage of entities that want to obstruct 
natural gas pipelines and for that matter, oil pipelines. And 
so, we're moving oil by rail, when it's much, much safer to do 
it by pipe.
    How do we expedite that? The President has an Executive 
Order for us to evaluate in certain parts of the country where 
we have seen pipeline infrastructure not being built and what 
can be done about that.
    In the short-term, Senator, what the Department of Energy 
is doing and, in particular, my office, is we're evaluating 
development of small, modular units that can be placed in a 
field where there's this stranded gas and it will stay stranded 
until a pipeline gets built.
    The attractiveness of these small, modular units to produce 
power or maybe even produce other products is that once the 
pipeline is built and that gas can go for a much higher value 
use, we can move that facility to another location because, as 
we build out the unconventional oil and gas, we're going to 
continue to have this issue until the pipelines, in effect, 
catch up with the production. And so, we have an opportunity to 
utilize that stranded gas.
    Senator Hoeven. We have the technology to capture it, it is 
the pipeline capacity and the LNG facility capacities to both 
move it around the country and to export it. That is the key.
    The irony is here we are in a situation where our country 
is increasingly infrastructure-constrained and the biggest 
challenge to developing more infrastructure is the cost to 
build it, and here the companies will pay the full cost to 
build that pipeline infrastructure, taking vehicles, rail cars 
and everything else off, rail tracks, trucks off the road, in 
addition to all of the other benefits.
    How do we get the consensus to get through some of the 
bottlenecks which, as you know, we are facing throughout the 
country whether it is in New England or the West Coast or 
wherever it may be?
    Mr. Winberg. Yeah, I think taking a good, hard look at 
interstate commerce and thwarting that interstate commerce 
might be a step in the right direction.
    Senator Hoeven. If you would, update me as to where you are 
on the fossil energy programs as regard your partnering in 
carbon capture projects like our Project Tundra and Allam 
Cycle, because the other thing is if we can't move the product 
to the market then how do we convert the product, whether it is 
natural gas or captured carbon, into a product onsite that we 
can monetize and use?
    Mr. Winberg. Yup.
    We've had a long-standing relationship with the University 
of North Dakota, EERC continues to do great work, Senator.
    As we look at the carbon capture, utilization, 
sequestration, we're cutting across coal, natural gas and even 
direct air capture. We've been at this for 25 years now. The 
Department of Energy is developing the technologies and 
reducing the cost.
    The last time you and I met, I told you that the goal we 
had was to reduce the cost of capture by 50 percent and if we 
get to that point then there are opportunities for utilizing 
that CO2 for enhanced oil recovery, enhanced natural 
gas recovery, perhaps even down the road, product development 
or product manufacturing. So across the slate of capture 
technologies, we're working very hard. In many cases, we're 
working with EERC on those.
    Senator Hoeven. Well, this is incredibly important right 
now and it really is the solution to the concern about 
capturing carbon example, as you said at one of our facilities, 
the Great Plains Synfuel Plant, as you know, we are capturing 
the carbon and using it for downhole, tertiary oil recovery.
    But what the latest project they have engaged in is they 
now take a lot of that carbon they capture and they are making 
anhydrous ammonia and urea, making fertilizer which we can then 
use throughout the Midwest, okay. So there is another case of 
actually converting it to a different product that we can use 
more in the immediate vicinity to get rid of some of these 
transportation barriers we were talking about earlier. These 
are the solutions.
    I mean, there is technological viability or technical 
viability and there is economic viability, commercial 
viability. That is where we have to crack the code. Just like 
we cracked the code with the shale play and look what has 
happened with oil. We need to crack this code. We need you to 
do it.
    I would ask if you would be willing to come back out to 
North Dakota this summer and meet with some of our players 
again working on this. Would that be something you would 
consider doing?
    Mr. Winberg. Absolutely.
    Senator Hoeven. Alright, thank you very much.
    The Chairman. Thank you, Senator Hoeven.
    I was reading press clips last night and this morning and 
obviously there is a great deal of attention in the Persian 
Gulf. It seems like there always is, but now even more so. 
Yesterday, at least three armed Iranian boats reportedly tried 
to seize a British oil tanker in the Persian Gulf. They were 
unsuccessful. The tanker was crossing into the Strait of Hormuz 
when the Iranians ordered the ship to change course.
    That is oil. But natural gas would also be out in these 
same areas and yet, the word Hormuz, the Strait of Hormuz, does 
not appear in the latest IEA Gas Security Review, which is, how 
can you not? How can you not include that as part of a 
security, a natural gas security review?
    I guess the question, I will go to both ends of the table 
here, to Mr. Tsafos and Mr. Winberg, why not? Are we not 
discussing this? I am assuming that DOE has examined the 
potential impacts of a Hormuz incident on LNG flows and what 
that might mean to us. So if we can have a discussion here.
    They have not called the second vote yet, so it just 
started, but that means I have a little bit of time.
    This is the geopolitical reality. I mentioned earlier when 
I was asking about the Alaska situation, one of the benefits 
that we have is we don't have to go through the Panama Canal. 
