Senate Energy & Natural Resources Committee Hearing on the Quadrennial Energy Review

The Senate Energy & Natural Resources Committee conducted an overview of the U.S. Department of Energy’s (DOE) Quadrennial Energy Review (QER), which examines the status, needs and capabilities of the nation’s energy infrastructure, and makes recommendations.  Secretary of Energy Ernest Moniz testified before the committee.

Sen. Lisa Murkowski (R-AK), the committee chair, quickly noted that while many of the recommendations could cost billions of dollars, most of the nation’s energy infrastructure is privately owned and sustained by private investment.  In her opening statement, Sen. Murkowski mentioned the need to ensure the Trans-Alaska Pipeline System has the resources necessary to remain strong and resilient.  While Sen. Murkowski was disappointed the QER did not address the 40-year-old ban on oil exports, she praised its recognition of the role the U.S. can play as chair of the Arctic Council in the context of energy production and infrastructure.

Sen. Murkowski’s full opening statement can be found here.

Sen. Maria Cantwell (D-WA), the committee’s Ranking Member, cited the QER’s finding that natural gas interstate pipeline investment could range as high as $52 billion by 2030—depending on the overall level of natural gas demand—while spills, leaks and explosions from oil and gas pipelines between 2003 and 2012 caused a total of $5.5 billion in damages.  She said these findings could promote innovative solutions to enhance energy infrastructure resilience, reliability, and security.  Sen. Cantwell’s full opening statement can be found here.

Secretary Moniz did not make an oral statement, but entered his written testimony in the record, which can be found here.  The full QER can be found here.

Sen. Murkowski said Alaska lacks the infrastructure to move natural gas to Asian markets, requiring a $65 billion investment.  Looking at the Alaska LNG project, Sen. Murkowski asked for assurances that the DOE is pursuing a conditional license and the project is receiving the Secretary’s full attention.

Secretary Moniz said DOE views the Alaska LNG project as very different from similar projects in the Lower 48 because of the cost to move the gas to an export facility. The DOE has already approved the free trade agreement (FTA) and is looking at the non-FTA part for the conditional approval.

Highlighting the QER’s statement that it is “essential to provide more timely permitting decisions,” Sen. John Barrasso (R-WY) noted the gaps in permitting and reviewing infrastructure projects, and the multiple years sometimes required to complete the process.  While Sen. Barrasso was pleased with the QER’s acknowledgement of permit delays, he was concerned the recommendations didn’t do enough to fix the problem. He said the QER called for more coordination among federal agencies and more permitting fees, but didn’t establish deadlines, reduce duplicative regulations, or limit lawsuits that slow the permitting process.

“Do we really believe that more money, coordination and engagement is all that’s necessary to resolve the delays in the federal permitting process?” Sen. Barrasso asked.  Secretary Moniz said no; DOE is doing what it can within its authority, but cannot stop litigation or limit the role of the state governments, especially with major interstate projects that are subject to the most delay.

Sen. Barrasso referenced the QER’s integration of North American energy markets, which create economies of scale and attract private investment, lower capital costs, and reduce consumer energy costs.  “Mexico energy reforms present opportunities to increase energy trade with the U.S. and enhance energy security for the region,” he said, adding that the Obama Administration had failed to state a policy that would allow crude oil exports to Mexico, despite bipartisan requests.

Secretary Moniz said they share the focus on North American energy, and agreed the Mexican energy reforms open more opportunities to integrate infrastructure and energy trade. The QER didn’t address any specific projects and crude oil exports are controlled by the Department of Commerce, he said. Mexico has proposed a concept for swapping heavy and light oil, which the DOE is considering.

Sen. Murkowski talked about how lifting the ban on crude exports would help energy infrastructure development. While the Trans-Alaska Pipeline System offers reliable infrastructure, it is not operating at full capacity, and at some point the U.S. could lose TAPS, stranding a domestic oil supply.  “While the DOE may not evaluate with OCS or NPR-A or ANWR, it does speak to the nexus of domestic production and infrastructure,” she said.

