Moniz Fields More Energy Export Questions

Following yesterday afternoon’s session at the House Energy and Commerce, Energy Secretary Ernest Moniz appeared before the Senate Energy and Natural Resources Committee this morning (Feb. 12) to consider the administration’s F.Y. 2016 budget request for DOE and related policy matters.

As happened yesterday, Moniz had several exchanges with both Republican and Democratic members of the committee on natural gas and oil exports:

Sen. Cory Gardner (R-CO): Recently, Assistant Sec. for Fossil Energy, Chris Smith, testified on Sen. Barrasso’s bill [S.33] that DOE would be able to comply with the 45-day deadline for approval [of LNG export license applications] contained in the bill… Have you included sufficient funding within this budget to ensure that the 45-day deadline could be achieved under S. 33? Moniz: Of course. The prologue is that I think we’re doing quite well already, but certainly with that bill—as Chris said—we believe we can work with those deadlines. And, we think we have the [budgetary] resources to do that. Sen. Lisa Murkowski (R-AK), Committee Chair: We appreciate that confirmation, Mr. Secretary.

Sen. Angus King (I-ME): I have a question that needs a one word answer: Can you confirm for me that when conducting your public interest reviews for LNG exports that the effect on domestic natural gas prices is a factor? Moniz: Oh, yes. Murkowski: That was two words: Oh and yes. (Laughter)

Sen. Debbie Stabenow (D-MI): I appreciate the fact that you have a balancing act to do and that you’re moving forward on LNG exports and I understand that you are updating the study on the impacts of increased—or wide open—exports… So, I wonder if you might talk about the update of the study and how it’s going to evaluate the impacts on costs for American consumers and businesses? Moniz: Certainly. As I mentioned in response to Sen. King’s question, the impact on domestic markets is explicitly one of the criteria for the public interest determination. As we said last year when we modified our procedures—which I think provided more clarity for the situation—we have the analytical base for up to 12 billion cubic feet [bcf] per day of exports.

Moniz: Of course, most independent economic analyses predict that we are unlikely to export more than about 10 bcf/day—or that’s at least the average projection—so, we did commission studies that are due later this year about what would be the economic impacts if we went beyond [the 12 bcf/day level]. The EIA [Energy Information Administration] does predict that in the current range very, very small impacts in terms of price, partly because when exports start—and we have no exports yet—the expectation is that for every unit exported there would be about two-thirds of a unit of additional natural gas production. That would keep a lid on any price increases. So we will keep looking at this all the time. We are currently up to about 5.7 bcf/day authorized for exports.

Stabenow: You would agree that other nations are paying more than we are for natural gas. China, for example, was paying more than $16 [per mmbtu] last year. Moniz: Yes, but that has changed dramatically with the oil price drop because in general these [LNG] contracts are indexed to oil. And, that’s another factor. We have seen both formally and informally some withdrawals from consideration [for DOE LNG export licenses] because right now the price structure is not adequate.

Sen. John Barrasso (R-WY): Before I start I want to thank you for working with us on our bipartisan LNG exports bill. I was very encouraged by Assistant Sec. Smith’s responses to our questions. As of yesterday we had six Democratic cosponsors and six Republicans. I look forward to working with you on this bipartisan measure.
Sen. Barrasso: Over the past several months, OPEC has decided not to cut oil production… and you’ve heard all of the different theories behind this… Some say they are trying to undermine America’s crude oil production. Regardless of their motivation, OPEC’s decision has caused some U.S. companies to cut investment and lay off workers in states such as Wyoming. Currently, American producers aren’t allowed to export crude oil from the United States. So, we have American producers that aren’t allowed to sell to Asia, to Europe, to Latin America, so they run out of customers. This is obviously a hardship for folks in my state and other states as well. In light of what’s happening worldwide, isn’t now as a good time as any to lift this ban on exporting crude oil from the United States?

Moniz: Senator, as you know, that’s in the Department of Commerce’s jurisdiction. We do provide technical support when requested… There are a few points I’d make. First, we are an enormous oil product exporter… we export a net two and a half billion barrels per day in products, which is a tremendous change… almost a reversal in sign from a few years ago. So, we are exporting—effectively—through products. We are also exporting natural gas liquids, propane, etc. In terms of crude oil, the other perspective is that we are still a seven million barrel per day importer of crude oil, so this issue must be taken in the context that we are actually enormous importers. I understand the next level of argument about matching refineries [with grades of oil]… Additional DOE analyses are forthcoming. I would mention one that the EIA published about the impacts on gasoline prices and their conclusion was none to possibly minor decreases to domestic prices, largely because the gasoline price is indexed more to the Brent benchmark.

Barrasso: Have you been in touch with the Sec. of Commerce on this issue? Moniz: We have held a number of technical briefings for them… And, as you know, they did issue a clarification on lightly-processed condensate which provided some additional clarity to the companies.

Sen. John Hoeven (R-ND): I’m a cosponsor of [S.33] and it would require approval within 45 days of the final EIS on an LNG export application… You and I have had negotiations on that. Do you feel we’ve got it in the format that’s workable? Moniz: Yes. As discussed, I think we’re doing a good job, but with the parameter put forward, we could work with those dates. Hoeven: Thank you.