We don't have the choke points. We don't have the pirates. We 
are not the Strait of Hormuz. But that factors into the 
discussion about availability of supply. Right now, we know 
what we know, geopolitically, but next week, it could all go to 
hell in a handbasket. So how do we factor this in as we are 
talking about LNG and the future of LNG exports from this 
country and more globally?
    Mr. Tsafos, if you want to go first and then Secretary 
Winberg.
    Mr. Tsafos. Thank you, Senator.
    I think what you highlight is incredibly important. And the 
way I think about it is, in this country, in particular, oil 
security, at least since 1973, people have been talking about 
it, thinking about it, writing about it, convening. And we just 
have not had the same exposure and experience with gas 
internationally and with LNG. So I think it's a matter of just 
the market advancing a little bit faster than our institutions.
    The report that you referenced from the International 
Energy Agency, you know, to be fair to them, it's a review of 
gas security of what has happened.
    The Chairman. Right, the past tense.
    Mr. Tsafos. But I think one of the examples that I wrote in 
my testimony is the European Union does the stress test. We may 
have, possibly on January 1st, a disruption of gas flows to 
Ukraine, and we have an idea of what that would do to different 
markets because there's an organization that runs stress tests 
to try to understand how different countries could cope with 
these kind of disruptions.
    I think there's a role to play both on the United States 
side, but also multilaterally with the International Energy 
Agency, to develop more tools, more information to try to 
understand, for instance, if you did have a disruption in the 
Strait of Hormuz, who would be most exposed, what is the 
capacity of the citizen to respond, how would it respond, what 
kind of policy mechanisms might be required to make the 
response better?
    These conversations are just far, far behind and I think 
it's time to elevate those. And I think that's one area where 
U.S. leadership with other countries of the IEA could play a 
very important role.
    The Chairman. I appreciate that.
    Secretary?
    Mr. Winberg. Clearly, the Strait of Hormuz is a very 
significant issue. It's primarily an oil issue more than it is 
a natural gas issue.
    But I think it's also worthy of note that despite these 
attacks, well, if we had had these attacks ten years ago, I 
think you would have seen a massive spike in the price of oil. 
And we're not seeing that so much and that's because we have 
more distributed production coming out of the United States.
    With respect, specifically to U.S. LNG, I said earlier, 
we're moving a lot of that into the European market so the 
Straits are not an impediment. There's talk about the 
constraints in the Panama Canal. Those are congestion 
constraints, not geopolitical constraints. But we have a wider 
variety of outlets and routes that we can move the LNG, whether 
it's through the Panama Canal or whether it's through the, 
around the Cape of Good Hope or straight over to Europe. So 
it's not so much affecting LNG. Again, that's not to say it's 
not critical and it's not important, but it is more of an oil 
issue than it is a natural gas issue at this point.
    The Chairman. At this point.
    Mr. Winberg. Right.
    The Chairman. I think that is important to recognize.
    And I appreciate what you said, Mr. Tsafos, about the IEA 
report being, kind of, a look back instead of projecting 
forward. But I think this is something that we need to be 
thinking about, not just for the perspective of how do we move 
our gas, but how do others move their gas to supply those 
markets, whether it is Qatar to China or wherever. And if that 
is disruptive, what that then does to the broader mix.
    Mr. Arriola.
    Mr. Arriola. Yes, Senator, what I would tell you is we're 
dealing with very sophisticated customers out there, that they 
don't just look at price. Price is obviously a very important 
driver, but they're looking at availability, the reliability of 
where it's coming from, the operator, the financial strength, 
you know, congestion points.
    In the LNG market today, unlike the oil market, I think at 
the end of 2018 we only had, we had less than 600 tankers out 
there. In the oil market, there are thousands----
    The Chairman. Yes.
    Mr. Arriola. ----of different sizes.
    So that's why you have more liquidity in the market as 
well, but I think that what we're finding is customers, 
especially in Asia and in Europe, are becoming much more 
sophisticated and concerned from a risk management standpoint 
of all of those factors. We think that security of the supply 
is extremely important.
    The Chairman. I mentioned that the IEA report is a look 
back. I am going to ask you to do a little gazing into the 
crystal ball here because we have heard some say that global 
LNG infrastructure could actually become stranded assets as we 
see the mix of the energy mix change in the years going 
forward. Is this a concern that you all think about? When you 
are talking about a regasification facility, export facilities, 
these are substantial investments.
    And we have a case in point here in this country where 
about ten years or so ago we were talking about we need to 
build more import LNG terminals. We have turned that around and 
gone the other way with exports. So we know how things can 
change.
    Is that something that you are worried about right now or 
is it just too far out on the horizon or are you just thinking 
about other things?
    Dr. Hart.
    Dr. Hart. If I could comment from a China angle.
    China is planning for renewable, non-fossil energy to 
account for 20 percent of their energy mix by 2030 and over 50 
percent of their energy mix by 2050. So we should definitely 
take that long-term goal into account before getting too 
excited about what role LNG could play in their energy mix.
