April 11, 2013

Secretary of Energy Nominee Not Definitive on LNG Export Policy

President Obama’s nominee to lead the Department of Energy, Ernest Moniz, received bipartisan support on the Hill on Tuesday and appears likely to sail through the confirmation process.

Moniz, a physicist at MIT and former undersecretary of energy, has made his support for natural gas production in the United States clear, and he used Tuesday’s hearings as an opportunity to double down on this position. According to the Washington Post, Moniz said he would use the natural gas boom as a means of reducing carbon emissions, increasing domestic energy production and expanding manufacturing job growth.

While Moniz appeared unequivocal in his views on natural gas, he was less clear on his position concerning liquefied natural gas (LNG) exportation. Moniz’s position on the issue is paramount to the future on LNG exportation, because the Department of Energy is responsible for approving companies’ applications to construct LNG export terminals.

Moniz’s previous work appears to reveal support for LNG exports. In 2011, Moniz led a study at MIT claiming that the United States should not prevent LNG exports. According to the report, “The U.S. should sustain North American energy market integration and support development of a global ‘liquid’ natural gas market with diversity of supply. A corollary is that the U.S. should not erect barriers to natural gas imports or exports.”

During Tuesday’s hearings, however, Moniz said that he would consider applications for export facilities on a case by case basis, which would include analysis as to whether exports were in the public interest and how they would affect domestic production. While Moniz is undoubtedly supportive of the natural gas boom, the question of LNG export policy remains.

Allowing the construction of LNG export terminals is one of the most contentious policy decisions in DOE’s purview. Manufacturing and energy intensive industries in the United States have prospered from the natural gas glut and the associated cheap prices, and these industries would benefit from a continuation of abundant domestic supply. Domestic energy businesses, on the other hand, would like to take advantage of the opportunity to export LNG to higher priced international markets. The Obama administration approved the first and only LNG export facility a year ago. Other applicants are still awaiting their fate, which will likely rest in the hands of Moniz.

In addition to the economic and trade considerations, the decision to allow exportation of U.S. LNG must account for its foreign policy implications. Analysts point to the potential of U.S. LNG exports to alleviate Russia’s leverage over our European allies as a compelling reason to allow exportation. Furthermore, some analysts see U.S. LNG as a tool to strengthen partnerships in the Asia-Pacific. In particular, allowing LNG exports would appease the Japanese, who are lobbying DOE to approve export terminals as a means to meet their post-Fukushima demand pressures and improve energy security. While high transportation costs may ultimately limit the extent of U.S. LNG exports to Asia, giving the go-ahead for the construction of export terminals could benefit the United States’ standing with our allies in the region. A future Secretary Moniz will have to consider these and the myriad other foreign policy implications associated with the exportation of U.S. LNG.

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I would be remiss not to mention Will Rogers’ departure. We will surely miss Will at CNAS. His impeccable writing and expansive knowledge are unique and irreplaceable. We recognize that his shoes are impossible to fill, but you can’t fault us for trying. The Natural Security Blog will continue, and we appreciate your readership and promise to strive to provide the quality of analysis and insights that Will brought to the blog. 

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