Senate Energy Committee Holds LNG Hearing

Sen. Lisa Murkowski (R-AK) and her colleagues on the Senate Energy and Natural Resources Committee held a hearing this morning on S. 33, The LNG Permitting Certainty and Transparency Act. Sponsored by Sens. John Barrasso (R-WY) and Martin Heinrich (D-NM) and a bipartisan group of ten other senators (five Democrats and five Republicans).

Following opening statements by Chair Murkowski, Ranking Member Sen. Maria Cantwell (D-WA) and Sens. Barrasso and Heinrich, the committee heard from:

  • Christopher A. Smith, Ass’t Secretary for Fossil Energy, U.S. Department of Energy.
  • Paul N. Cicio, President, Industrial Energy Consumers of America.
  • Martin J. Durbin, President and CEO, America’s Natural Gas Alliance.
  • Ross E. Eisenberg, Vice President, Energy and Resources Policy, National Association of Manufacturers.
  • David Koranyi, Director, Eurasian Energy Future Initiative, Atlantic Council.

The written statements from these five witnesses have been posted on the committee’s website. After the oral statements, the witnesses fielded questions from senators. These were the most interesting exchanges (all paraphrased):

Murkowski: Mr. Smith, you’ve outlined the steps that DOE is taking to reduce the time delay between approvals, but you state that this legislation is “not necessary.” I understand that you’re not saying that the administration opposes this legislation, but do you think S. 33 is workable? Smith: The ideas behind this legislation are expediency and transparency. That’s what we’ve been trying to do at the department. We think we’re doing a good job under existing law. If legislation is passed, DOE will be able to meet the law. Murkowski: So, 45 days is workable? Smith: Yes.

Cantwell: I like natural gas. I like exports. But I also like inexpensive domestic natural gas. Mr. Durbin, can you talk about some of the new uses for LNG, such as in the trucking and maritime industries? Durbin: EIA has great information. Power and industrial uses will grow. Chemicals, too. Transportation is a great growth area, but it’s not going to be as large a demand driver as the other sectors. Cantwell: Mr. Smith, what happens if projects are denied under the 45-day deadline? Smith: We look at each applicant on a case-by-case basis. These “public interest” reviews involve a large record of comments. There’s no way to predict which might be approved or denied. We don’t take a cookie-cutter approach.

Barrasso: Mr. Smith, you state that DOE is committed to act expeditiously, but a lot of applications have been pending for a long time. Smith: As you know the exporter must obtain both FERC and DOE approval. Our process (as revised) states that DOE will wait to move on final approvals until after FERC has acted, but we will act expeditiously. Barrasso: So you can meet the 45-day deadline? Smith: Yes, we can. Barrasso: Mr. Koranyi, can you explain how U.S. LNG exports can help Europe even if that gas doesn’t go there? Mr. Koranyi: It has already helped. Because the U.S. isn’t importing LNG, there has been downward pressure on global gas prices. This can grow as U.S. begins to export natural gas. This is especially important in Central and Eastern Europe, where there is often only a single gas supplier at present.

Heinrich: Mr. Durbin, you’ve heard the claim that U.S. LNG exports could lead to domestic price inflation such as in Australia. Durbin: I’d say it’s like apples and oranges, but they aren’t even both fruit. The main difference is that Australia is exporting more than 50 percent of their production, and we’ll never ever approach that level. EIA predicts about nine percent of U.S. gas in exports. Heinrich: And our gas market is 40 times larger? Durbin: Yes. Heinrich: Mr. Smith, would passage of our bill impact the number of applications? Smith: I can’t speculate that. Heinrich: Our bill requires disclosure of LNG destinations. Is that useful? Smith: Yes, we believe transparency is always useful.

