[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
U.S. ENERGY ABUNDANCE: EXPORTS AND THE CHANGING GLOBAL ENERGY LANDSCAPE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 7, 2013
__________
Serial No. 113-38
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
RALPH M. HALL, Texas JERRY McNERNEY, California
JOHN SHIMKUS, Illinois PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
ROBERT E. LATTA, Ohio LOIS CAPPS, California
BILL CASSIDY, Louisiana MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia DORIS O. MATSUI, California
CORY GARDNER, Colorado DONNA M. CHRISTENSEN, Virgin
MIKE POMPEO, Kansas Islands
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California (ex
FRED UPTON, Michigan (ex officio) officio)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 2
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 5
Prepared statement........................................... 6
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 7
Prepared statement........................................... 8
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 8
Witnesses
J. Bennett Johnston, Chairman, Johnston & Associates............. 10
Prepared statement........................................... 13
Byron Dorgan, Co-chair, Bipartisan Policy Center................. 17
Prepared statement........................................... 19
James Bradbury, Senior Associate, Climate and Energy Program,
World Resources Institute...................................... 26
Prepared statement........................................... 28
Answers to submitted questions............................... 128
Michael Breen, Executive Director, Truman National Security
Project........................................................ 54
Prepared statement........................................... 56
Mike Halleck, President, Columbiana County Board of Commissioners 61
Prepared statement........................................... 63
Amy Jaffe, Executive Director, Energy & Sustainability, UC Davis
Graduate School of Management.................................. 66
Prepared statement........................................... 68
Answers to submitted questions............................... 130
Submitted Material
Statement of U.S. Representative Michael R. Turner............... 117
Letter of May 3, 2013, from Charles P. Sammarone, Mayor of
Youngstown, Ohio, to the Subcommittee.......................... 120
Letter of May 6, 2013, from Scott Lincicome of the Cato
Institute, to the Subcommittee................................. 121
U.S. ENERGY ABUNDANCE: EXPORTS AND THE CHANGING GLOBAL ENERGY LANDSCAPE
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TUESDAY, MAY 7, 2013
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman of the subcommittee) presiding.
Present: Representatives Whitfield, Scalise, Hall, Shimkus,
Pitts, Terry, Burgess, Latta, Cassidy, Olson, McKinley,
Gardner, Pompeo, Kinzinger, Griffith, Barton, Johnson, Upton
(ex officio), Rush, McNerney, Tonko, Engel, Green, Capps,
Doyle, Barrow, Matsui, Castor, and Waxman (ex officio).
Staff Present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Press Secretary; Matt Bravo, Professional Staff Member;
Allison Busbee, Policy Coordinator, Energy & Power; Tom
Hassenboehler, Chief Counsel, Energy & Power; Jason Knox,
Counsel, Energy & Power; Ben Lieberman, Counsel, Energy &
Power; Nick Magallanes, Policy Coordinator, CMT; Brandon
Mooney, Professional Staff Member; Mary Neumayr, Senior Energy
Counsel; Chris Sarley, Policy Coordinator, Environment &
Economy; Jeff Baran, Minority Senior Counsel; Alison Cassady,
Minority Senior Professional Staff Member; and Caitlin
Haberman, Minority Policy Analyst.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call this hearing to order
this morning. Today we are going to have a hearing on the U.S.
energy abundance, exports and changing global energy landscape.
And at this time I would like to recognize myself for 5 minutes
for an opening statement. And I will be introducing members of
the panel, but I will probably yield a few seconds to my friend
from Ohio, Mr. Johnson, to introduce one member of the panel
from his district.
But this is an exciting day, a very important hearing. And
we do thank the witnesses for being here with us today. We look
forward to your testimony. All of you have had unique
experiences in this area, and we know that your testimony will
be quite valuable.
America's growing energy production is a game changer, and
today's hearing, entitled ``U.S. Energy Abundance: Exports and
Changing Energy Landscape,'' explores the geopolitical benefits
of the U.S. becoming a world leader in energy production and
exports.
As we have discussed in previous hearings, America's energy
abundance is creating employment opportunities and growth at a
time when little else in the economy is going as well, and that
alone is enough reason to support domestic energy production.
But while this energy abundance is a source of jobs at home, it
can also be a force for good and competition around the world,
and it is this potential that we hope to address today.
Until a few years ago most of us assumed that the U.S. was
well past its peak in terms of domestic energy production and
that we would become increasingly dependent on imports,
particularly oil imports from OPEC nations. Many feared the
same thing was happening with natural gas, and some even
worried about an emerging OPEC-like natural gas cartel
dominated by Russia and Iran. This committee held many hearings
discussing the grave geopolitical consequences of global energy
markets dominated by nations that do not necessarily share our
values and who are not shy about using energy exports to exert
leverage over other countries.
But now the tables are turning, thanks to American
innovations in hydraulic fracking and directional drilling that
is expanding the supply of domestic oil and natural gas.
Instead of being beholden to energy exporting nations, we are
fast becoming one ourselves.
Perhaps nowhere is the reversal more stark than with
natural gas. Debates about natural gas used to center around
whether to permit facilities to import supplies of liquid
natural gas from abroad to help make up for dwindling domestic
production. But now these would be import terminals are being
reproposed as export terminals. The reason for this reversal is
that domestic natural gas production is now rising so fast that
there is more than enough to meet domestic demand affordably
and export the surplus to nations that need it, such as Japan
and Great Britain. By taking advantage of these expert
opportunities we can help our own economy and at the same time
strengthen our ties with key allies.
I might add that the benefits of energy exports also apply
to coal, and I would like to draw your attention to a May 1st
Wall Street Journal article that chronicles how U.S. coal
exports to Eastern Europe are helping to displace Russian
natural gas and neutralize Russian influence. And even Bulgaria
was able to get a 20 percent reduction in price for natural gas
its buying from Russia because of additional coal that they are
using.
Not only should we be focused of course on natural gas and
oil and coal, but we need also to focus on pipelines, port
facilities, and other infrastructure investments necessary to
make full use of our energy abundance.
So this is a vitally important hearing, and as I said, we
are going to look forward to your testimony because we are at a
threshold of a great opportunity in this Nation to be energy
independent.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
America's growing energy production is a real game changer,
and today's hearing, entitled ``U.S. Energy Abundance: Exports
and the Changing Energy Landscape,'' explores the geopolitical
benefits of the U.S. becoming a world leader in energy
production and exports.
As we have discussed in previous hearings, America's energy
abundance is creating employment opportunities and growth at a
time when little else in the economy is going as well--and that
alone is enough reason to support domestic energy production.
But while this energy abundance is a source of jobs at home, it
can also be a force for good around the world--and it is this
potential that we will address today.
Until a few years ago, most of us assumed that the U.S. was
well past its peak in terms of domestic energy production and
that we would become increasingly dependent on imports,
particularly oil imports from OPEC nations. Many feared the
same thing was happening with natural gas, and some even
worried about an emerging OPEC-like natural gas cartel
dominated by Russia and Iran. This committee held many hearings
discussing the grave geopolitical consequences of global energy
markets dominated by nations that do not share our values and
who are not shy about using energy exports to exert leverage
over others.
But now the tables are turning, thanks to American
innovations in hydraulic fracturing and directional drilling
that is expanding the supply of domestic oil and natural gas.
Instead of being beholden to energy exporting nations, we are
fast becoming one ourselves. Perhaps nowhere is the reversal
more stark than with natural gas. Debates about natural gas
used to center around whether to permit facilities to import
supplies of liquefied natural gas from abroad to help make up
for dwindling domestic production. But now, those would-be
import terminals are being reproposed as export terminals. The
reason for this reversal is that domestic natural gas
production is now rising so fast there is more than enough to
meet domestic demand affordably and export the surplus to
nations that need it such as Japan and Great Britain. By taking
advantage of these export opportunities, we can help our own
economy and at the same time strengthen our ties with key
allies.
I might add that the benefits of energy exports also apply
to coal, and I would like to draw your attention to a May 1st
Wall Street Journal article that chronicles how U.S. coal
exports to Eastern Europe are helping to displace Russian
natural gas and neutralize Russian influence. Countries like
Bulgaria and Poland that used to be under Russia's thumb are
now gaining a measure of autonomy thanks in part to American
coal. This kind of BTU diplomacy can be repeated throughout the
globe, allowing us to strengthen our working relationship with
many countries while reducing the influence of troublesome
regimes.
Of course, none of this can happen if we shut the door on
domestic energy production. For this reason, we need to address
the fact that the Obama administration continues to keep most
federal lands off-limits to energy leasing and that regulatory
efforts may be underway to crack down on hydraulic fracturing.
The president likes to say he is for all-of-the-above, but
Congress needs to hold him to that.
In addition, we need to allow the pipelines, port
facilities, and other infrastructure investments necessary to
make full use of our energy abundance. The Obama
administration's four-year delay in making a decision on the
Keystone XL pipeline project is a warning sign that the
infrastructure approval process is badly broken and needs to be
fixed.
The benefits of being an energy-exporting nation could also
be derailed if we place unnecessary restrictions on these
exports. For example, some argue that exports of natural gas
will create domestic shortages and serious price spikes in the
U.S. But, with resource assessments continuing to be revised
upward and studies from the Department of Energy and the Small
Business & Entrepreneurship Council touting the net economic
benefits that are strongly positive, these fears are becoming
more and more unfounded. The real risk is if the U.S. does not
take advantage of energy export opportunities. Failure to do so
would be a lost opportunity, both economically and
geopolitically.
Increased production and trade in American energy benefits
both our economy at home and our standing around the world. I
look forward to our discussion on how to move forward.
# # #
Mr. Whitfield. At this time, I recognize the gentleman from
Ohio, Mr. Johnson, for the purpose of an introduction.
Mr. Johnson. Thank you, Mr. Chairman. I do consider it a
distinct honor. You talk about energy abundance and job
creation through domestic energy production, nowhere in the
Nation is that happening any more prevalently than in eastern
and southeastern Ohio. We sit on top of the Marcellus and the
Utica shale, and so many, many opportunities are coming our
way.
No one knows that better than one of our own county
commissioners, Mr. Michael Halleck from Columbiana County.
Commissioner Halleck is a stalwart believer in accountable,
responsible government. He has got a track record that proves
that. Every time that I go into Columbiana County to talk about
energy production, to meet with oil and gas companies, to talk
with business owners who are working hard to create jobs and
make ends meet for the residents of our district, you can find
Michael Halleck close by. He is engaged. I am very honored to
have him with us today. I think you are going to enjoy his
testimony.
Mr. Chairman, I yield back. Thank you.
Mr. Whitfield. My time has expired. Thank you very much.
At this time, I recognize the gentleman from California for
a 5-minute opening statement, Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
Today's hearing is the subcommittee's first opportunity to
focus on liquefied natural gas or LNG exports. I think it is an
important topic and I am glad we are having this hearing.
There is no question that a significant energy transition
is underway here in the United States. State and Federal
renewable energy policies are paying off. We have doubled our
capacity to generate renewable electricity from wind and solar
just in 4 years. Cheap natural gas is also helping to transform
our electricity sector. This market reality is driving a shift
away from the use of polluting coal to generate electricity.
These changes are positive developments, and we will hear a
lot today about the geopolitical implications of America's
energy abundance. We will also talk about the impacts on
America's economy, American jobs, and America's balance of
trade.
But I want to address a different issue: the relationship
between U.S. energy markets and climate change. Climate change
is the biggest energy challenge we face as a country. We can't
have a conversation about the global consequences of America's
energy policy without also having a conversation about climate
change.
In November, the International Energy Agency concluded that
if the world does not take action to reduce carbon pollution
before 2017, then it will be impossible to prevent the worst
effects of climate change because of the carbon dioxide
emissions that would be locked in by energy infrastructure
existing at that time. That means that the energy policy
decisions that we make today will have a real and direct impact
on whether we can prevent the worst impacts of global climate
change in the future.
It is through this lens that we need to examine whether we
should export LNG to other countries. LNG export terminals are
huge multibillion-dollar infrastructure investments that will
last for decades. We should understand the climate impacts
before these facilities are built, not after.
I have an open mind about LNG exports. There is a case to
be made that exports of LNG may allow other nations to move
from coal to natural gas. That could lead to reduced carbon
emissions. In addition, a number of studies predict that LNG
exports would have generally positive economic effects. There
is also a case to be made that free trade in natural gas may
help our allies in Europe and Asia who are currently dependent
on higher-priced natural gas imports from Russia and the Middle
East.
But we also need to consider the impact LNG exports could
have on domestic greenhouse gas emissions. Liquefying and
transporting natural gas is an energy-intensive process that
would generate significant carbon pollution. LNG exports would
increase the domestic price of natural gas, which could
increase U.S. carbon emissions as a result of a shift back to
coal for electricity generation. And methane itself is a potent
greenhouse gas. It is 25 times more potent than carbon dioxide
in warming the planet. Exports would stimulate more domestic
natural gas production, which can emit substantial amounts of
methane if not controlled.
As the Department of Energy considers the pending
applications to export LNG, I hope they will develop concrete
answers so that we can understand the climate impacts of moving
in this direction.
I thank the witnesses for being here, and I look forward to
there testimony. And I would be pleased to yield a minute that
I have left to any member on the Democratic side who wishes to
use it.
Mr. Green, I yield back the balance of my time.
Mr. Green. I thank my ranking member, and I want to welcome
our panel. I appreciate particularly our two former Senators
working with you as a House Member years ago.
I come from a district in Houston that actually is a large
petrochemical complex, so we are concerned about exporting
because we have seen expansion of our chemical industry
substantially over the last 2 or 3 years. But I still think
there is a possibility we can share with the world some of not
only our expertise in drilling, but also our natural gas. In
fact, we were on a committee trip, or at least a trip a few
weeks ago, and some members on the Republican side were there.
The German Chancellor asked if we would be able to export
natural gas to Germany, and I know one of my Pennsylvania
colleagues said they would like to send Pennsylvania and Ohio
gas. I told her we would be glad to send Texas gas, too, but it
needs to be done in a reasonable manner.
And, my ranking member, thank you again for yielding to me.
