Moniz and Energy Exports at House Hearing

The Energy and Power Subcommittee of the House Energy and Commerce Committee held a hearing this afternoon (Feb. 11) to discuss—among other subjects—the administration’s budget request for the Department of Energy (DOE) for Fiscal Year 2016. The sole witness was Dr. Ernest Moniz, the Secretary of Energy. Three exchanges between leading energy export proponents on the committee and Sec. Moniz are worth repeating verbatim:

Rep. Fred Upton, E&C Chair: [Opened by describing his “Architecture of Abundance” energy plan.] We also think it’s important to think about how we can use our energy resources… as a source for global good. I know that you have been personally involved—for many, many months—in discussions with our allies in Eastern Europe and around the world… and I wonder if you might expound on those? Moniz: Thank you and let me assure you publicly what we have discussed privately, namely that we look forward to working with you on the [energy] framework that you’ve put forward…

Moniz: With regard to the international events… one is Ukraine, which you effectively alluded to… Our people, led by our emergency response people, but bringing others—such as the Red Cross, FEMA, the Canadians—we have sent teams over to Ukraine three times. Our teams—I want to emphasize—did not write the winter energy contingency plan for the Ukrainians, but led them through the process of how to do that and they wrote their own energy contingency plan that identified, correctly, the problems there were going to be with coal this winter…

Moniz: [Our efforts] have been very much appreciated and the Ukrainian government is asking us to do more… We had a fact-finding group go there the week before last… They would like training. They would like to know how to manage emergency response. They want to know about energy modelling. These are all very helpful tools for them, but that’s where we’ll need some discussion with Congress and other parts of the administration on how we can respond to that.

Rep. Bill Johnson, LNG Bill Sponsor: My line of questioning deals primarily with LNG exports… Do the [previous EIA/NERA] studies and recent economic updates give DOE sufficient data to make the public interest determination about LNG exports? Moniz: Last year, when we modified the process, we said that we have the analyses for up to 12 [billion cubic feet] bcf per day of exports. Right now we’ve approved 5.7 bcf, so we have lots of headroom. But, we said we would need to commission—and we have done so—additional studies for going from 12 to 20 bcf, should that be called upon. We are still waiting on the final update.

Johnson: When do you expect the [Dominion] Cove Point [LNG export] terminal to receive its final DOE approval? Moniz: I believe Cove Point has received its final approval. (Turns to staff.) Johnson: Maybe we can mutually verify… Moniz: We will verify either way… We have no applications available right now for our final action. Johnson: It was our understanding that you were waiting for FERC [the Federal Energy Regulatory Commission] to reject the [Cove Point] project opponents’ request for a rehearing, but FERC is not under a time-limit… Therefore, the question is: Are you waiting for FERC to do a rehearing? Does anyone know? Moniz: (turns again to staff.) I’m sorry. You’re correct, I am advised that we had not given final approval. We are waiting for the EIS [environmental impact statement] from FERC.

Johnson: So FERC does not have a time-limit for the rehearing… Is there a policy requirement that DOE wait for FERC to deny the request for rehearing, or is it just DOE practice? (Before Moniz can respond.) Because I liked your first answer, I want it approved. Moniz: We need to have the EIS in order to have the information on environmental impacts before the public interest determination. Johnson: Is that what would come out of the rehearing process? Moniz: If FERC is doing a rehearing.

Johnson: Well, that’s the problem, if FERC is under no timeline, then it [the project] just sits there. Moniz: I will go look into this. Johnson: Will you? Moniz: Yes, I will, but we need to have accurate information before making the public interest determination. We decided long ago that we didn’t want to be doing a parallel environmental review so we typically just adopt the FERC statement.

Rep. Joe Barton, Oil Exports Bill Sponsor: I have introduced a bill to repeal the ban on crude oil exports. I’ve heard you say reasonably positive things about that. So, I’d like to hear your position again. Moniz: As you know, that issue is up to the Department of Commerce to address. They did issue this clarification recently about lightly-processed condensates. Barton: They’re handling permits on a case-by-case basis—which is appreciated—but that’s not a substitute, in my opinion, for a comprehensive policy. It’s more cumbersome, takes a lot longer, and is not universal.

Moniz: Again at the policy level, that’s an issue that the Commerce Department must address. I do always put it into context that we still import seven million barrels per day. That was, of course, before the recent price impacts and we must ground-truth… We have had some analyses done. EIA, for example, has published a piece that says that exports would probably have zero or a small negative effect on gasoline prices. Barton: Right. Moniz: That’s mainly because the Brent price tends to correlate with our product prices. So, we will continue to do analyses that supports a decision.

Barton: I know that the Department of Commerce has to make these decisions, but I would assume that if the President were thinking about making a change in the law about crude oil exports he would consult with the Secretary of Energy, and you happen to be the Secretary of Energy… I would also point out that we export about four million barrels per day of refined products. Moniz: Yes. Barton: Which is up considerably, so you’ve got a situation where the patient is half pregnant… We’re exporting the refined products, but not allowing the crude, and that gives our refiners somewhat of a captive market for the domestic crude oil. If we just went to a free market totally, then everybody would be better off. We would squeeze the profit margin of the refiners because they would not be able to maintain that captured discount, which has fallen from about $25 per barrel to about $5 per barrel right now. So, as world oil prices come down, that discount that domestic refiners are receiving is coming down, too

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