Shelley Moore Capito (D-WV): My state has been blessed by massive shale gas reserves and our discoveries continue to grow… we now have greater reserves than Oklahoma. Mr. Smith, the Cove Point project in Maryland cleared FERC in late November, more than three months ago. When will you move on that project? Smith: We wait for FERC to completely finish. We now estimate a decision on Cove Point in February. Capito: Mr. Eisenberg and Mr. Durbin, how closely are you monitoring U.S. gas reserve estimates? Eisenberg: We monitor both the science and policies very closely. Supply matters significantly and every year EIA says we have more and more gas. Durbin: My written testimony shows how U.S. reserve estimates have grown since 2002. Even today, EIA put out some new information concerning natural gas liquids.

Debbie Stabenow (D-MI): This natural gas situation is a big deal. Mr. Smith, thanks for your work in this area, including your update on the economic impacts study. Doesn’t domestic use produce more jobs than exports? I don’t know why we’re not more concerned about consumers. Mr. Cicio, could you expand a little? Also, isn’t this bill “Australia-lite?” Cicio: We are not looking short-term. We’re looking 10 years out. EIA says that our technically recoverable resources are 58 years, not 100. We believe that domestic use will produce more good long-term jobs. The export terminals generate construction jobs, but not long-term, permanent jobs.

Rob Portman (R-OH): Ohio wasn’t always viewed as a major natural gas producing state. Now we are, and we also have a great manufacturing base. This legislation is a balanced approach, that’s why I’m cosponsoring it. I also think the U.S. regulatory regime is harming us. We’re getting worse. Other nations are getting better and capital is flowing elsewhere. That’s another reason I’m supporting the bill. Mr. Eisenberg, can you speak a little more about the 45-day deadline in the bill? Eisenberg: We poll our 14,000 members frequently. Regulatory certainty is their top priority, both on the front-end of the process as well as the back-end. You can follow the law, just make a decision on an expeditious basis.

Mazie K. Hirono (D-HI): Okay, so I hear that the DOE process is only one of two that exporters must go through. The other is the FERC review. Are you okay with the FERC process? Durbin: Yes, generally. It is a long, involved, and expensive process, but at least it’s predictable.

Al Franken (D-MN): Sadly, this bill does my state no good whatsoever. We produce no natural gas in Minnesota. Mr. Durbin, your industry would be the biggest winners. Durbin: Manufacturers around the nation will benefit from LNG exports. Franken: Maybe, but it doesn’t create the kinds of jobs in Minnesota that domestic use of gas will provide. Members need to understand where this natural gas renaissance came from: basic and applied research, paid for by all citizens of the United States.

Bill Cassidy (R-LA): I’d be remise if I didn’t point out that much of the fracking sand in the United States is produced in Minnesota. How many jobs would be created if we could unshackle the shut-in wells in fields such as the Haynesville. Durbin: Providing for these exports we can increase demand for gas and create hundreds of thousands of jobs around the country. Cassidy: Why does DOE consider life-cyle impacts of natural gas while FERC says, “that’s imponderable.” Smith: DOE has to look at everything that effects the country with respect to the “public interest,” including very long-term matters such as life-cyle costs.

Angus King (I-ME): I can’t understand why NAM would support LNG exports. Our manufacturers have an energy advantage and I don’t know why we’re willing to give that away. Mr. Durbin, would you support an amendment that would limit U.S. natural gas exports to nine or ten percent of domestic production? Durbin: I don’t think that’s necessary. We can have it all. If you look at all the statistics out to 2040 we see that supply will always outstrip production. Mr. Cicio? Mr. Cicio: The Australian consumer is now being asked to pay the same price as the big industrial consumers in Japan or Korea. We need to think long-term here.

Steve Danes (R-MT): The geopolitical implications are significant. I remember the letters I got as a House member from our European allies talking about the importance of energy supply diversity. I’m excited about what this issue and discussion can mean for America and our friends around the world. Mr. Eisenberg, you said regulatory uncertainty is the number one issue for manufacturers. Eisenberg: It is, but let’s take this one level higher, this is about regulatory certainty and about free trade. NAM believes that on balance free trade always wins.