Mr. Whitfield. The gentlemen's time has expired. At this
time I recognize the chairman of the full committee, Mr. Upton
of Michigan, for 5 minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman.
Today's hearing continues the subcommittee's look into what
is becoming a welcome theme: how American energy abundance is
rewriting the playbooks for all levels of energy policy. This
new strategy is a reality, resulting from advancements in
innovation and technology, has game-changing potential for
America's energy future with more jobs, lower prices, and, yes,
less volatility, as we will hear today, has far-reaching
implications abroad as well.
As we learned at our February hearing, U.S. energy
resources are vastly abundant and growing, with technology
continuing to evolve and new areas of the country becoming
centers for exploration and production. It is not just Texas,
Alaska, and Louisiana anymore, but places like Illinois, Ohio,
Michigan, even California who are in the process of developing
or considering developing new oil and gas resources from
domestic shale.
This diverse geographic abundance is helping to ease the
volatility of the recent past, where prices were becoming
increasingly vulnerable to hurricanes and geopolitical turmoil,
to create a new North American gas market that is becoming the
envy of the world.
America's natural gas movement is creating competitive
opportunities domestically for manufacturing and technology, as
well as international opportunities to help our allies reduce
their reliance on geopolitically unstable regions of the world.
And I believe that our abundance means that we can have both
new jobs from a renaissance in the energy and manufacturing
sectors, along with new diplomatic strength from using these
resources to reinforce our ties to important allies and trading
partners. Our changing energy landscape will in fact produce
both economic growth and real gains.
To think that America in just a short period of time would
be at such a strategic advantage to use our natural resources
to not only help our country domestically with new jobs in
energy and security, but to also influence Russia's ability to
wield an energy weapon over its European customers, is truly
remarkable. Yet as today's witnesses will tell us, that is
exactly what is beginning to happen.
This hearing should also remind us that we must remain
steadfast in our support for efforts to maximize use of our
energy resources. As American shale production expands from
natural gas to oil, we have to embrace our newfound capability
to lift and shift the power structure with Venezuela, Russia,
and the Middle East back to our favor and strive to avoid
needless litigation or bureaucratic delays that threaten this
realignment.
We are in the midst of a budding success story about
American prosperity, jobs, and national power. We are
continuing to produce valuable energy resources safely and
responsibly around the country. But the benefits do not stop
there, as emissions also continue to decline.
I look forward to the testimony today, including Senators
Johnson and Dorgan. You have been good friends and we respect
your valuable expertise, and I look forward to that, and would
yield to our Republicans on our side.
Mr. Barton.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Today's hearing continues this subcommittee's look into
what is becoming a welcome theme: how American energy abundance
is rewriting the playbooks for all levels of energy policy.
This new energy reality, resulting from advancements in
innovation and technology, has gamechanging potential for
America's energy future with more jobs, lower prices, and less
volatility--and as we will hear today--has far-reaching
implications abroad as well.
As we learned at our February 5th hearing, U.S. energy
resources are vastly abundant and growing, with technology
continuing to evolve and new areas of the country becoming
centers for exploration and production. It's not just Texas,
Alaska, and Louisiana anymore--but places like Illinois, Ohio,
Michigan, and even California--who are in the process of
developing or considering developing new oil and gas resources
from domestic shale. This diverse geographic abundance is
helping to erase the volatility of the recent past where prices
were becoming increasingly vulnerable to hurricanes and
geopolitical turmoil to create a new North American gas market
that is becoming the envy of the world. America's natural gas
boom is creating competitive opportunities domestically for
manufacturing and technology as well as international
opportunities to help our allies reduce their reliance on
geopolitically unstable regions of the world.
And I believe our abundance means we can have both: new
jobs from a renaissance in the energy and manufacturing
sectors, along with new diplomatic strength from using these
resources to reinforce our ties to important allies and trading
partners. Our changing energy landscape will produce both
economic growth and geopolitical gains.
To think that America, in just a short period of time,
would be at such a strategic advantage to use our resources to
not only help our country domestically with new jobs and energy
security, but to also influence Russia's ability to wield an
energy weapon over its European customers is truly remarkable.
Yet, as today's witnesses will tell us, that is exactly what is
beginning to happen.
This hearing should also remind us that we must remain
steadfast in our support for efforts to maximize use of our
energy resources. As American shale production expands from
natural gas to oil, we must embrace our newfound capability to
shift the power structure with Venezuela, Russia, and the
Middle East back to our favor and strive to avoid needless
litigation or bureaucratic delays that threaten this
realignment. We are in the midst of a budding success story
about American prosperity, jobs, and national power. We are
continuing to produce valuable energy resources, safely and
responsibly around the country, but the benefits don't stop
there as emissions also continue to decline.
I welcome our entire esteemed panel to this hearing,
including Senators Johnston and Dorgan. Your extensive
backgrounds and contributions to this discussion are incredibly
valuable. Increased production and trade in American energy
benefits both our economy at home and our standing around the
world. The energy landscape is changing, and we will all be
better for it. I look forward to our discussion on how to move
forward.
# # #
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman. And thanks to Chairman
Whitfield for holding this hearing. It is good to see Senator
Johnson and Senator Dorgan. I worked with them in the past, and
it is good to see you here at the witness table.
This is an important hearing. I don't think it is a secret
that I am a supporter of free markets and a robust American
energy policy. Currently our oil and gas sector is creating
about 9 million jobs a year and sending in taxes more than $30
billion to the Federal Treasury every year.
We have the blessing of the Lord on our side in the United
States that the latest estimates, although it is difficult to
estimate, we think over 2,000 trillion feet of natural gas
resides beneath our lands in the United States, 2,000 trillion
feet. Because of past laws, we give the Department of Energy
the right to make a decision on exports and natural gas, if it
is not to a country where we already have a free trade
agreement. There are currently 19 of those applications
pending, one has been approved. It would be my hope that
several more are approved in the near future.
If you believe in free markets this is a win-win. You only
make an agreement if it benefits the seller and it benefits the
buyer. In this case the seller is the American economy and the
jobs that are created in America. And the winner overseas is
the increased economic prosperity because they get natural gas
from the United States that is orders of magnitude less
expensive than it is from any other supplier.
So, Mr. Chairman, this is a good hearing, and I look
forward to the witnesses and then asking them questions. And
with that I would yield back to the chairman.
[The prepared statement of Mr. Barton follows:]
Prepared statement of Hon. Joe Barton
Thank you, Chairman Whitfield, for holding this hearing to
examine the national security and foreign policy implications
of our abundant energy resources. America's energy revolution--
the massive increase in oil and gas production from shale
formations--has shifted the geopolitical framework governing
foreign diplomacy. The positive effects are being felt both in
the U.S. and abroad, and this is just the beginning.
The increase in oil and gas development is strengthening
our economy here at home by supporting nearly 9 million jobs
and sending more than 30 billion dollars to the Federal
Treasury every year. It is the bright spot in an otherwise
gloomy economy.
The growth in domestic production also means we are
importing less, freeing up supplies of natural gas and oil
around the world, weakening the grip of state-owned energy
companies like Russia's Gazprom, which once held sway over
European natural gas markets.Allowing exports of American
natural gas, and possibly even oil, would further enhance our
power and influence--strengthening our relationships with
allies and weakening the control of adversaries such as Iran.
I support American energy exports because I support free
markets and free trade. The fundamental principle of free
markets is that both sides to transactions benefit. We keep
jobs here at home--our businesses can continue to innovate and
grow. Our allies around the world benefit because they can
diversify their supply and decrease their reliance on OPEC
nations. Together, we benefit knowing the safety and security
of our energy supply will not be subject to the whims of
adversaries seeking to use energy as a political weapon.
I want to thank the witnesses for appearing before us today
to allow us to better understand what may be possible in this
new era of energy.
Thank you, I yield back.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentleman from Illinois, Mr. Rush, for a
5-minute opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I want to thank you, Mr. Chairman, and I want to
join with my colleagues in welcoming our expert witnesses,
particularly our former Senators, Senator Johnston and Senator
Dorgan.
Mr. Chairman, with the technological advances in the area
of energy production and the prevalence of shale oil and gas
due to hydraulic fracturing, or fracking, today's hearing is
both timely and very necessary. Not long ago experts predicted
that the U.S. would be forced to rely on increased natural gas
imports in order to meet our energy demands. However, today we
are seeing a boom in domestic production of oil and natural gas
due to fracking and horizontal drilling. And now we must
consider whether the U.S. should become a net exporter of
natural gas, and, if so, over what period of time.
Between 1990 and 2012, Mr. Chairman, natural gas production
in the U.S. increased by 34 percent, and the EIA projects that
under existing policies natural gas production will rise by an
additional 39 percent by the year 2040. In fact, in a National
Journal article dated April 30th, 2013, entitled ``The U.S. Has
Much, Much More Gas and Oil Than We Thought,'' it was noted
that the U.S. has double the amount of oil and 3 times the
amount of natural gas than previously thought stored deep under
the States of North Dakota, South Dakota, and Montana. And this
was according to new data that was released by the Obama
administration.
The article went on to note that in just the Bakken and
Three Forks plays alone the U.S. Geological Survey estimated
that there are 7.4 billion barrels of recoverable oil and 6.7
trillion cubic feet of natural gas waiting to be tapped. While
the EIA predicts that under existing policies U.S. Total
natural gas consumption will increase from 24.4 trillion cubic
feet in 2011 to 29.5 trillion cubic feet in 2040, the agency
also notes that as domestic production outpaces consumption the
U.S. could become a net exporter of natural gas by the year
2020. In fact, Mr. Chairman, President Obama reiterated this
fact personally this past weekend during the development forum
in Costa Rica where he indicated that he may be close to making
a decision on whether or not the U.S. should become a net
exporter of natural gas.
In an E&E article published yesterday, on May 6th,
entitled, quote, ``Obama Says U.S. Likely to Be a Gas Exporter
By 2020,'' end of quote, President Obama is quoted discussing
this very same issue. He said, and I quote, ``Because of the
extraordinary advances in technology that we have made in the
U.S., we are likely to be a net natural gas exporter as soon as
2020. I have got to make a decision,'' he says, ``an executive
decision broadly about whether or not we export liquefied
natural gas at all,'' end of quote.
So, Mr. Chairman, as this discussion of potentially
exporting LNG heats up, I join with my colleagues in commending
you for convening today's hearing where we will both be able to
learn more from our distinguished panel on both the benefits
and potential negative impacts of this pertinent issue as it
relates to the economy, to jobs, to manufacturing, and to the
U.S. trade balance, as well as the impact on climate change.
More importantly, Mr. Chairman, I look forward to hearing how
LNG exports would impact the pocketbooks of ordinary consumers
so that American families are not subjected to adverse
consequences, those that are intended and those that are
unintended. Mr. Chairman, I look forward to this hearing, and I
yield back the balance of my time.
Mr. Whitfield. Thank you very much Mr. Rush.
And that concludes the opening statements today. So now we
get to listen to the opening statements of our distinguished
panel. And at this time I would like to introduce the panel
members. First, on my left, Senator Bennett Johnston, who is
from the great State of Louisiana and had a distinguished
career in the U.S. Senate. And one of the many areas that he
was certainly involved in was in energy. He is now the chairman
of Johnston & Associates.
And, Senator, we are glad to have you here with us today
and we look forward to your testimony.
We have Senator Byron Dorgan from the great State of North
Dakota. He also had a distinguished career in the U.S. Senate
and certainly is a well-versed public policy person on energy
issues. And we look forward to his testimony as well. And he
is, by the way, also the co-chair of the Bipartisan Policy
Center, that recently came out with a document about the energy
needs of America and directions that we should be moving.
We have Mr. James Bradbury, who is a senior associate,
Climate and Energy Program, at the World Resources Institute.
And we appreciate your being with us.
We have Mr. Michael Breen, who is the executive director
for the Truman National Security Project. We have Mr. Mike
Halleck, who has already been introduced by Bill Johnson, but
Mr. Halleck's the President of the Columbiana County Board of
Commissioners and certainly has worked a lot on energy issues.
And we have Ms. Amy Jaffe, who is the executive director for
energy and sustainability, UC Davis Graduate School of
Management.
So thank you very much for joining us today.
And at this time I am going to recognize each one of you
for 5 minutes, and there is a little box on the table and the
red light will come on when your time is up. So you can just be
aware of that. And at this time I recognize Senator Johnston
for 5 minutes for his opening statement.
STATEMENTS OF HONORABLE J. BENNETT JOHNSTON, CHAIRMAN, JOHNSTON
& ASSOCIATES; HONORABLE BYRON DORGAN, CO-CHAIR, BIPARTISAN
POLICY CENTER; JAMES BRADBURY, SENIOR ASSOCIATE, CLIMATE AND
ENERGY PROGRAM, WORLD RESOURCES INSTITUTE; MICHAEL BREEN,
EXECUTIVE DIRECTOR, TRUMAN NATIONAL SECURITY PROJECT; MIKE
HALLECK, PRESIDENT, COLUMBIANA COUNTY BOARD OF COMMISSIONERS;
AND AMY JAFFE, EXECUTIVE DIRECTOR, ENERGY & SUSTAINABILITY, UC
DAVIS GRADUATE SCHOOL OF MANAGEMENT
STATEMENT OF J. BENNETT JOHNSTON
Mr. Johnston. Thank you, Mr. Chairman, Ranking Member Rush,
ladies and gentlemen of the committee. The Department of Energy
says we have 100 years of natural gas. They say that by 2020
supply will go up by 40 percent, while demand will go up only
20 percent. The amount of natural gas seems to be growing every
week. Just last week The Washington Post reported that
Williston Basin has 3 times as much natural gas as they
thought. They also said, by the way, that China has 50 percent
more natural gas than the United States has.
Now, DOE commissioned to study by the Cambridge Energy
Research Associates, a definitive study, which indicates that
we can safely export natural gas without any untoward effect on
the price--no price spikes, no difficulty in terms of supply.
Now, that question is traversed, is argued against by some
of the chemical companies, principally Dow Chemical, who says,
if you have unfettered exports, then that is going to lead to
supply disruptions, price spikes, and other difficulties. So
the issue I would like to speak about today is the question of
how to allocate this huge beneficence of natural gas in the
United States. Is it by regulation or is it by the free market?
