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Key US Senator Starts Work on Natural Gas Bill, Mulls Export Restrictions

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WASHINGTON – Sen. Ron Wyden (D. Ore.), one of the leading voices on energy policy in the U.S. Senate, is laying the groundwork for a broad-based energy bill that could impose new restrictions on natural gas exports and create additional oversight for hydraulic fracturing.

The bill represents the first serious attempt by Senate lawmakers this session to modernize U.S. energy laws following a surge in natural gas production that has transformed the energy landscape.

Mr. Wyden, who became chair of the Energy and Natural Resources Committee earlier this year, is planning a series of meetings in May to gather input from other senators, as well as state regulators, natural gas producers and environmental groups, an aide for the senator said. A bill could surface shortly after that.

The goal is to find common ground on often-divisive energy issues, leading to legislation that can attract enough support among committee members. “This is a collaborative process,” the aide said.

The bill, which is in the early stages of being developed, will seek to address natural gas exports and hydraulic fracturing, or fracking. It will also tackle infrastructure issues and could look at ways to promote natural gas vehicles, people familiar with the issue said.

One of Mr. Wyden’s most challenging tasks will be to find common ground on the issue of natural gas exports.

With nearly 20 companies seeking permission from the U.S. Energy Department to ship natural gas to countries lacking a free-trade agreement with the U.S., the issue has divided lawmakers and pitted energy producers like Exxon Mobil against manufacturers like Dow Chemical.

Mr. Wyden is one of the most vocal critics of exports. Like other skeptics, he’s concerned swelling exports will lead to higher gas prices at home, stripping away a key competitive advantage for manufacturers that use natural gas as a raw material.

Energy companies say the U.S. government should steer clear of any restrictions. The hefty cost of building an export facility, which can top $7 billion, will inevitably weed out many applicants and serve as a natural control on export levels, they say.

Mr. Wyden has called for finding a “sweet spot” on exports– allowing enough shipments to incentivize energy companies to continue producing natural gas but restrictive enough to keep a cap on domestic prices.

The top Republican on the committee, Sen. Lisa Murkowski (R., Alaska), is a strong supporter of domestic energy production and would likely reject strict new controls on exports.

Mr. Wyden could propose a specific limit on exports–equal to 10% of daily production, for example–or create a new legal definition for when exports should be blocked because they are no longer in the best interests of the U.S.

The boom in natural gas production has been swift and dramatic. Production increased 25% between 2007 and 2012, according to the U.S. Energy Information Administration, due in large part to advances in drilling and production technologies.

With thousands of wells dotting the U.S. landscape, private citizens and environmental groups have started to voice concern over the safety of hydraulic fracturing, a common practice whereby natural gas is unlocked from underground rock formations using a high-pressured mix of water, sand and chemicals.

The fight over fracking often revolves around the question of whether state officials are capable of ensuring safety. The natural gas bill could include additional forms of oversight by the federal government.

One possible proposal would allow states to develop their own standards and then require a federal agency such as the Environmental Protection Agency to sign off on the states’ plans. Another proposal is to strengthen the role of the Interstate Oil and Gas Compact Commission, a group representing several states in their efforts to develop energy policies.

The natural gas bill will serve as a key test for senators responsible for guiding U.S. energy policy. The Energy and Natural Resources Committee has a reputation for bipartisanship but its members became gridlocked last session over a separate issue relating to oil royalties and failed to pass any meaningful legislation in months.

If the panel can pass a substantive natural gas bill, with new leadership and new members, it will be in a good position to tackle other thorny issues that have surfaced as a result of newfound energy supplies.

 

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About the Author:

The Louisiana Oil & Gas Association (known before 2006 as LIOGA) was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oilfield services. Our primary goal is to provide our industry with a working environment that will enhance the industry. LOGA services its membership by creating incentives for Louisiana’s oil & gas industry, warding off tax increases, changing existing burdensome regulations, and educating the public and government of the importance of the oil and gas industry in the state of Louisiana.

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