Addressing North American energy integration and permit delays across borders, Sen. Murkowski asked Secretary Moniz to elaborate on how a light-heavy oil swap can be achieved with Mexico.  He responded that a stronger dialogue is needed.  He said he was surprised to learn that a U.S. Secretary of Energy hasn’t visited Canada in over a decade, which he has since remedied.  He plans to meet with his Mexican and Canadian counterparts at least once a year.  They met most recently in early April to identify the barriers to integrating their energy systems.  Secretary Moniz also co-chairs a joint U.S.-Mexico task force that will meet in late May to discuss energy and environmental issues.

Sen. John Hoeven (R-ND) asked how the U.S. can bolster its energy relationship with Canada if it doesn’t approve the Keystone XL pipeline.  Secretary Moniz said that while the QER doesn’t comment on specific projects, the U.S. already has over 70 pipelines crossing the Canadian border and more than four gigawatts worth of pending applications for high voltage hydropower projects, which is strong evidence of a good relationship with Canada.

Sen. Hoeven asked Secretary Moniz for his position on lifting the crude oil export ban.  While reiterating that the U.S. Department of Commerce makes that decision, Secretary Moniz said the U.S. still imports 7 million barrels of oil a day, in contrast to self-sustaining domestic LNG.  The issue, he said, is whether or not oil exports would result in more production.  “During today’s oil prices, it may be a hard case to say there would be a large change in production output,” Moniz added.

Sen. Al Franken (D-MN) cautioned that LNG exports could raise prices in the U.S.  Regarding renewable energy resources on tribal lands, Sen. Franken wants to see more pilot programs for micro-grids in Indian Country to create jobs and improve energy technology.

Secretary Moniz said he would be happy to work on that and mentioned the DOE’s expansion of the Office of Indian Energy Policy and Programs, which is currently authorized with a budget cap.  The President’s FY2016 budget requests $11 million for a loan guarantee program, which could leverage $11 million in energy projects, well above the office’s budget cap.  This credit subsidy could improve energy resource capacity for Alaska Native villages and Lower 48 tribes.

Sen. Bill Cassidy (R-LA) said the Russian Federation claims it controls a significant portion of world uranium deposits and could impact the price by limiting supply.  Secretary Moniz said this sounded surprising as the largest reserves are in Kazakhstan and Australia.  Sen. Cassidy responded Russia owns those reserves, and reserves in the western U.S (referring to a New York Times article, found here).  Secretary Moniz said he would look into how this might impact U.S. energy security.

Sen. Murkowski followed up on the activities of the Office of Indian Energy.  Heating is the biggest energy challenge in the north, she said, lauding the DOE’s partnership with Canada on delivering energy to remote regions.  While in Iqaluit, Nunavut, at the Arctic Council Ministerial meeting on April 24, Sen. Murkowski noticed the town’s extreme remote location and the high expense of generating heat exclusively with diesel fuel.  She said the U.S. can learn from Canada on energy delivery in remote regions, and with the chairmanship of the Arctic Council, the U.S. can improve its partnership with Canada to explore more energy-saving technologies.  She encouraged DOE to partner with Alaska’s Cold Climate Housing Research Center to develop innovative technologies.

Regarding QER recommendations, Sen. Murkowski referred to the Remote Community Renewable Energy Partnership, where the U.S. State Department will construct a high penetration wind diesel hybrid system in a rural Arctic community.

Sen. Murkowski reminded Secretary Moniz that since 2008, the State of Alaska has spent $247 million out of its Renewable Energy Grant Fund to support 275 renewable energy projects.  The state also used $5.5 million from its Emerging Energies Technology Fund to fund 20 emerging technology projects and invested $600 million through the Home Energy Rebate Program to make dwellings statewide more energy efficient.

Sen. Murkowski hoped the QER is not limited to a single project, but will build on what Alaska has already done and continues to do, and help develop a stronger partnership.  Secretary Moniz welcomed that partnership, and noted DOE has a permanent office in Anchorage.