Now, people in the market will point out that it takes 5 to
7 years and $10 billion to $20 billion to have an export
terminal, with the trains and the ships and the D gas
facilities on the other end. And don't ever think that all of
those who put up a few hundred dollars to apply for their
permit are going to be able to make it to the finish line.
In my judgment, and my experience has been that the market
is the best way to do that allocation. Let me give you my
experience with markets because it is pretty extensive. My
first subcommittee was Production and Stabilization of the
Banking Committee. We had jurisdiction of President Nixon's
wage and price controls. We had hearings that indicated that it
was a disaster--shortages, dislocations, supply disruptions--
and I think our hearings had a lot to do with making the case
to suspend those wage and price controls.
Then the Federal Power Commission--some of you remember the
Federal Power Commission--was regulating the price of natural
gas in order to protect consumers. The problem was they set the
price so low that they dried up the supply. In the cold winter
of 1976-1977 hundreds of thousands of employees in the Midwest
were out of work because there was no natural gas, the
regulators didn't know how to regulate. So in that cold winter
we passed in 5 days the emergency natural gas bill--5 days we
passed that bill.
And we came along the next year with the Natural Gas Policy
Act. I think one or two of you were here in this room for that
year-and-a-half conference committee. What we did is deregulate
the price of natural gas by degrees between 1978 and January
the 1st, 1985. It was the most controversial bill you can
imagine. All three networks-- we only had three networks at
that time--they were here, and, oh, my gosh, you know, the
regulator said it is going to ruin things, the price is going
to shoot through the roof, the supply is going to dry up. Guess
what? Come January the 1st, 1985, the supply was adequate, the
price actually went down, and we proved, absolutely proved that
the free market works in commodities and particularly in
natural gas.
Then we had the Fuel Use Act of 1978 where they prevented
natural gas from being burned under boilers, and that turned
out to be a disaster, the Congress didn't know how to allocate
the highest and best use of natural gas. And just in case you
think that since I left the Senate that the regulators are
doing any better job, just look at electric cars. The President
says we are going to have a million electric cars in a couple
of years. We have got less than 100,000 now.
And how about ethanol? We are supposed to have 36 billion
gallons of ethanol, over half of that cellulosic ethanol. Right
now, according to their estimates, we should be having 500
million gallons of cellulosic ethanol. You know how many we
have got? Less than a million gallons, less than 1/500, and the
prospects are not any better.
So the question is, does anyone really believe that the
Department of Energy years in advance, 5 to 7 years in advance,
can really accurately predict supply and demand and predict who
is going to be able to come up with billions of dollars and
make decades-long supply and demand offtake agreements? They
can't do it.
You know, markets are dynamic. There are many factors which
are working which change by the month, some change daily, labor
rates, interest rates, diesel cost, steel, pipeline capacity,
NIMBY risk, regulatory risk, capital availability, technology
changes. All of those things are working rapidly. And the way
to allocate those, that great beneficence of natural gas, is to
let the market do it because it can react faster than the
regulators can react.
Thank you, Mr. Chairman.
Mr. Whitfield. Thank you, Senator Johnston.
[The prepared statement of Mr. Johnston follows:]
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Mr. Whitfield. And, Senator Dorgan, you are recognized for
5 minutes.
STATEMENT OF BYRON DORGAN
Mr. Dorgan. Mr. Chairman, thank you very much.
I am here on behalf of the Bipartisan Policy Center.
Senator Trent Lott and I co-chaired, along with two others, a
major study on energy and have produced this document. This is
the executive summary. I would encourage all of you to get it.
It is an unbelievably important source book. And we are hoping
that the House and the Senate will hold a hearing on this
because we have tried to create what we think could represent
bipartisan opportunities for policy changes in the area of
energy.
I left the House, by the way, in 1992, went to the Senate,
spent my next 18 years there. The last time I was in this room
in 2007 as an energy conferee, and at that point FERC had said
we were running out of natural gas, 2007. So times changes a
bit. That is only 6 years ago, 5 \1/2\ years ago. We were
running out of natural gas. An old Indian chief once said that
the success of a rain dance depends a lot on timing. Well,
timing is everything, and timing here with respect to where we
were in 2007 versus now is unbelievably interesting. So let me
talk about four major ways that the energy circumstances have
changed on the planet.
First of all, U.S. supply. We are producing more, a lot
more oil and gas, but also producing more renewable energy. And
the oil and gas that comes from innovation in combining
horizontal drilling with hydraulic fracturing. So that is all
good news. We are producing more, that is good news for our
country, and not just more fossil, we are producing more
renewable, which is good news for our country.
Efficiency, which is the fifth fuel. A lot of people don't
understand how much efficiency has contributed to where we are
as a country. And so that is very important, and there are
major U.S. benefits as a result of this.
Second significant issue, we add 200,000 people to the
planet every single day. We added Dallas, Texas, net to the
planet every week. We are headed towards 9 billion people. They
are going to want to have refrigerators, washing machines, and
air conditioners. They are going to want to drive cars as well
that are going to need to stop at a fuel station once or twice
a week--or let's hope once every 2 weeks. My point is the
growing demand as a result of increased population will
continue.
So number one, we are producing more, that is good for our
country. Number two, there is going to be substantial growth in
demand on the planet.
Number three, you can't come to the intersection of
discussing energy without understanding that you have to be
concerned about the climate and climate change issues. It is
clear to me that the wide consensus will be, is and will be in
the future that we need a lower carbon future. That is going to
play a role. Deny, as some will, energy policy is linked to
environmental issues.
And number four, you can't discuss all this without
understanding there remains an oil cartel on this planet that
sets international pricing. We need to understand that because
that plays a role in our lives as well.
Now, let me talk about the Bipartisan Policy Center's
report. The major issues there are diverse sources. We say,
yes, this is great news on oil and gas, it is transformative
for our country in lots of ways, good for us. We believe we
should continue producing. I offered the amendment in the 2009
bill that didn't get to the floor of the Senate to open up the
eastern Gulf. I mean, we should continue producing. But diverse
sources means also continue to push renewables as well.
And we also talk about improving productivity. That means
transmission, CAFE, transportation fuels, all of those areas.
We talk about innovation. Innovation is critically important
for our country. We must innovate to succeed.
And then finally governance. We have 20 Federal agencies
that have some part of the energy policy. I mean, how do you
have an orchestra without a band director? And yet we have 20
different agencies that play a role in energy policy.
So we have put together a set of 50 recommendations. And,
again, I hope very much both the House and the Senate will hold
hearings on these sets of recommendations on energy policy. It
describes how on a bipartisan basis we can make progress in a
Congress that seems unbelievably gridlocked. We had an advisor
group of 20 people, CEOs from every part of the political
spectrum, public policy groups and corporations and so on, as
we created this document.
Now let me talk at the end of this with respect to the
issue of exports. The export of natural gas, it seems to me,
will be continuing to play a significant role. What we decided
is we believe the market should make the decision about the
exports of natural gas. And I know some are worried, well, if
we export natural gas we are going to see increases in domestic
prices. Look, we have already doubled our exports of natural
gas to both Canada and Mexico. A lot of people don't know that.
We are piping natural gas to both of our neighbors and have
doubled that since 2007.
I think it is far more likely that domestic prices will
affect exports than it is that exports will affect domestic
prices. And so we decided in this report that the market should
make the judgment about the exports of natural gas.
So, Mr. Chairman, again, I am going to ask the Bipartisan
Policy Center if we might provide--I think I just gave the last
copy I had to Bennett Johnston, this is the full copy--but I
would love to have all of you have a copy of this. It is an
unbelievably good source book for virtually all areas of energy
with 50 recommendations that I think could advance the
bipartisan interest of this country and this Congress.
Mr. Whitfield. Thank you Senator Dorgan.
I know many of us have copies of it but we would be happy
for you all to supply it to the committee so we can make sure
everyone has it.
[The prepared statement of Mr. Dorgan follows:]
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Mr. Whitfield. Mr. Bradbury, you are recognized for 5
minutes.
STATEMENT OF JAMES BRADBURY
Mr. Bradbury. Thank you and good morning. Thank you for the
opportunity to contribute to the deliberations of this
subcommittee. My name is James Bradbury. I am a senior
associate in the Climate and Energy Program at the World
Resources Institute. WRI is a nonprofit, nonpartisan think tank
that focuses on the intersection of the environment and socio-
economic development.
I am pleased to be here today to offer WRI's perspective on
the climate implications of U.S. Liquefied natural gas exports.
I encourage this committee to consider not just the economic
and geopolitical opportunities of LNG, but also the
environmental, and particularly climate-related implications.
In my testimony today I want to emphasize a number of points
that are often overlooked in this discussion, in particular
fugitive methane emissions and the cost-effective solutions
available for reducing them today.
LNG exports will lead to an increase in domestic production
of shale gas, which will have important environmental
implications, including an increase in U.S. greenhouse gas
emissions. One major emission source is leaks from natural gas
infrastructure. Methane is the primary component of natural gas
and a potent greenhouse gas, with a warming effect that is at
least 25 times greater than carbon dioxide. These fugitive
emissions represent lost product and reduced revenue for
companies and governments, with negative consequences for air
quality, local environment, and the climate.
In 2011 methane leaks from domestic natural gas
infrastructure resulted in more greenhouse gas emissions than
all of the direct and indirect emissions from U.S. iron and
steel, cement and aluminum manufacturing combined. These
upstream emissions, along with emissions associated with the
liquefaction, transport, and regasification of LNG,
significantly reduce the relevant advantage that exported
natural gas would have over coal or oil from a climate
perspective. The bottom line is that the projected expansion of
domestic oil and gas production increases the risk of higher
greenhouse gas emissions if proper protections are not in
place.
The impact of LNG exports on global carbon dioxide
emissions is expected to be fairly minor. The International
Energy Agency estimates that an expanded global market for
natural gas would reduce global carbon dioxide emissions by a
mere 0.5 of 1 percent by 2035. But these scenarios do not
consider associated upstream methane emissions. The U.S. EPA
estimated that the scale of leaked methane from global natural
gas and oil systems is projected to be 10 times greater than
IEA's estimated CO2 reductions resulting from a
future with more abundant natural gas.
Ultimately U.S. policies are needed to reduce these
fugitive methane emissions if natural gas and LNG are to be
part of the solution to climate change. WRI research has found
that such policies are among the most important steps that the
U.S. can take today to help meet our greenhouse gas emissions
reduction goals.
The good news is that most strategies for cutting leakage
are highly cost effective and the EPA's recently finalized
rules are already having emissions benefit. But there is more
work to be done. By stepping up to address these emissions the
United States has an important opportunity to improve our
economic and geopolitical standing by showing leadership in
addressing global climate change. We can do this through
commonsense policies that promote the development, deployment,
and export of low-emissions technologies and practices that
will allow for the cleaner production and more efficient end
use of natural gas here in the U.S. and internationally.
While there are some benefits to increased natural gas
production, there are also risks and associated costs. Further
expanding our reliance on fossil energy resources exposes us
and our allies to the destabilizing effects of climate change.
In its 2010 Quadrennial Defense Review the Department of
Defense found that climate change could have significant
geopolitical impacts around the world, including weakening
fragile governments, food scarcity, spread of disease, and mass
migration.
For energy markets to serve the public interest the price
of energy must reflect its true cost. Society pays when our
health care premiums rise due to the harmful health effects
caused by high ozone levels and other air pollution. Taxpayers
pick up the tab for climate change when more frequent extreme
weather events cause increasing damage to our communities and
critical infrastructure.
Yet every day that we take no policy action on climate
change we make the policy choice to let climate change run its
course. The present course ignores the overwhelming consensus
of climate scientists who have been warning for decades that
rising greenhouse gas emissions will cause the planet to warm,
sea levels to rise, and the weather to become more extreme. It
is indisputable that these climate changes are already
happening today, in many cases much more quickly than expected.
Urgent action is needed.
I would be glad to take questions. Thank you.
Mr. Whitfield. Thank you, Mr. Bradbury.
[The prepared statement of Mr. Bradbury follows:]
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Mr. Whitfield. Mr. Breen, you are recognized for 5 minutes.
STATEMENT OF MICHAEL BREEN
Mr. Breen. Thank you, Mr. Chairman, Ranking Member Rush,
members of the Committee. Thank you for inviting me here today
to appear before the committee to discuss the geopolitical and
strategic implications of rising U.S. energy production, oil in
particular. I serve as the executive director of the Truman
National Security Project and Center for National Policy, two
organizations dedicated to forging strong, smart, and
principled national security policy for America.
As a former Army captain and an Iraq and Afghanistan combat
veteran, I am also proud to be one of the leaders of Operation
Free. That is a nonpartisan nationwide coalition of more than
5,000 veterans who belive that our dependence on oil poses a
clear national security threat to the United States.
To be clear, oil is immensely important to our economy and
will remain so for the foreseeable future. Its value goes far
beyond its utility as a liquid fuel. Petroleum is a key input
in advanced manufacturing, pharmaceuticals, agricultural
products, and a host of other applications. Unfortunately,
however, a near total dependence on oil as a fuel has eclipsed
petroleum's other contributions, which threatens our prosperity
and our security.
Our dependence on oil as a single source of transportation
fuel poses a clear national security threat. As things now
stand, our modern military cannot operate without vast access
to vast quantities of it. Our economy is equally dependent.
More than 93 percent of our transportation sector is reliant on
oil.
Today oil is a vital strategic commodity, a substance
without which our national security and prosperity cannot be
sustained. Until and unless we develop alternatives, the United
States has no choice but to do whatever it takes in order to
obtain a sufficient supply of oil. Oil is a fungible product,
traded globally, with prices set on a world market. In other
words, global supply and global demand set the market and drive
the price, not American supply and American demand alone. When
it comes to the price at the pump there is no such thing as
foreign oil.
Recent technological advancements, such as horizontal
drilling and advanced hydraulic fracturing, are promising. They
offer the chance to increase domestic production, allowing us
to reach supplies of oil that were until recently too expensive
or impossible to obtain. These advances have led some to claim
that the United States is suddenly capable of producing enough
oil domestically to meet our needs. They believe that this will
solve our oil-related economic and national security problems.