    The Chairman. Mr. Arriola.
    Mr. Arriola. Yeah, I would tell you as a developer of 
export terminals, we look at diversity of supplier and/or 
diversity of customers very importantly.
    At our Cameron LNG facility, for example, we've got three 
major customers that each take a third and they're diversified 
geographically and the customers that they serve because we 
want diversity.
    And as we think about what we're doing in the other 
facilities in Louisiana, Texas or from Mexico, we want to make 
sure that we have multiple potential customers and maybe even 
potential equity investors so that you can reduce that risk of 
somebody walking away and you have an empty plant.
    The Chairman. Mr. Tsafos or--go ahead, either one of you. 
Go ahead.
    Mr. Tsafos. Senator, I worry about this a little bit, in 
part, because I've done a lot of forecast in my life so I know 
how wrong they tend to be. Having said that, I think there's 
two reasons why other people don't worry as much as I do. One 
is if you look at most long-term scenarios, even in the 
transition of the energy system toward, sort of, a Paris ``plus 
or minus'' world, gas does well. That's, sort of, the base. The 
second thing that I think is even less understood is the system 
is, sort of, shifting from relying on power generation as a 
source of growth to relying on industry and buildings. Power 
generation is the area where gas has a lot of competition with 
renewables, the competition into buildings and then the 
industrial sector is less severe.
    I think there are a lot of people that are comforted by the 
fact that they're not just relying on power generation that is 
very competitive for gas demand growth, but they have a 
broader, sort of, customer base and that therefore, even in a 
transition of the energy system, those areas of consumption 
will remain.
    So I think those are the things that people respond to me--
to make me worry less, but I still worry about, you know, 
whenever you make 25-year bets, some people are bound to be 
wrong.
    The Chairman. Mr. Riedl.
    Mr. Riedl. The only thing that I would add there, I think 
that those are fantastic points. The one thing that I would 
think is important also to talk about, and Dr. Hart actually 
touched on it earlier, is the development of technology on the 
import side, especially as Senator Cassidy was making 
suggestions about the EXIM Bank and their involvement.
    The ability to invest in an asset that will no longer be an 
onshore asset, no longer stranded, so to speak, and especially 
in emerging markets where maybe creditworthiness might be a 
challenge for those countries that are looking to transition to 
natural gas. Having that ability to move a regasification 
that's floating rather than an onshore facility gives that sort 
of optionality that if we run into some sort of change, whether 
it be from a financial standpoint or technology standpoint that 
allows a different adoption of a different fuel. Now all of 
sudden we have the ability to move that asset to someplace 
else. So I would suggest that as technology on the import side 
continues to develop, it reduces that risk that you were asking 
about.
    The Chairman. All very important points, I appreciate that.
    This has been a great conversation. I am just thinking, 
some years back I tasked my energy team to help us put some 
focus on what we called our Energy 2020. It sounded so far 
away, and now we are working on 2030. But at that time, you 
know, it was just, it was really, kind of, a vision that we 
might be able to get to a point where, from an LNG perspective, 
we were actually a player, and we have gone from just dreaming 
about being a player to being the player in many ways.
    And so, it is a reminder to us that the technologies have 
allowed us to do so much, but it is also a reminder, and you 
mentioned this Dr. Hart, to not assume that the markets that we 
are banking on today are still going to be those great 
customers for us ten years from now, because they may do just 
exactly what we did in this past decade in terms of our ability 
to ramp up.
    And so, I think we recognize that a fair amount of this is 
a dynamic environment. I don't recall which one of you used the 
terminology as an ``evolutionary rather than a revolutionary,'' 
but sometimes that evolution happens quicker than any of us 
could have imagined or dreamed.
    Staying on top of things is critically important to us but 
also recognizing the role that we can play from a geopolitical 
perspective, our strategic role. Again, that is why we have 
rolled out this first of a series of white papers in terms of 
our global, strategic energy competition because we are at that 
place where we really can be engaged in that global 
competition. And how we assert that leadership is going to be 
an important part of the mix moving forward.
    So thank you for the conversation. It has been very helpful 
to what we have been talking about here as members of this 
Committee, but I think you have challenged us to think a little 
more broadly about the opportunities but also to be cautious 
about some of the hurdles or the pitfalls that may lie ahead.
    Dr. Hart, you raise a fair and legitimate concern about 
when somebody is willing to pay a premium price, they are 
usually looking for something in return. I think that you 
certainly heard from Senator Manchin an air of caution there. 
Alaskans are clearly eyes wide open as they have looked to how 
they can move their natural gas.
    We certainly don't want the Chinese to have control and 
that was made very, very clear, but again, you go into these 
agreements making no assumptions that it is going to be an easy 
road when you have partners that may have some different 
interests than you.
    I am told that we are closing out the vote, so I am going 
to go do my duty there, but I thank you for joining us here 
today.
    With that, we stand adjourned.
    [Whereupon, at 11:57 a.m. the hearing was adjourned.]

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