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Senate Energy Committee Begins 'Fresh Look' at Policy

With the domestic shale gale in full force, Senate Energy & Natural Resources Committee Chairman Ron Wyden (D-OR) and Lisa Murkowski (R-AK), the ranking Republican on the committee, vowed Tuesday to work together in a bipartisan effort to rethink energy regulation -- but their differences on the issued appear unresolved.

It was only a few years ago that lawmakers were being pressured to react to forecasts of energy scarcity in the United States, Wyden said in opening the committee's first meeting of the 113th Congress and his first meeting as chairman.

"Today the outlook could not be more different," he said. "Instead of scarcity and shortages, the prediction is that domestic production will soon outstrip American demand. Given the dramatic change in the outlook for natural gas supply, it is clearly time for a fresh look at our current policies and to start thinking about how to update those policies to reflect the very new reality." The committee's goal, he said, should be to find "an economic and environmental sweet spot, where U.S. gas producers can make enough money to continue producing, and U.S. manufacturers have an affordable, stable supply of natural gas, and where the environment is not only protected, but actually benefits from greater use of natural gas and lower CO2 [carbon dioxide] emissions."

The purpose of the hearing was to explore opportunities and challenges associated with America's natural gas resources.

"If the line outside and the packed room this morning is any indication, I think it's fair to say people want a discussion about energy; they want some movement on energy, and I think it's fair to say that we're here to deliver," Murkowski said Tuesday.

As shale gas takes up a growing part of the nation's energy mix, debate over the regulation of hydraulic fracturing (fracking) seems sure to take more central place in the committee's agenda during Wyden's tenure.

"Communities across the country have already been in touch with the committee to share their thoughts and concerns about whether the hydraulic fracturing process that's used to produce shale gas near their communities could result in the contamination of their groundwater supply," Wyden said. "That type of situation would not only be tragic for the affected community, but also could lead to citizen pressure to shut down not only unsafe production, but also operations that were safe."

Murkowski believes states, rather than the federal government, are best suited to regulate fracking.

"The fact of the matter is we've got different geology all around the country. So when you're talking about a one-size-fits-all approach, maybe we need to look a little more critically at that," Murkowski said.

Most of the testimony during the hearing focused on liquefied natural gas (LNG) exports and the potential impacts on the economy.

"Just a few years ago investors were still betting on building new natural gas import terminals. They now face in communities across the country billions of dollars worth of stranded investment," Wyden said. "It is hard to see the logic behind replacing that kind of speculation on gas imports with similar speculation on gas exports. My own view is we have to make sure we don't miss this opportunity for our nation's economy and millions of unemployed workers who are now looking for good paying family wage jobs that you can get from the American manufacturing sector..."

If LNG exports result in domestic gas prices near $10/Mcf, "that would essentially eliminate any competitive advantage for American manufacturers and investments that could be made here at home, and it will essentially go to advantage overseas' opportunities," Wyden said.

America should be cautious about exporting LNG, because "there are no global rules" when it comes to natural gas, and unintended consequences could be significant, according to Dow CEO Andrew Liveris.

"Natural gas is difficult to ship and store, and it is not bought and sold on an open, free market,.no matter what the economic theorists tell you," Liveris told the committee. "The fact is, if we shipped half or more of our natural gas offshore, it would have severe unintended consequences for U.S. prices." Domestic companies would compete for a smaller pool of gas, driving up prices, and America would lose a huge competitive advantage, he said.

To Murkowski, the LNG debate should include a discussion of the role that market forces will play not only on domestic gas prices, but on the number of export projects that are eventually built. "Gas is a global commodity, and other countries, including Canada, are already moving forward, so I don't think that dragging our feet is an option here if we want to export our LNG," she said. "We should also not forget the positive impacts that exports would have on our trade imbalance and the geopolitical benefits of exporting to our allies."

The U.S. shale bonanza has the potential to open a myriad of opportunities for the manufacturing sector, according to National Association of Manufacturers Vice President Ross Eisenberg. "But let's not kid ourselves here, none of this is going to happen if we can't get the natural gas out of the ground," he told the committee. "We've got the natural gas, and we believe the free market can generally resolve any disputes over how the gas should be used. But if the federal government takes an overly prescriptive or reactive approach to permitting, to regulation or to exports, then our natural gas-fueled manufacturing renaissance will be over quicker than it began."

Pressure is mounting for the administration to make decisions about LNG exports. More than 40 groups and individuals, including Sierra Club and the Delaware Riverkeeper Network, signed on to an advertisement in the New York Times Tuesday calling on President Obama to take a "timeout" from natural gas exports. LNG exports "will mean more drilling and fracking on U.S. land, which are dirty and dangerous practices," according to the ad.

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