Yet, even if U.S. oil imports dropped dramatically,
geostrategic problems would persist. And though we do not
always share the same oil sources as our international
partners, our security is put at risk by their volatility. For
instance, in December 2011, Iran threatened to close the Strait
of Hormuz, a waterway that ships one-fifth of the world's
supply of oil. This resulted in global oil prices jumping 2
percent, exceeding $100 a barrel. Words alone were able to
drive up the cost of oil in markets from the Gulf to Asia.
Meanwhile, global demand for oil is rising at a
breathtaking pace, with no sign of slowing down in the
foreseeable future. While American demand has been very high
but relatively static for some time, demand in China, India,
and the developing world is skyrocketing. According to the
Energy Information Administration, America's oil consumption is
expected to grow by 11 percent over the next 2 decades.
Meanwhile, in that same timespan, China's oil consumption is
expected to grow by 80 percent and India's by 96 percent. And
by the end of the decade, China alone is expected to sell more
than 30 million cars a year. To put that in perspective, last
year about 76 million cars were sold worldwide.
It is unrealistic at best to imagine that increasing
production can somehow keep up with such dramatically rising
demand. Further, because the price of oil is set on a global
market, it is subject to events outside of our control or
influence. All of us agree, I am sure, that the United States
should not be subjected to the whim of hostile or unstable
regimes with nationalized oil assets.
The U.S. Currently controls and secures the world's most
critical shipping routes. Some contend that, producing more at
home, we could relinquish many of those responsibilities.
Indeed, a recent RAND study estimated that if the military were
to stop defending oil supplies and sea routes from the Persian
Gulf to the United States, it would save between 12 and 15
percent of the entire defense budget, more than $90 billion
annually.
But imagine if we did disengage from this duty. A number of
our adversaries would recognize this is an opportunity and our
allies would be faced with serious challenges. Look, for
instance, at the Asia-Pacific market. Eighty-five percent of
the oil shipped through the Straits of Hormuz today, which
supplies one-fifth of all oil traded worldwide, goes toward
Asia, not the United States. The oil then transits the Indian
Ocean and enters the North Pacific through the Straits of
Malacca, a razor-thin chokepoint constantly under threat.
According to EIA, if the strait was blocked, nearly half of the
world's shipping fleet would be required to reroute. Hostile
actors have taken notice. According to documents seized during
the raid that killed Osama Bin Laden, Al Qaeda was planning to
hijack and destroy oil tankers in the straits.
But more than the security of oil flows is at stake. We
have to consider the effect that would occur if the United
States pulled out of the Pacific and pulled out of the Indian
Ocean and who might step in. China would certainly be willing;
few others would be capable of doing so.
So it should be no surprise that our military is leading
the world in developing next generation energy technologies.
Our single-source dependence on oil threatens our national
security. Even dramatic increases in domestic oil production
will not free us from the global dynamics of the market or
relieve us of our global responsibilities.
Fortunately, more advanced energy technologies are
available and increasingly viable. We must support their
development and continue to lead the world through innovation.
Thank you.
Mr. Whitfield. Thank you.
[The prepared statement of Mr. Breen follows:]
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Mr. Whitfield. Mr. Halleck, you are recognized for 5
minutes.
STATEMENT OF MIKE HALLECK
Mr. Halleck. Mr. Chairman, Ranking Member Rush,
distinguished members of this committee, thank you for the
privilege of appearing before you today. Congressman Johnson,
thank you go for your kind introduction. My name is Mike
Halleck. I am president of the Columbiana County Board of
Commissioners. Columbiana County is located in eastern Ohio,
bordering Pennsylvania and West Virginia. We are part of the
Appalachian region. Our county is comprised of 540 square
miles, with a population of about 110,000.
In the past 2 years our county in particular and
surrounding counties in general has transcended into an energy-
based economy from a manufacturing one. A little more than 2
years ago our county had an unemployment rate of about 16
percent; today it is about half that. Permit me to address our
manufacturing base for a moment. Ohio, and especially northeast
Ohio, has been a manufacturing power since the industrial
revolution. While in recent decades automobiles and steel were
major employers, the advancement of technology and to some
extent imports have challenged their future.
However the good news is that eastern Ohio is quickly
becoming an energy economy, which has enhanced our
manufacturing base even more. A few examples would be V&M
Steel, a French company that invested $750 million in our
region to manufacture pipe for the oil fields and their
pipelines. Another would be a billion-dollar cryogenics plant
that separates the different gases for shipments. Just in the
past week another announcement was made regarding a $300
million pipeline and gas processing plant by NiSource, a
division of Columbia Gas.
To put all of this in perspective I will share with you a
few of the more compelling statistics associated with this. In
a few short years there have been over $7 billion invested in
our area. That is about 2.5 times the total value of the real
estate as if valued in our county. Over 39,000 jobs created,
with projections of 143,000 by 2020; 266,000 by 2035. During
2012 the average wage for manufacturing in Ohio was $55,000,
while the wages for the oil and gas industry average was
$81,000. The oil and gas industry accounted for $1.5 billion in
new tax revenue to the State of Ohio.
To bring a single well online takes about 410 people across
150 different professions. The average well should generate
about $1 billion in revenue. A recent study by Penn State that
this Marcellus Utica, quote, ``play,'' unquote, was protected
to be the largest natural gas find on Earth, second only to the
border region of Qatar and Iran, not necessarily a place that
we would want to stake our energy future.
Finally, yes, there are billions and soon to be trillions
of cubic feet being harvested as we speak, and, yes, there
could and already has been a suppression of gas prices. What do
we do next? While lower prices are welcome domestically, we
should not in my view make the prices so cheap through too much
supply that we force the producers to lower production. Better
yet, why not pursue exportation to countries that we have open
trade with? It would seem to me that not only would this
stabilize price, but give the United States a different
standing in the world and make a statement of energy
independence.
A recent report by Secretary Chu and the Energy Department
seemed to suggest something along this same line of thinking.
Several Members of Congress seemed to share the same school of
thought in a recent letter to Secretary Chu. And it was
refreshing to see the nonpartisan signatures on this letter.
After all, energy independence is not and should not be a
partisan issue.
While I am certainly not an expert in this field, much less
an economist, common sense would tell me that if we are
exporting more product abroad there will be a need for more
production. Thus more workers would be needed for this
production.
Again I thank you for this privilege, and in particular
Congressman Johnson for inviting me here today. I would be
happy to answer any questions. Thank you.
Mr. Whitfield. Thank you, Mr. Halleck.
[The prepared statement of Mr. Halleck follows:]
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Mr. Whitfield. Ms. Jaffe, you are recognized for 5 minutes.
STATEMENT OF AMY JAFFE
Ms. Jaffe. I want to thank you for this opportunity, and
also thank the committee for bringing to the fore the subject
of the international implications and U.S. foreign policy
implications of U.S. energy exports. I would submit that our
discussion on energy exports, in particular on LNG exports, has
been too focused, 100 percent on the domestic market
consequences, whether that is a job consequence or a price
consequence. And I believe that we need to not take these
decisions in a vacuum, that the context of U.S. foreign policy
needs to be taken into account in the discussion of our export
policy for both natural gas and other products.
The context is that for the last 3 decades the United
States has had an active foreign policy to promote free trade,
open trade, and energy exports in investment. That is important
not only to the United States, but to the global economy. Why
do we want free trade in energy? As has been mentioned by many
of your committee members and by my fellow panelists, we have
operating in the global market an effective oil cartel that
keeps the price of oil much higher than it would be without
those artificial restrictions. And those restrictions are
developed through energy trade, so countries like the Middle
East and so forth organize to restrict exports of oil or
natural gas in a manner to raise the price internationally and
they also restrict open investment in oil and gas exploration.
We send our diplomats to countries like Russia, China, and
the Middle East to discuss with them having better and more
open-access rules for the investment in oil and gas. It is this
lack of investment in oil and gas abroad in recent years that
has caused us to have the kinds of financial crises that have
revolved around sharp increases in energy prices that we saw
not only in the 1970s, but also in 1990 when Iraq invaded
Kuwait, also more recently in 2007 and 2008 when we saw energy
prices for all businesses in our country hurt American
consumers, hurt average Americans.
So it is important to have the United States have an open
and assertive policy in trade policy globally, that we do not
favor, that we promote free trade, that we do not--that we
object to restrictions in investments and trade in oil and gas.
Because that is our standing foreign policy and an important
foreign policy because we don't want other countries that
produce a lot of oil in the Middle East and other places to
hold and restrict their exports, we cannot ourselves then have
a policy where we choose to restrict our exports, because
therefore we would move into a world where energy becomes
possibly a political weapon or an economic weapon, and that is
not in the vital interests of the United States.
The best way to prevent the kind of global imbalances in
energy supply that affects our jobs and hurts every American is
to have a policy, a foreign policy that promotes trade and open
markets. If the United States doesn't have an open-market
policy then we cannot advocate it for other countries.
When we consider LNG exports we need to put that export
debate in the context of our own free trade agreements. Our
free trade agreements have to be meaningful because otherwise
why would anybody want to have economic agreements with the
United States and important trade relations. We export natural
gas to Mexico. Last year we exported 1.69 bcfd of natural gas
to Mexico under the NAFTA agreement. That is an advantage of
trade.
We hold a free trade agreement with South Korea. South
Korea would desire to buy liquid natural gas from the United
States from the new proposed export terminal. We cannot supply
natural gas under a free trade agreement with Mexico and turn
to South Korea and tell them that we are not going to honor our
agreement with them. Once we honor our agreement with South
Korea, how are we going to turn to Japan, a country that would
like to buy our LNG exports, and tell them even though they
have been a staunch ally of the United States for decades, we
are going to export our LNG to South Korea under a free trade
agreement but we are not going to provide these resources to
Japan.
So the best way to protect consumers from the kinds of
seasonal problems that could erupt from having exports is to
have a mandate for minimum inventories in the United States as
they have in Europe and Japan.
Thank you.
Mr. Whitfield. Thank you, Ms. Jaffe.
[The prepared statement of Ms. Jaffe follows:]
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Mr. Whitfield. And thank all of you for your testimony and
for taking time to be with us today.
Now we will have a question period and answer, and I will
recognize myself for 5 minutes for the first set of questions.
First of all, I am happy to hear that many of you support a
free-trade, open-market system on the export and in the entire
energy sector. I read your testimony, Senator Johnston, and I
was thinking back about all these Federal policies that you
referred to, like the Fuel Use Act, the wage and price controls
and others, and the unintended consequences that came about as
a result of those government policies. And so I was--and Mr.
Dorgan talked about--in the publication that they were involved
in, he specifically said restricting international trade in
fossil fuels is not an effective policy to reduce global
greenhouse gas emissions, and I agree with that as well.
Mr. Breen, one question I did want to ask you, you talked a
lot about oil policy today, and do you have a position on the
export of energy from America, liquid natural gas as an
example?
Mr. Breen. Sure. My position is that there may be some
advantages to that. I am 100 percent in favor of the idea of a
free market, a global free market in energy. My concern focuses
around oil, primarily because the United States is single-
source-dependent on oil for transportation.
So the good news on electrical energy production and
industrial energy productions is it is diversified. Natural gas
is part of it. There are other renewables.
In the case of transportation, 93 percent plus is totally
dependent on oil, and so that is why I focused on it. It is----
Mr. Whitfield. But on the natural gas, did you say you do
or you don't have a position on that?
Mr. Breen. My position is that it is probably not a bad
thing. I think natural gas is a great bridge fuel----
Mr. Whitfield. OK.
Mr. Breen [continuing]. From a climate perspective.
Mr. Whitfield. OK.
Mr. Breen. And certainly Russia's use of it geopolitically
is----
Mr. Whitfield. Thank you.
Senator Johnston, you talked about, as I had said earlier,
about the adverse policies of the government trying to dictate
what will and will not be done. I was just curious, can you
imagine any sensible way that we can actually try to restrict
exports of natural gas that would be an effective government
policy?
Mr. Johnston. Mr. Chairman, I have thought a lot about
that, and if you made me come up with a policy, I don't know
what it would be. I mean, if you did it chronologically as to
who first files for the permit, I think there are some 16
permits now pending, that would not make any sense, because,
you know, it just costs a couple of hundred dollars, I think,
to file one of these things, and it doesn't tell you who has
the best application, or who will be able to--you know, you
have got to have a decades-long supply agreement, and a
decades-long off-take agreement, and many billions of dollars,
and that first application just doesn't tell you who is going
to be able to do that.
So I don't think there is a way to do it. I think it would
be just as disastrous as the Federal Power Commission trying to
set the price of natural gas.
Mr. Whitfield. Do you have an opinion on that, Senator
Dorgan?
Mr. Dorgan. Yes. I generally agree with that. You know, we
currently have in law a restriction with respect to the export
of oil, as you know.
Mr. Whitfield. Right.
Mr. Dorgan. That has been there since the 1970s.
And let me make a point in response to what Mr. Breen said
as well. It is the case that the additional production, for
example, of oil and natural gas is really good news for our
country, really good news, but it is also the case that 70
percent of the use of oil in this country is used in
transportation, and 90 percent of transportation fuels are oil-
based. And so is that worrisome? Should we be trying to
diversify? The answer to that is yes, of course we should.
Mr. Whitfield. All right. Thank you.
You know, Mr. Bradbury, you talked about the climate change
issue, which certainly is important, but I think here in
America we do need to take credit for the steps that we have
made to improve our environment. Our CO2 emissions
are down lower than they have been in 20 years. And when you
think about the immediate impact, for example, when the
Russians stopped the supply of gas into the Ukraine, when they
stopped the supply of gas into Bulgaria, and they were without
gas for 4 or 5 days, when you think about the immediate impact
on the lives of people because they can't get adequate energy
sources, and then you compare that to the long-term climate
change issue that is out there, trying to balance immediate
needs versus long-term needs is something that we all, I think,
struggle with.
But you don't even have to comment on that. My time is
actually expired, so I will recognize Mr. Rush for 5 minutes.
