Laws of the Past: Are U.S. Energy Laws Limiting the Country’s Potential?

January 7, 2014

Host: The Brookings Institution

Event: The Future of Energy Trade

Speakers: The Honorable Lisa Murkowski (R-Alaska), Ranking Member, Energy and Natural Resources Committee, U.S. Senate

Since discovering large domestic caches of shale natural gas, the United States has quickly begun shifting from an energy importer to a net exporter. The Energy Information Administration (EIA) predicts that the U.S. will nearly double its crude oil production by 2019; the country is also expected to become a leading natural gas exporter by 2018, and last year (July, 2013) the U.S. produced 7 quadrillion BTU in a single month, the highest ever recorded. In short: the U.S. is currently producing more energy than it has during any other time in history. However, even as the U.S. continues to tap new energy sources and expand its exporting market, some argue that the country is not living it up to its full potential.

Speaking at the Brookings Institute in Washington, DC, Senator Lisa Murkowski (R-Alaska) claimed that antiquated energy laws, “written for a now bygone world,” are holding the U.S. back from reaching its full energy potential. As it stands now, management of energy materials are spread throughout a number of government agencies. The State Department reviews proposals for cross-border oil pipelines (such as the Keystone XL) while the Commerce Department manages petroleum, crude oil, and condensate. The Department of Energy (DOE) approves natural gas exports while the Commerce Department permits exports of natural gas liquids. The Federal Energy Regulation Commission (FERC) regulates natural gas pipelines.

Under our current system, natural gas can be exported through pipelines to Canada and Mexico in a short period of time. However, when it comes to liquefying natural gas and exporting it overseas, one is required to gain permission from the DOE, in order to gain a selling license, as well as gain permission from the FERC to build a liquefying station. This process of gaining approval is costly and can take years to complete. Sen. Murkowski argues that it is currently easier to build LNG facilities in Australia, where the U.S. government is helping finance liquefaction projects. Similarly, Sen. Murkowski claims that restrictions barring the shipment of crude oil, unless first converted to diesel, are absurd, given that there is a law that allows shipment of crude solely to Canada.

Working around three principles, detailed in a white paper she released earlier today, Sen. Murkowski expressed a willingness to work with the executive branch, in examining the current energy architecture established around banned exports, “to do no harm where regulations we have in place are working,” and to make progress in abolishing old and inefficient regulatory policies.

Regarding banned substances, Sen. Murkowski called for ending the prohibition on crude oil and condensate exports. Currently, two of the U.S. largest energy fields at Bakken and Eagle Ford are producing light tight oil (LTO), which is too light for many U.S. refineries in the Gulf. Though there are known and practiced methods for refining LTO into a marketable product, the U.S.’ ever growing stock of LTO remains stationary because old crude oil laws prohibit from being shipped to East Coast refineries. Without action, current laws would result in the U.S. developing a massive glut of LTO’s and, according to Sen. Murkowski, improve the efficiency of the world energy markets and lower prices around the globe.

In the spirit of improving efficiency, Sen. Murkowski questioned the effectiveness of putting pipeline approval in the hands of the State Department, which she claims has strained ties with Canada while negotiating over the Keystone Pipeline, and also questioned whether the approval of LNG plants should not be sped up and entrusted to one agency.

It is the Senator’s belief that the current energy regulations are inefficient and could potentially cause harm to the U.S. global standing. The build up of crude oils not only threatens the U.S. economic prosperity, it also threatens the country’s image as an innovator and global leader. In the fight against climate change, the U.S. has the potential to be a lead exporter of cleaner and cheaper forms of energy. Given the opportunity to lead, the U.S. should do so. The technology to produce cleaner energy already exists, all that is needed is the will and determination to redefine laws and strive for a new future.

You can watch the full presentation here.

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07. January 2014 by Will Houstoun
Categories: Economics, Energy | Comments Off on Laws of the Past: Are U.S. Energy Laws Limiting the Country’s Potential?