Mr. Rush. Thank you, Mr. Chairman.
We have had some interesting testimony and testimony that
has touched on LNG exports from a myriad of perspectives. And
all these perspectives are quite important, but I would like to
hear a little bit more about how exporting LNG impacts the U.S.
consumer.
Unlike oil, which is set on--whose prices are set on the
global market, natural gas prices are set under a regional
scale or a North American and Europe and also in Asia. And
today we are paying reasonably low prices for natural gas, less
than $4 for a gallon, but when you compare to Europe, they are
paying $10 per gallon, and in East Asia it is $12 to $16 per
gallon, and experts expect these prices to increase over the
coming years. As a matter of fact, the EIA estimates that Henry
Hub's spot prices for natural gas will increase by 2.4 percent
as producers begin drilling more oil, and especially in more
difficult terrain.
So the question that I have is how will this exporting LNG
impact the cost of natural gas for America's families and
consumers and the manufacturers? Will this impact be
significant, and will it be widespread in the various and
different sectors of our economy? Will there be an overall gain
or loss in manufacturing jobs and other types of employment if
we started exporting LNG? And so the impact on the American
consumer is where I center my question. And anyone on the
panel. Maybe, Senator Johnston, if you would be so kind to
start it out.
Mr. Johnston. Thank you, Mr. Rush.
That is a very key question, and it was the subject of the
Cambridge Energy Research Associates' study: What was going to
be the effect on consumers? And they examined the question from
many different aspects and determined that it would not have an
adverse effect on American consumers. The reason is that demand
begets supply. The more demand you have, the more supply you
have.
Now, in my home State of Louisiana, now, we have got what
we call the Haynesville shale, some of the most prolific of the
dry shale plays in America, but it is, for the most part, not
being developed now because the price is a little bit too low.
Now, you don't need a huge price to develop a Haynesville or
some of the Texas shales, but you need more than you have got
right now.
So what Cambridge said, and what other studies have shown,
is that demand will produce more supply, and that the price
effects will not be bad, that they will be good for the
country.
Mr. Dorgan. There is a Brookings study on that point. There
is a Council of Foreign Relations study on that point. And, you
know, it is interesting. As we are talking here, one of the
most significant oil plays on the face of the planet is in the
Bakken in North Dakota. There is a substantial amount of
natural gas. Most of it is being flared. I mean, if you fly
over that place at night, it looks like another giant American
city, because the price of gas at this point is not high enough
to suggest to them they want to build the pipelines to gather
it. The price of sweet light crude is where they are going to
make profit up there, not collecting low-price natural gas. So
we are burning a lot of natural gas at this point.
But my point was that there are studies that have been
done, three of which I have looked at, that suggest export of
natural gas would have rather minimal impact on the U.S.
consumer.
Now, on the positive side, of course, it will reduce our
trade deficit. There are a series of positive things that will
come as a result of it.
Mr. Rush. Ms. Jaffe.
Ms. Jaffe. So my organizations have studied that issue as
well. I would say that over time the natural gas market--we are
currently studying that market together with Harvard--the
natural gas market is going to look more like the oil market.
In other words, the United States will probably not be that
isolated a market.
And if we do not export LNG from the United States, what
will happen is gas from Canada will be exported through
different projects that would be proposed of Canada. So you are
going to have natural gas exports from North America one way or
the other, and that will affect sort of a global effect on the
price where in the end the price in Asia that you cited will
come down over time as natural grass projects in Australia and
other places come online.
We have a global surplus of natural gas. It will assert
itself more and more over time, and I do believe that that
would give protection to U.S. consumers.
You know, the oil industry is a cyclical industry, and, as
many members of the panel have mentioned, sometimes when the
price gets too low, companies stop drilling because they don't
have profitability in a particular field, and that causes some
volatility for consumers. But overall there is so much natural
gas supply that it is hard to foresee we would go back to a
condition that we saw several years ago where the price of
natural gas in the United States was $10. It would take
something very extreme to produce that kind of result.
Mr. Whitfield. The gentleman's time has expired.
At this time I recognize the gentlemen from Louisiana Mr.
Scalise for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
having this hearing.
We have had a number of hearings in this committee about
the new technologies, what technology has done to increase the
supply. You know, years ago people thought there were short
limits on how much oil we had left, of natural gas, and, of
course, with the advancements in technology and then the
Deepwater in Louisiana, Senator Johnston knows we have
experienced even larger finds of large reserves of fossil fuels
with the shale plays, as you mentioned in the Haynesville play.
And I have been up there myself and seen just the job creation
that it has created, but also the energy independence. And I
have toured the Cheniere facility in southwest Louisiana, the
first of those 20 facilities that are either looking to export
LNG or, as Cheniere is, in the process of doing.
You know, there are so many opportunities for us to become
energy independent within 10 years. It is a very realistic
possibility if we get the policy right here in Washington. And
unfortunately, as our hearings in the past have shown us, the
policies have not always matched the goal of having energy
independence. You know, for those of us who want an all-of-the-
above strategy, which includes wind and solar, but being
realistic about their limitations, and understanding the
demands of a manufacturing economy, we are going to need to
continue advancing the technologies that we have for fossil
fuels as well.
I want to start with you, Senator Johnston, and then first
thank you for your 24 years of service to the great State of
Louisiana and to our country----
Mr. Johnston. Thank you.
Mr. Scalise [continuing]. For serving in the Senate, and
especially for your leadership on the Senate energy committee.
You know very well the challenges that we face.
In your testimony you talk about some of the times where
the Federal Government gets it wrong. And probably all the
times where the Federal Government tries to go and predict,
whether it is with renewable fuel standards, and, you know, you
cite the 2007 Congress projections that are now so far off that
are our refineries are telling us they are hitting the blend
wall. You know, you talk about the President's own predictions
of I think it was, what, a million electric cars on the road by
2015, and today we have 87,000 electric and hybrids.
So the government hasn't really been good at picking
winners and losers. In fact, you know, we had the hearings here
in this committee about Solyndra and that scandal, and where
the government literally came and tried to pick winners and
losers, and just ends up picking losers, and the taxpayers foot
the bill.
If you can just expand on some of the things you talked
about in your testimony about what would be a good strategy, as
you cite Adam Smith and Wealth of Nations; and, you know, is
government regulation versus a free market approach the right
way to go. And, of course, history has a lot of indicators for
which way is the better path.
Mr. Johnston. Well, thank you very much, Mr. Scalise.
There are huge opportunities for natural gas and for other
fossil fuels around the world. Qatar is a huge producer,
Indonesia, Australia. Chevron has a facility in Australia they
are spending $81 billion on, and they will be exporting all
over.
In addition to that, you know, if the price did get too
high, and I mentioned this to Mr. Whitfield, you can use coal
to make chemicals. My son and I are involved in a plant in Lake
Charles now which will make chemical precursors out of pet
coke, which is essentially the same thing as coal. So there are
huge opportunities for energy, and the market will sort those
out. It is----
Mr. Scalise. Do you----
Mr. Johnston. You know----
Mr. Scalise. Do you think it is an achievable goal. When
those of us who talk about energy independence within 10
years--again, if we get smart policy, if we get the policy
right out of Washington, do you think it is achievable that we
can be an energy-independent Nation----
Mr. Johnston. Absolutely.
Mr. Scalise [continuing]. To secure that future for our
country?
Mr. Johnston. Absolutely. You know, they are drilling down
in the Gulf of Mexico now below 30,000 feet, and they think
there are huge, huge--a huge new undiscovered basin down there.
There are just tremendous opportunities if we just get the
regulators out of the way. And, you know, we need regulation
for a lot of things, for safety, et cetera, but when you are
regulating the supply and demand of commodities, government
just can't do that very well. You know----
Mr. Scalise. Unfortunately the history has shown----
Mr. Johnston [continuing]. On ethanol, they still haven't
gotten it right. You know, we have known for years that they
weren't producing any cellulosic ethanol, but they are still
requiring it, and you would think the regulators would learn at
some point.
Mr. Scalise. We are going to keep pushing them to get
there. So I appreciate all of your testimony, but, again,
Senator Johnston for your leadership to our State.
And I would be happy to yield back the balance of my time,
Mr. Chairman.
Mr. Whitfield. Thank you.
At this time I recognize the gentleman from California Mr.
McNerney for 5 minutes.
Mr. McNerney. Thank you, Mr. Chairman. Thank you for
holding this hearing. I have enjoyed all of your testimony, so
it is a great choice of panelists this morning.
I don't think there is really that simple of answers on
these questions. We are producing more oil and gas, and that
has some real benefits in terms of national security, which was
brought out clearly; in terms of prices, which encourages
manufacturing in this country, which we need to do. It
encourages other benefits, too, employment, and that was
brought out by Mr. Halleck.
But there are also some disadvantages: gas leakage into the
environment, which is a global warming problem, perhaps more of
a problem than the coal production that we are trying--that gas
might displace. There is groundwater contamination. But it
seems that the disadvantages could be mitigated with high
standards for the wells and also with requirements for
transparency for fracking and horizontal drilling.
Mr. Bradbury, would you comment on that, please?
Mr. Bradbury. Sure. Well, thank you, Mr. Congressman, for
the question.
Well, absolutely. I think--well, this is one of the good-
news stories of the past year with EPA finalizing their New
Source Performance Standards for well completions, requiring
green completions for all new natural gas wells. Those
standards, it would be useful and I think a commonsense measure
to have those applied also to natural gas liquids and oil wells
with associated gas. To have----
Mr. McNerney. Especially with regard to the leakage.
Mr. Bradbury. This would address leakage at the well as you
are starting the production. You are doing the well, finishing
the development, the well completion of the well.
Mr. McNerney. Thank you.
Mr. Bradbury. And so that is a commonsense standard that
could be expanded beyond what is there.
Mr. McNerney. Thank you.
Mr. Bradbury. But there are also a number of other
technologies that could be used----
Mr. McNerney. Thank you, Mr. Bradbury.
Mr. Bradbury [continuing]. Not just for wells, but across
the spectrum.
Mr. McNerney. Senator Johnston, I appreciate your comments
about regulation of supply and demand is not necessarily a good
place for us to go, but do you agree that we could use higher
standards with regard to wells to prevent leakage and to
prevent contamination of groundwater? Do think that is a good
place for us to go here as a part of our policymaking?
Mr. Johnston. Yes, Mr. McNerney. I think no one cares more
or has more to lose than the oil companies, oil and gas
companies, about leakage and pollution, and so I think that
they are working hard, I really do believe, to have the highest
standards.
One of the problems is that some of the smaller producers
have yet to adopt the high standards. We need to adopt the
highest standards, particularly for fracking, because public
support of fracking is very, very important. I think it
deserves public support, and I think that they will be able to
do it safely. That was the conclusion of a study done by John
Deutch, and Ernie Moniz was part of that study. They said we
need to have the highest safety standards, but we need to
produce through fracking.
Mr. McNerney. I think you made an excellent point there,
then. Public acceptance is absolutely critical. Based on past
performance, there are problems. Communities are going to be
reluctant to allow fracking in their areas without the right
transparency and assurances that this is a safe process, and I
don't feel we are quite there yet.
But I am going to go on to, Mr. Breen, I appreciate what
the Truman National Security Project is doing with regard to
the implications of our national policies in terms of national
security, our national energy policies. How much work has the
Truman Project done with regard to the implications of global
warming on our national security?
Mr. Breen. Thank you for the question. It is good to see
you.
We have done quite a bit of it, as has, much more
importantly, the Pentagon and the intelligence services. The
consensus is that this poses a serious national security
threat. The Natural Security Advisor Tom Donilon just gave a
speech to that effect a couple of weeks back, saying that
national security is threatened by climate.
Recently the commander of our forces in the Pacific was
asked what his top national security concern was, which I think
is an interesting question, given that he is responsible for
China, North Korea and a whole host of other issues in the
Pacific, and his answer was climate.
If you look at the accelerants of instability and the
threats that come from this, with regard to terrorism, but also
with regard to mass population migrations, terrorist
recruiting, all kinds of issues, it is pretty clear that we are
going to be dealing with this. And, as General Zinni likes to
say, we can pay down now, and the cost will be in treasure, or
we can pay down later, and the cost will be treasure and blood.
Mr. McNerney. OK. I was going to ask, Ms. Jaffe, for your
input on that, but I am running out of time, so I will have to
yield back at this point. You were shaking your head, so I
couldn't resist.
Mr. Chairman, go ahead.
Mr. Whitfield. Have you yielded back? OK.
At this time I recognize the gentleman from Texas Mr.
Barton for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman.
I have got a photo on--several photos on my wall down in my
office, and one of them has myself and Senator Johnston
standing behind the first President Bush at the White House
when he signed a bill that repealed the Natural Gas Policy Act.
Mr. Johnston. I have got the same picture on my wall.
Mr. Barton. Yes. And I was chairman of the conference
committee in 2005 that Senator Dorgan was a part of, and we did
meet in this room. Both of those bills were bipartisan bills.
Both of those bills--the Energy Policy Act in 2005, over half
the Senate Democrats voted for it, and a third of the House
Democrats voted for it. So for these young folks on the second
row here in front of me, there is hope. We might actually burst
out in bipartisanship on LNG exports.
I would ask Mr. Bradbury, I listened to your comments, and
if I interpret them correctly, my understanding is if we handle
this fugitive methane emissions issue, at least your
environmental group would support an LNG export bill; is that
correct?
Mr. Bradbury. Well, the World Resources Institute doesn't
take a particular position on this specific issue, but
certainly by reducing these upstream methane emissions, we
could ensure that natural gas is lower-carbon-emitting--or
lower-greenhouse-gas-emitting than coal or oil when oil and
diesel fuel is used for transportation. If you get----
Mr. Barton. You know, it wouldn't be the end of the world
if the environmental community broke down and actually
supported a positive energy-production bill. I mean, if we can
meet the environmental standards, I know some of my friends on
the Democratic side would be interested in being supportive.
Former Chairman Waxman, if I heard him in his opening
statement, said he has an open mind. And I know unless the
minority leader Mrs. Pelosi has changed her mind, she has been
a supporter of natural gas as a fuel. So we really do have some
hope here.
I would ask Senator Johnston, on these pending permits what
would be wrong with setting some standards, some guidelines for
the Department of Energy in terms of environmental protection
and perhaps capital reserves, and then approve them all if they
meet those standards, and then let the market determine which
of them actually gets the contracts to do the exporting? What
would be wrong with that approach?
Mr. Johnston. Well, as you know, for onshore facilities,
FERC approves those, and they must meet those standards. That
does not give them an export permit, but they must get a FERC
permit or a NOAA permit for offshore facilities. So that takes
care of the safety, and they must have the high standards
there.
Now, the law provides that--it is an old law, it hasn't
been updated and doesn't have a lot of standards, but it does
say that DOE shall approve unless the national interest is
against it. In other words, the preference is for approving,
and I think that is proper. In other words, I think that the
permit should be granted unless the case can be made against
it.
Mr. Barton. See, I don't think we are going to build 19 LNG
export facilities. I don't think there is a world market. You
are probably going to have one or two on the west coast, and
one or two on the east coast, and one or two in the Caribbean,
but if you let the market work, the market will sort, in my
opinion, those types of things out.
The gentleman that talked so much about oil as a strategic,
do you oppose natural gas being used for a transportation fuel,
Mr. Breen?
Mr. Breen. Absolutely not. No. I think in cases where
natural gas is viable as a transportation fuel, particular
medium and heavy trucking or garbage trucks, things like that,
municipal fleets, we should be embracing any opportunity to
lower the single-source dependence of our transportation sector
on oil. I think that is good.
I think--I am also in favor of other technological
approaches as well. I think the more diversity there is in that
sector, the better off we are.
Mr. Barton. OK. And finally, Mr. Halleck, as the person who
is living in the real world in Ohio, what is the long-term
expectation to the local economy in your area because of the
Marcellus drilling activity? Is it positive, negative, short
term, or is the expectation that it is going to create a stable
employment base for decades to come?
Mr. Halleck. Well, Congressman, we have been told that it
is certainly 20 to 25 years. There have been some that has told
us it is as much as 50, but I think conservatively 20 to 25
years. And it has certainly been a game changer in our area.
And for the first time in--I was a commissioner back in the
1990s as well--we are not struggling like we used to to balance
our budget.
Mr. Barton. We have the Barnett shale down in my part of
Texas, and we think another 50 years. And it is not nearly as
big a reserve base as the Marcellus is.
Mr. Halleck. Yes.
Mr. Barton. With that, Mr. Chairman, I yield back. Thank
you.
Mr. Whitfield. At this time I recognize the gentleman from
New York Mr. Tonko for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair. And welcome to our
panelists.
Virtually all of you have addressed the question of whether
we should or should not export LNG, and most have testified in
favor of the government allowing exports of LNG. Senator
Johnston noted that an LNG facility takes some 5 to 7 years to
build at an investment cost of some $10 to $40 billion. A
facility has to secure those long-term contracts for supplies,
obviously, of the gas to export and from customers to sell it
to.
I observed that there are markets at all scales, and the
interest in exports appears to be driven primarily by a desire
to maintain or expand production here in the United States, to
ignore or override the signal our national market is providing
to the gas-production industry, the low price indicating an
excess of demand over supply and the market signal to reduce
production.
The other benefits we may achieve nationally by exporting
LNG would not drive this debate alone, so I expect we will
export LNG. I am wondering whether you have opinions about what
the right level of exports might be? How much exporting should
we allow and from which areas?
Mr. Johnston. My point really is that the market should
determine that. And, you know, there are all of these market
signals that are changing day to day. I mentioned some of
those: the price of labor, the price of interest rates, diesel,
steel, technology, capital availability, regulatory delay, et
cetera. All of these are market signals which are changing
month to month, day by day, and those are going to restrict the
amount of LNG that you can export. And there are also these
worldwide competitors: Australia, Indonesia, Qatar. All of
these are going to be working simultaneously. And I don't think
that any regulators, not this committee, not myself, not
anybody, can determine a proper level.
I think the better way to do it is to let the market do it.
The market is not perfect, but I think it is better than
regulators would be.
Mr. Tonko. Any other one? Any other panelists have an
opinion?
Yes, Ms. Jaffe.
Ms. Jaffe. I think that what you are going to find is that,
first of all, it takes a long time, as the Congressman said, to
build these facilities. And there are some regions that the
cost of producing gas is going to be higher or lower than
others. So, for example, in northwest Canada, the natural gas
there is stranded.
So if we were to choose not to build, not to allow LNG
exports from the U.S. Gulf of Mexico, those facilities, the
economics would be that that gas would go out in that
direction, that would raise the overall prices of North America
to the small amount that would happen. So this idea that
somehow if we were to block the Gulf Coast, that would help
some manufacturer in my State of California and other places,
that is not likely to happen, because there will be exports
from North America when the market demands it.
But as I mentioned, there is so much natural gas in other
places that I really do think that it probably would be a very
small amount of exports that will come from the United States.
And if we had an export facility, one of the things that
would happen is if I was a producer in another market, and I
had a reason to seasonally store my LNG, because the United
States has such giant saltstone storage for natural gas, we
might find that producers would bring their natural gas here
and store it and then have the opportunity to export it at a
later date. So we might find that we provide what I call hub
services, where the United States would be a focal point for
export of natural gas globally in storage. And so we might
actually benefit from having our facilities be used in a way
that would help the international market, and we might have gas
actually flowing here just as a storage facility.
Mr. Tonko. Well, I believe DOE has applications for some 30
facilities. How do they approach this? Do they--should they
move forward?
Ms. Jaffe. Let me speak to that. As you know, we have more
than a dozen LNG import facilities that were built that are
going to be empty for the foreseeable future, maybe for, you
know, 20 to 30 years. And obviously if the industry could
forecast correctly how many facilities we need for export or
import, we wouldn't have all these bankrupt facilities now that
are sitting empty for importation.
So I think the fact that companies applied for a license is
really pretty insignificant. What you really need to know is
that there is one company, Cheniere, that has made a commitment
to build a facility, and that facility will likely go.
In the natural gas business, there is something we call the
first mover advantage. The first facility that gets built will
be the profitable facility, if any facility will be profitable.
I might question whether or not even any facility will wind up
being profitable over the long term, but the point is if I am
first, I am much more likely to make a business out of it than
if I am fifth or tenth.
And so people put their licenses in. Thirty people might
put their licenses in. Some of it is gaming: I want to get
everybody else to be discouraged to do this, because there are
so many of us. Right? And then maybe only the first one or two
or three will ever get built. And if you think of how many
facilities were built here in the United States to import, and
how many of them got approved, and how many of them are going
to remain empty, you can think about the fact that those 30
applications are really meaningless.
Mr. Tonko. Mr. Chair, I yield back.
Mr. Whitfield. The gentleman's time has expired.
At this time I recognize the gentleman from Texas Mr. Hall
for 5 minutes.
Mr. Hall. Thank you, Mr. Chairman.
And I also thank the two Senators there that I worked with
for many years, both great leaders. And I enjoyed, Senator
Johnston, following you and Lloyd Bentsen. You were simply
great. And thank you for coming here today. And to you others,
I appreciate the time you put into it and the time you have
given us here with your testimony.
Joe, I was with you out there when we went West to sign the
last good energy bill that this Congress has passed. And I well
remember Bush giving some of us pins, but I well remember him,
in good nature, turning to me and saying, Ralph Hall is with us
because he likes the coffee on Air Force One. What he didn't
know was I had six of his mugs in my briefcase at that time.
But, you know, Senator Dorgan, you are exactly right on
your fine energy past, and history and support, and you are
right when you say we must understand climate change. And we
get a lot of that from the other side, too, and, of course, we
should.
And we must understand, though, that we have also spent $34
billion and had very little change, climate change, very little
effect on it. I just think that it is obvious that we have an
administration that is antienergy. And the environmentalists
did say don't drill on little ANWR, it is just 19 million acres
there.
And I well remember we had, I think, 22 bills over to the
Senate, and we had Senator Frist, I believe, Doctor, was the
chairman then at that time. And he thought more like a
businessman than he did about energy, in my opinion, because
one of those bills got through, and Clinton vetoed it. And the
Bushes had a shot at, I think, the other 20. And someone would
get up to filibuster it, and the Senator would pull it down
because I think he didn't want to waste the Senate's time. I
really think he should have burned them down, let those who
wanted to filibuster filibuster, and we would have some
drilling on ANWR that we don't have now.
They say don't drill on little ANWR, it is just 19 million
acres. If we don't want to drill on, what, a couple of thousand
acres or a thousand acres there for 60, maybe 50 years of
energy, I think we ought to be doing that.
I guess it is obvious that we do have an antienergy
administration, and my question to you, I guess, Senator
Johnston, is do you believe that our national energy policy is
still mistakenly based on the belief that we are somehow in an
age of energy scarcity?
Mr. Johnston. You know, I don't really believe in energy
scarcity. I think new supplies are pulled up all the time. They
are based on technology like fracking. I well remember--you
know, it wasn't very many years ago that we had almost not
heard of shale gas. George Mitchell, down in your State, old
friend of mine, you know, he went in with some DOE money and
created that new technology, which has revolutionized America.
Bakken oil and the Bakken shale has revolutionized certainly my
colleague's home State.
So I think there is not the scarcity that some talk about.
I think we can be energy independent in this country, and I
think it is a goal we should pursue.
Mr. Hall. And we talk about free market versus regulation.
Of course, that is an easy choice for me, but if I would come
down on the side of regulation, I would have some concern about
the EPA and their regulation, their lack of science that they
take into consideration as they----
Mr. Johnston. Well----
Mr. Hall. They really damaged the energy thrust.
Mr. Johnston. Well, I disagree with the EPA on some things,
agree with them on others. Certainly we need the highest
environmental standards, which I think we can, consistent with
energy independence.
One of the things that neither EPA nor any other agency can
do is allocate resources, and that really is the heart of my
point today, that government regulatory bodies just can't
allocate resources. Let them make safety rules, but don't try
to allocate resources.
Mr. Hall. Thank you.
And I will just close with the fact that jobs are hurting
us, and they are hurting for 18-, 19-year-olds, and graduates
who want jobs and are seeking jobs. There are fewer jobs, and
unless we change some things up here, we are not going to have
very many employers a year from now. The most important word in
the dictionary today other than ``prayer'' for young people is
the world ``energy.''
And I thank you both, and I thank this panel for your
input.
I yield back.
Mr. Whitfield. At this time I will recognize the gentleman
from California Mr. Waxman for 5 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman.
We have heard a lot lately about U.S. carbon dioxide
emissions being at their lowest levels since 1994. The
implication is that no further action to address climate change
is necessary, and that is simply not the case.
As a result of increased renewable energy generation, a
shift from coal to natural gas generation, and the economic
recession, U.S. emissions have dropped in recent years. But
what matters most is whether U.S. emissions are on track to
decline in the future by the amount needed to prevent dangerous
climate change, and I am not aware of any reputable expert who
believes this to be the case.
Scientists tell us that our emissions need to decline by at
least 80 percent below 1990 levels by 2050 to avoid a dangerous
level of warming. The latest projections by the Energy
Information Administration show that U.S. carbon dioxide
emissions from fossil fuel combustion actually will be 13
percent higher than 1990 levels in 2040, the last year in EIA's
model. There is an enormous gulf between what these emissions
will be without additional action and what they need to be to
avert catastrophic warming.
Senator Dorgan, you co-chaired a bipartisan panel that
issued recommendations for our energy policy. Was there
agreement that climate change is a serious issue and that
additional policies will be necessary to reduce greenhouse gas
emissions?
Mr. Dorgan. Congressman Waxman, we did at the front end of
this report indicate that we felt climate change was an issue
that needed attention, it needed policy direction. We did not
attempt in this report to create a policy framework for how we
might address climate change, but we did indeed say that, well,
we are going to cover a lot of energy issues, that climate
issues were important and needed to be addressed.
Mr. Waxman. Thank you.
We need to think about LNG exports through the lens of
climate change. If the U.S. is going to export LNG, if we are
going to make long-term, multi-billion-dollar infrastructure
investments, it is important for those exports to produce a
climate benefit.
Methane emissions from the natural gas industry are a
challenge in that regard. Methane is a potent greenhouse gas,
and it is crucial that we reduce those emissions.
Mr. Bradbury, are there measures that can be taken to
reduce methane emissions from the U.S. natural gas sector using
existing technology?
Mr. Bradbury. Yes. Absolutely, Congressman. There are--in a
report we recently published, we identified a total of eight
technologies that would cut these upstream greenhouse gas
emissions by more than 50 percent. In my testimony includes
more detailed analysis of that and through a couple of
different scenarios.
Mr. Waxman. These measures are cost-effective as well?
Mr. Bradbury. They are. And all eight that we looked at are
definitely cost-effective.
Mr. Waxman. How long, Mr. Bradbury, would it take for these
measures to generate enough savings to cover the cost of
implementing them?
Mr. Bradbury. The payback period--thank you for the
question. The payback period, we found, is up to 3 years at
most for each of these measures and technologies, sometimes
only a few months. So we are talking about wasted energy in
addition to a powerful and potent greenhouse gas, so it is much
like energy efficiency, can be very cost-effective.
Mr. Waxman. What is a reasonable target for methane
leakage? If we took the cost-effective steps you described,
would we meet the target?
Mr. Bradbury. Yes. There are a couple targets you would
want to shoot for. For natural gas to be less greenhouse-gas-
emissions-intensive than coal, you want your emissions levels
to be--your methane leakage levels to be below 3 percent of
total production. Right now, according to the recent EPA
inventory, we are below 2 percent. So we are in a pretty good
zone in that regard.
And a better target, I think, for total leakage would be 1
percent leakage as a portion of total production, which we can
get to with these technologies and measures that I mentioned.
At the 1 percent leakage point, that is where you are at break
even with respect to diesel. If you are going to switch from
natural gas to diesel, and you want there to be an immediate--
diesel fuel for long-haul trucks, for example, if you want to
have an immediate climate benefit.
Mr. Waxman. Thank you very much. I appreciate it.
I am obviously looking at this whole question before us
from the perspective of climate change, but I know that there
is a lot of focus on the exports, and I think Ms. Jaffe, who I
am happy to see again, has made a very powerful case. I am open
to that issue, I want to think about it. But as usual, you are
very astute in your expression of things that we ought to take
note of, and I thank you so much for your testimony, and all
the other witnesses as well, especially my two former
colleagues, who have such a distinguished record in the energy
field.
Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Illinois Mr. Shimkus for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
I am going to try to get to four questions in 5 minutes, so
if I ask it concisely, and I get somewhat a concise response,
maybe I can get that done.
I want to start with Mr. Bradbury there. Are you or any of
your organization invested in any energy enterprises?
Mr. Bradbury. No.
Mr. Shimkus. Actually have skin in the game----
Mr. Bradbury. No.
Mr. Shimkus [continuing]. To be able to make a financial
projection of whether there is a 3-year-to-1 payback on all
this stuff? These are just theoretical, right? You are not
putting real money into this?
Mr. Bradbury. No, we are not putting our own money.
Mr. Shimkus. OK. That is--thank you.
Senator Dorgan, 2005, I was here, too. It was one of the
great energy conferences where we actually debated amendments.
I wish we could get back to that era, because it was a great
debate in this committee room.
I did look at the executive summary. I didn't read the
whole report. You do in the executive summary have a bullet
point on transmission, but it kind of--you are really referring
to the transmission pipeline for transportation of either
natural gas or liquid transportation fuels; is that correct? Or
are you talking about the electricity?
Mr. Dorgan. Mostly the electricity when we refer to that,
but, you know, when you talk about transmission, you also want
to be----
Mr. Shimkus. I think it is something we really have to
focus on, because what we see going on right now--and I just
read an article today about Canada and Maine, and the market
will move a product, and it will--there is--it is dislocating
other types unless we have a very good policy of incentivizing
the building of more pipelines.
Mr. Dorgan. We do have--we have electric transmission
problems and issues of stranded energy----
Mr. Shimkus. Right.
Mr. Dorgan [continuing]. Because we can't transport to the
load centers----
Mr. Shimkus. Correct.
Mr. Dorgan [continuing]. Where you get wind or store----
Mr. Shimkus. Especially with the green.
Mr. Dorgan. And we also pipeline transmission issues.
Mr. Shimkus. Right.
Mr. Dorgan. Although we have built a lot of pipelines in
the last 10 years, natural gas pipelines.
Mr. Shimkus. Right. There are stories about us--as reverse
flowing now natural gas from the plays to maybe the LNG
terminals and stranding refined product along the path of the
old stranded--I would hope that is something we can look at,
and I will look through your report to see. I think it is a big
issue. I know of two areas where retailers are now being
stranded by their product because of LNG movement.
Mr. Johnston. Let me mention to you on oil, every day in
the Bakken in North Dakota, they are transporting 500,000
barrels of oil a day by train; not by pipeline, by train.
Mr. Shimkus. Right.
Mr. Johnston. Burlington Northern has----
Mr. Shimkus. Well, to address the greenhouse gas issue,
what is a better ability if you are worried about this, I am
personally not, but would be by pipeline; not by trucks, not by
train, but by pipeline. So I would hope the environmental
community--and we see what they are doing with Keystone XL,
they are not helpful--they would understand that moving
commodity products through pipeline is the most efficient,
safest way, and actually in the greenhouse gas arena, it is a
tremendous savings.
Mr. Halleck, I have got an article here from a local paper,
southern Illinois paper, which is where I am from, and I just
want a quick response to these two statements I have
highlighted in this article.
Some envision the kind of economic boon they have heard
about in other States: tens of thousands of workers drilling
for oil and gas, local businesses barely keeping up with
demand, and many municipal coffers flush with cash.
Is that what you have observed?
Mr. Halleck. I would concur with that, though, while we are
in much better financial----
Mr. Shimkus. Yes. This is poor southern Illinois. I
represent 33 counties. And so there is--we have got a play
coming, and so there is this whole debate, and you have lived
it.
The other part that says, others are spooked by stories of
housing shortages, towns overrun with strangers, torn-up roads,
and claims of polluted water, and worry that drilling would
forever alter the serenity, beauty and very character of an
area they consider special.
Has that happened to your county?
Mr. Halleck. That is not really a concern. The technology
today is such that we actually have rigs that have been on
site, and they are gone in 30 days. So that is no problem.
Mr. Shimkus. Great. Thank you.
And if the staff would put up this slide for Ms. Jaffe.
I also chair the Baltic Caucus. And I hope this comes up
right. I have a picture here.
So that is a proposed LNG terminal that will go in in
Lithuania. Also, I think there is one being proposed for
Poland. I deal with Eastern European issues, democracy
movements. I have been very focused in Russia does extort their
neighbors through energy.
If we have the ability to export liquefied natural gas,
what does that do to two things: the ability of Russia to
extort their neighbors, and the ability of the local Eastern
European countries and allies, most of all who are NATO now,
they are all in the EU, what does it help with their economy?
Ms. Jaffe. Well, I think it is very important. You raised
an extremely important point, because, number one, we don't
want Russia to use the threat of a cutoff of natural gas to
create a wedge between us and our allies in Europe. We want
everyone in Europe to feel a strong alliance, economic and
otherwise, with the United States and not have to worry about
their energy supply being curtailed by Russia.
Secondarily, you can imagine how positive it would be if
the Russians threatened to cut off one of our allies in Europe,
and an American company could supply them with natural gas
through an export terminal from the United States.
Mr. Shimkus. You all did great. Thank you very much.
I yield back, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Texas Mr. Green for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. And I said in my minute
my ranking member gave me, but, again, I want to welcome our
two Senators, and appreciate your leadership on energy for many
years.
Senator Johnston, my only concern is that the one LNG
export facility, Cheniere, it is on the Sabine side of
Louisiana instead of on the Texas side, but the company
actually is a Houston company, so we have worked together
across that Sabine River for many years.
And, Senator Dorgan, it goes without saying, some of the
success in the Bakken shale and the report that you just did,
and I will have some questions in a minute.
Ms. Jaffe, I want to--we miss you in Houston at the Baker
Institute at Rice University, but I know at UC Davis you are
much closer to the wine country there, although we still have
some Texas wine we are working on.
But I represent one of the largest petrochemical complexes
in the world in east Harris County, and I got some pushback a
few years ago for supporting LNG exports, because I also
represent a lot of folks who work in the fields, whether they
be in south Texas or west Texas or anywhere else. But I support
the exports, not just from the free-market perspective, because
we need the additional incentives for production in certain
parts of the country. And producers in south Texas are still
producing dry gas, natural gas, simply because they get
liquids. And when I drive through south Texas, I see the amount
of flaring of the dry gas. It hurts me, because I know those--
one, it is bad for the environment, but all those producers
would love to be able to have a market for that gas instead of
sending it in the air. So our chemical industry and our utility
sector want stable, low prices, but we need to ensure that the
market will still be there and incentivize it.
Senator Dorgan, you testified that after reviewing several
recent studies on the impacts of LNG exports, the Bipartisan
Policy Center and Energy Board concluded that domestic gas
prices are more likely to drive export levels than exports are
likely to determine domestic prices. This is an important
point, because I think it is a fear that we have 19 export
applicants that could end up constructing export terminals. I
just don't see our market allowing 19 of them. But why do you
think the domestic gas prices more likely will drive the export
levels than exports are likely to drive the domestic prices?
Why do you think that is going to happen?
Mr. Dorgan. Well, first of all, I don't think any of us
really understand very well the economics of moving liquefied
natural gas from our country after recovering it and moving it
halfway around the world. I don't think anybody fully
understands the economics of it, but I do think that, you know,
if natural gas prices were to rise in this country in any
significant way, that would have an impact on whether it would
be economical to continue that practice.
The studies suggest that there would be an impact, but it
is very, very modest. And, you know, just how little we knew 5
years ago about where we are today describes how little we know
today about what might or might not happen. All we can do is
use an antenna for guidance on what should be the best
practices and what should represent the best interests of our
country.
Mr. Green. Well, and my colleague from Illinois, I was
proud to be on the committee, we did the 2005 energy bill, and
at that time Congressman Tierney and I actually had an
amendment to that bill that federalized importing, because I
have a chemical industry, and we were getting our lunch eaten
by Rotterdam, and the North Sea gas is cheaper, so we wanted to
import it. And now the good example of the Cheniere there in
Sabine River, they built an import facility, but now they are
investing another $2 billion to build an export facility. So
you are right, our crystal ball just doesn't work as well as we
would like to it do.
Ms. Jaffe, you mentioned the U.S. Asian allies, Japan and
South Korea, are seeking flexible U.S. Gulf Coast LNG contracts
for reasons of economic and geopolitical. Can you elaborate on
their geopolitical calculation for wanting this LNG,
particularly, obviously, Japan, because of their decision to
downgrade nuclear, and they are buying that LNG from anybody
who can sell it to them? So could you just elaborate on that?
Ms. Jaffe. Yes. I think that it is important in the context
of the Arab Spring, and also, of course, in the past history
with Russia, that these countries want to be able to buy
natural gas from a market where there is a multitude of
competitive players so the gas is not controlled by a state
monopoly, they don't have to worry about there being a change
of power in the country and suddenly their contract isn't
honored, or that there is some leverage, geopolitical leverage,
that is at--you know, brought to bear in the discussion of
supply.
So the great thing about the United States market is that
through innovation and competition, we have, you know, dozens
and dozens and dozens of companies, and we have a very
competitive market. We have what we call natural gas-on-gas
pricing; so in other words, we don't have an artificial price
tied to oil or some other commodity.
So by allowing some amount of exports, what it means is
countries like Japan or South Korea can ask for a natural gas
price tied to a market price and not be subject to sort of
artificial constraints, not have to worry about cutoff of
supply. It just makes a big difference, makes a more dynamic
market.
And I do think that what is going to happen over time,
though, you know, one can never have a crystal ball, is that as
the United States market is more connected with the global
market, then what you are going to see is oil-linked price
contracts imposed by a Russia or by a Middle East country will
not be able to stay up, because there will be so much supply,
and you have a global market, and you will have more flexible
competitive markets, more projects will compete into different
markets.
We have the industry developing these technologies where
they have ships that can be moved from place to place to do
production, or to have even a ship that can be a receiving
terminal, and we will get to have a very commoditized market in
natural gas where countries like Japan will not have to worry
about their supply.
Mr. Green. Mr. Chairman, I know I am out of time. I had a
question for Mr. Bradbury. I would like to submit it.
But I am glad we are at 2 percent leakage on methane, and
that is below the 3. Believe me, every producer that I know
would love to get down to 1 percent, because they would like to
have that methane being sold on the market to somebody instead
of releasing it into the air.
So again, thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentlemen from
Texas Mr. Olson for 5 minutes.
Mr. Olson. I thank the chair.
And welcome to our panelists. Special welcome to our two
Senators, Senator Johnston, Senator Dorgan; and Ms. Jaffe, who
spent some time at the Baker Institute at my alma mater, Rice
University, in Houston, Texas.
I am going to focus on the national security implications
of LNG exports. Having deployed to the Persian Gulf and the
Strait of Hormuz from June of 1994 until November of 1994, I
have seen firsthand how important that region is to the global
economy and, by extension, U.S. national security.
This new U.S. energy renaissance gives our country a once-
in-a-lifetime chance to minimize the direct impacts on our
economy from the Persian Gulf and to develop strong diplomatic
relations and increase our national security. One way to do
that, I think, is exporting LNG.
We have talked about benefits with Japan's recovery from
the earthquake, tsunami, South Korea. I want to focus on the
world's largest democracy, India. One in six human beings lives
in India, over 1 billion people. That is a huge market
potential for American companies. And I am blessed to have a
consulate from the Indian Government in Houston, Texas, who
just reported on board this past fall. I spent 3 hours having
lunch with him, 30 minutes talking about their need for U.S.
LNG. He said basically to keep their economy growing, they have
to have more sources of oil and gas, because they don't have
much domestic sources at all.
They are not getting pipelines built from the west, not
going to come through Pakistan. Obviously they don't get along
together. To the north, the Himalayas. If you can get a
pipeline through the Himalayas, God bless you, 20,000-feet
altitude, man, oh, man. That is the eighth wonder of the world.
And to the south is a region of the world that is quickly
destabilizing, which seems like all terrorists are moving down
towards Myanmar, that part of the world. And again they need,
they want our gas. So, Ms. Jaffe, could you care to comment on
giving India natural gas? Benefits to the United States? Cons?
Ms. Jaffe. I think the point that we really warrant to
focus on is that the United States has this ability, which we
have never had before, sort of like the opposite of Russia
being able to cut people off, right? We might have the ability
to supply our allies or to supply other countries. As we become
more energy independent, and I really believe the combination
of our improving efficiency of automobiles, combined with deep
water and combined with the shale play, we are probably going
to get to the point where we are not going to be--the imports
we are going to have are going to be from Canada, or Saudi
Arabia, is going to be bringing oil to the refineries it owns
in the United States. And when we get to that point, we are
going to have a lot of opportunities. We are going to have the
opportunity to step up to the plate and we be the swing
producer to the global market like the United States was in the
1960s. So we will have the opportunity if we have an ally that
is having an energy problem, we will have the opportunity to
offer energy aid through sales of exports. And indeed we might
be able to use our Strategic Petroleum Reserve more flexibly if
we have an ally that has a supply disruption.
So if you think about it, during Hurricane Rita and
Katrina, how did we get past our terrible shortages in Houston
and other cities is we were able to borrow gasoline from the
emergency stockpile of Europe. And we, the United States, could
wind up being in a position to be able to be a key supplier. We
will be able to use our energy relationships to strengthen our
national power. And when we have a better trade balance it will
make us stronger in the global economy, we will be able to
stand up to China in a different way because we are going to be
an energy exporter when they are an energy importer. They are
going to have the energy dependence that we have been talking
about for 30 years and we are going to be a major energy supply
source.
So we really have a tremendous potential here to get it
right. And you are already seeing yourself with improved
relationships with India, that they care about the United
States from an energy point of view, and that is exactly the
opportunity we have in front of us.
Mr. Olson. Yes, ma'am.
Senators, either one care to comment about that, India LNG
benefits for America?
Mr. Dorgan. Make a point: I would not want us to be talking
about using SPRO in this country to help an ally.
Mr. Olson. Oh, yes. This is pure exports.
Ms. Jaffe. Only if we didn't need imports at all. If we
don't need any imports then we don't need the international
tool. Our imports are not needed (off mike) our domestic
production supply all our requirements.
Mr. Olson. And I am on the negative side of my time, so I
yield back the balance.
Mr. Whitfield. Thank you very much. At this time I
recognize the gentleman from Pennsylvania, Mr. Doyle, for 5
minutes.
Mr. Doyle. Thank you, Mr. Chairman. And welcome to all our
witnesses, especially our two distinguished colleagues from the
Senate. We appreciate your testimony.
Mr. Chairman, I have been engaged on this issue for quite
some time now and been particularly interested in the role the
Federal Government takes in permitting LNG export facilities.
And unlike some of my colleagues on this committee, I have
actually been pleased with the careful consideration DOE has
given to the issue. You know, it wasn't that many years ago
when companies were building LNG import facilities, making bets
on the need for imported LNG to meet our energy demand. Who
would have guessed in less than a decade these same companies
would now be petitioning DOE to turn those import facilities
into exports facilities? So I don't fault DOE for taking a
cautious and careful approach to approving these permits.
By submitting a two-part study on the effects of LNG export
on the U.S. economy and reviewing the hundreds of public
comments submitted to those studies, DOE has taken the proper
action to understand the issue. But that study showed us that
in every scenario modeled LNG exports offer a net gain to the
U.S. economy. This really shouldn't surprise any of us, the
fact that economies gain from allowing trade is not new, but as
a guy from Pittsburgh who has witnessed the effects of trade on
the local economy I think what we should be concerned with is
who gains, how much do they gain, and at what cost to the
environment.
And while I remain convinced that LNG exporting should be
both allowed and supported by the Federal Government, I don't
believe a careless, blanket approval of all pending permits
would serve the purpose of the American people.
Let me asked my two distinguished colleagues, you both
indicate your support for LNG exporting whether by allowing the
free market to act or by opposition to any kind of export ban,
and I agree with that. Do you believe, though, that the
Department of Energy does have a role to play, a proper role to
play in the permitting of LNG export permits as determining it
is in the public interest?
Mr. Johnston [off mike]. A preference is to issue the
permit, I think that is a proper role and I agree with you they
did the proper thing in commissioning the study, the SPRO study
which indicated in all of the different scenarios that it is in
the national interest of consumers.
Mr. Doyle. Yes, Senator Dorgan, you agree with that?
Mr. Dorgan. And I think, you know, I think ultimately there
will be far fewer facilities built than the numbers that are
being tossed around these days.
And let me before I leave here today, Mr. Chairman, have
the record show my great restraint as an author of the
renewable fuel standard in 2005, my great restraint sitting
next to my friend Senator Johnston without responding to a bit
of it.
Mr. Johnston. We don't grow corn in Louisiana.
Mr. Doyle. And to both my colleagues, you believe DOE
currently has the sufficient information to act on these
remaining permits?
Mr. Johnston. I believe so.
Mr. Doyle. Yes. Thank you.
I want to will also ask Mr. Bradbury. First, I want to say
welcome back to the committee, Mr. Bradbury, it is a pleasure
to see you here. And as some of my colleagues on the committee
may recall, Mr. Bradbury was instrumental in developing a
mechanism in the Waxman-Markey bill, which later became called
the Doyle-Inslee provision, which offered protection for
energy-intensive and trade-exposed industries. It seems like
you are back here today with some equally impressive work.
While I note my support for LNG exporting, I take seriously
the concerns you have raised about methane leakage and life
cycle emissions. As you know, EPA just lowered its estimates of
methane leaks during natural gas production by almost 20
percent from what they had previously reported. Nonetheless, if
concerns about methane leakage remain, it is important, I
think, that we address them if we are going to support export
of this resource to other countries.
So to that end, Mr. Bradbury, could you please help us
understand how the technologies you cite in your testimony
work? Can they really significantly reduce fugitive methane
emissions while being cost effective and have payback periods
of 3 years and less? Could you give us some detail on that? And
then secondly, if these technologies help a company retain
their product by not letting it escape into the air, why aren't
gas companies making the investment in them?
Mr. Bradbury. Well, thank you for the question. I will do
my best to respond as quickly as possible. And to the first
question also, I think as a partial response to Mr. Shimkus'
question earlier, which is that our projections of payback
period for these technologies are actually not theoretical,
they are based on published estimates from actual experience
with these technologies, which you can find on Natural Gas STAR
Web site and other sources as well.
So as I noted earlier in response to Mr. Waxman's question,
it really is, this is analogous to energy efficiency. You are
not wasting product and so there is a benefit economically over
time. More details on these technologies to some extent are in
my testimony, but also in a full report, which I would be happy
to share with you and discuss afterwards.
A couple technologies I mentioned initially. So green
completions I also mentioned earlier, which is very cost
effective and now required for gas wells. There is the use of
plunger lift systems for liquids unloading, it is essentially
to remove liquids from a well so that gas can flow more freely.
These systems avoid venting that is unnecessary when you are
cleaning these wells up that could be used more widely. And
just simple leak detection and repair, so sending people out to
these sites to identify the leaks and then repair them. Of
course it puts people to work doing that and you can get a good
payback as well.
And there is a final point I really would like to
emphasize. The reason that companies aren't doing this in some
cases, there are a couple of different answers. It is similar
to why companies don't always have the most efficient systems
in terms of energy efficiency, is there are competing
priorities for investment and there is also market structure
issues. The production company that owns the gas is often not
the same as the service company or midstream company that
processes the gas or the pipeline companies through which the
gas flows. And FERC has authority over that to set tariffs and
rates, but sometimes they are structured so that this is just a
pass-through cost. So while it would beneficial for the
environment and to consumers to reduce these leaks, it is not
necessarily aligned properly through the market structure in
terms of business interest.
Thanks for the question, and great to see you again and
great to be back. Thanks for your remarks.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentlemen from Ohio, Mr. Johnson, for 5
minutes.
Mr. Johnson. Thank you, Mr. Chairman. And I, too, would
like to thank the rest of our distinguished panel for being
with us today to talk about this important topic.
Mr. Halleck, you and I come from a region of the State of
Ohio and a region of America where people are struggling.
Unemployment is still excessively high. Many Americans struggle
to provide their children with the clothes and supplies that
they need to go to school. The average median income is well
below the national average. Double-digit unemployment through
much of our region. What is happening in oil and gas in Ohio is
a big deal to the people that live there.
In your testimony you talked about the astounding blessing
that gas production, oil and gas production has meant to our
county. Can you illustrate for us a little bit about what this
transformation has been? What was it like prior to oil and gas
development?
Mr. Halleck. Well, Congressman, what brought me initially
some 30 years ago to Ohio, formerly I was in the clothing
business. And I have watched the steel mills in our area, the
automobile industry, I have watched a lot of things over the
past 30 years, some through automation, but importation, just
an overall decline in the economy in that part of our State.
And there is really nothing to replace that. Someone asked me
the other day about, what do you know about oil and gas, and I
said really not much other than what I watched on the Beverly
Hillbillies growing up. And I say with all due respect to our
constituents, there is actually some of that today that is
going on.
I have been told we have over 200 new millionaires just in
the county I represent. It is conservative by nature so you
wouldn't always know that, but I can just tell by looking at
the percentage that our general fund budget in terms of our
sales tax, property taxes, and others has drastically improved.
But it has been a game changer and it has given opportunity
certainly to those that aren't only about I think 8, 10 percent
of our communities went on to higher education. And this gives
these folks that would lean more towards vocational training
some, really some $100,000-a-year jobs that normally they would
never have.
Mr. Johnson. Sure. Let's talk a little bit about LNG
exports. As you know, I have been a staunch supporter of LNG
exports as well. We live in a manufacturing corridor. You
talked about the steel mills. Manufacturing is an industry that
is very important to the economy of our region. Can you talk a
little bit about how important you think it is that we open up
the lines for exporting liquid natural gas?
Mr. Halleck. Well, if the estimates, and I am sure a lot of
the reports have been maybe overly optimistic, but even if they
are just optimistic, they are overwhelming in terms of the
supply that we would have. In fact, Senator Johnston and I were
talking earlier, in my humble opinion it would seem to me that
if--we were talking about flaring--if we get to the point where
natural gas is too cheap, then, for lack of a better term, they
would turn off the spigot. I think it not only would stabilize
prices, but certainly give us a sense of energy independence.
Mr. Johnson. Do you see increased exporting of liquid
natural gas as a threat to a manufacturing resurgence in Ohio
or do you think it would help?
Mr. Halleck. No, I think it would help. I don't see it as a
threat.
Mr. Johnson. Great. Great.
We often hear from Hollywood and from opponents of oil and
gas development that the only people that are benefiting from
the oil and gas boon in places like eastern and southeastern
Ohio is some CEO of a distant oil and gas corporation. How
widespread has the benefit been? You talked about the new crop
of millionaires that have been created, can you expand on that
a little bit?
Mr. Halleck. Well, it is certainly a trickle-down affect.
Just in our county the other day we asked, there was a parcel
of property that we own, or the county, I should say, and they
wanted to use because it was close by a small stream for water.
Just in a 2-week period it brought in almost $40,000. Now, that
would not be a lot of money in Los Angeles, but that would be a
lot of money in Lisbon, Ohio. That is just one small example.
If you look at the farm equipment, because we are an
agricultural community, which is not taxed, there has been
literally tens of millions of dollars through the royalties
that have been spent on people that were leasing land. So it is
far reaching, and it is a trickle down certainly.
Mr. Johnson. Well, thank you very much.
Mr. Chairman, thanks for letting me participate and I yield
back.
Mr. Whitfield. The chair recognizes the gentleman from New
York, Mr. Engel, for 5 minutes.
Mr. Engel. Thank you very much, Mr. Chairman.
Several years ago I founded the Oil and National Security
Caucus, and one of the reasons I have an open mind about all of
this is that I think that we cannot really be free with our
policies as long as we rely on foreign oil. And so anything
that can ramp up production of domestic resources for energy is
something that I think we should look at, albeit there are some
safety concerns, there are some environmental concerns. But I
think it is something that we need to look at.
So I have been focused on North American energy
independence, and the increase in natural gas supplies
obviously are a boon to this possibility. Can someone speak, I
want to piggyback on the exporting of LNG, will we hurt our
long-term energy security? Can someone speak to the long-term
impact of exporting LNG? I know there is a rush to say that we
should export it, but, you know, I am wondering should we not
try to keep more for domestic purposes.
Ms. Jaffe. I think the one thing you need to bear in mind,
because of course markets change, and I know there is a
concern, first people are telling us we don't have enough
resource and then suddenly we have this hugely abundant supply.
I think the point is that nothing is irreversible. So we can
allow LNG exports, they can bring a benefit to our trade
balance and our international stature. And if some later date
30 years from now or 20 years from now we find that that policy
no longer fits we might have different circumstances, we can
revisit it. I don't see that it is necessarily going to be a
threat to our energy security.
There is a lot of opinion about how much resource we have.
I do believe that the resource is so extensive that we probably
could export a substantial amount from several terminals and
have it actually not affect prices all that much except maybe
occasionally seasonally. And I think that one of the impacts, I
mean the reason that a Japan or an India or a South Korea are
lining up to buy these exports is because they actually see a
price advantage. In other words, they are paying very high-
priced oil-linked prices for natural gas. If they could at
least have our market integrated, we have what we call gas-on-
gas pricing, then they could move the market to a more
competitive footing where natural gas prices would trade based
on natural gas prices and not based on instability in the
Middle East.
There is great advantages to having all the oil globally in
the system move to natural gas. Japan is burning crude oil and
oil for both electricity, and also China uses oil in their
petrochemical industry. Just for both environmental reasons and
for strategic reasons we would want to see the world moving
more away from oil in those industries and even maybe in
transportation to natural gas because it is so much more
plentiful and so less controlled by artificial forces like
Russia or OPEC.
So I think that it is important at this time when we have
the luxury of having abundance to make a statement as the
United States that we favor free trade, we are going to honor
our free trade agreements, we export natural gas to Mexico. I
don't think we can turn around and tell South Korea, that we
also have a free trade agreement with, but somehow we are not
going to provide them with the same opportunities.
So I think that we really have to look at the balance of
our strategic and foreign policy and understand that at least
in the immediate term chances are these exports are not going
to affect domestic consumers, right? And, you know, again I
want to emphasize this is sort of a topic for another time.
When we export refined products in this country we are going to
export LNG. The way to ensure that consumers are not harmed in
a case where we have a sudden seasonal change in temperature or
we have a sudden refinery accident and there is a disruption,
the way to do that is to ensure that we have minimum inventory
standards for companies operating in this country, which they
have in Europe and they have in Asia. We can say that you have
to hold a certain number of days of your customer supply. And
the reason we have volatile prices in this country is that we
don't do that, even though if we did we would not have to worry
about the impact on consumer prices of being part of a global
market.
Mr. Engel. Well, thank you. I had another question but I
guess all my time is used. I just want to welcome back our
colleagues Mr. Dorgan, Mr. Johnston.
Good to see both of you. Thank you all.
Mr. Whitfield. Thank you, Mr. Engel.
And thank the witnesses once again. We genuinely appreciate
your being here with us to talk about this important subject
matter. And I want to ask unanimous consent that we enter into
the record a letter from Congressman Michael Turner on this
issue, the mayor of Youngstown, Ohio, and the Cato Institute.
And the record will remain open for 10 days for any additional
submissions.
[The information appears at the conclusion of the hearing.]
Mr. Whitfield. Do you have a comment, Mr. Rush?
So with that, today's hearing is concluded, and we look
forward to working with all of you as we move forward. Thank
you.
[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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