Obama Nominee Pledges Case-by-Case Review of Gas Exports

President Barack Obama’s nominee for energy secretary said the U.S. should consider the “cumulative” economic effects of exporting more natural gas, without indicating whether he believes it would hurt domestic manufacturers and drive up prices as some Democrats contend.

Ernest Moniz, head of the Massachusetts Institute of Technology’s Energy Institute, told the Senate Energy and Natural Resources Committee today the Energy Department should individually review each application to construct export terminals and weigh regional impacts in the U.S. of more sales overseas.

Hydraulic fracturing in shale rock has driven down costs for natural gas, boosting manufacturers in the U.S. that use it as a fuel or ingredient for their products. The department is reviewing more than 16 applications from companies that want to export some of the U.S.’s growing reserves.

“We have an obligation to make judgments application by application,” Moniz said.

Among those seeking to export gas are Sempra Energy (SRE) of San Diego and Dominion Resources Inc. (D) of Richmond, Virginia. Cheniere Energy Inc. (LNG) has won approval for a facility that would begin exporting in 2015.

Moniz told the committee, which is considering his nomination, he would make sure the data the Energy Department will rely on in reviewing applications to build export terminals are “relevant to the issue at hand.”

Economic Study

The Energy Department is relying on an economic analysis, released in December, to examine the applications from companies to build terminals to export liquefied natural gas to markets in Europe and Asia, including Japan. Moniz pledged to review the study.

The analysis, which endorsed exports, used outdated information and didn’t fully examine regional effects, said Oregon Democratic Senator Ron Wyden, the chairman of the panel.

Some critics of unlimited exports have expressed concern that the department would approve all the applications at once and leave it to the market to determine which ones were built. That could lead to too much gas going overseas, companies such as Dow Chemical Co. (DOW) have argued.

As an academic, Moniz, 68, a former Energy Department undersecretary for President Bill Clinton, has favored natural gas as a bridge fuel between coal and sources that generate less pollution.

Sierra Club

Environmental groups including the Sierra Club in San Francisco say hydraulic fracturing, or fracking, is a threat to the environment.

The MIT’s Energy Institute issued a report in 2011 that said the environmental risks of increased drilling and production “are challenging but manageable.”

Moniz said in prepared testimony that the “natural gas ’revolution’” is reducing carbon-dioxide emissions and leading to a “dramatic expansion” of manufacturing in the U.S. Natural gas releases fewer carbon emissions, which most scientists say contribute to global warming, than coal.

Moniz told the committee that it was, “very important to have public confidence in environmental stewardship as we produce this resource.”

Fracking Regulations

The Interior Department is writing regulations for fracking on public lands. Moniz said the Energy Department may study whether methane leaks from the drilling and transport of the fuel undercut its climate benefits.

Moniz and the energy institute he ran at MIT have been criticized because some of the authors of the 2011 natural gas report didn’t acknowledge ties to the industry.

The Public Accountability Initiative, a Buffalo, New York- based group that opposes fracking, said today that newly released financial disclosures to Canadian regulators show that Talisman Energy Inc. (TLM) paid MIT study co-chairman Anthony Meggs $4.5 million in 2012.

“Moniz promoted the junk science of gas industry millionaires as if it was independent research,” said Kevin Connor, Public Accountability Initiative’s director, in a statement.

The issue didn’t come up at today’s hearing.

Moniz himself has ties to the energy industry. He performed consulting work last year for General Electric Co. (GE), BP Plc (BP/), and Riverstone Equity Partners LP, according to his financial disclosure forms.

Moniz disclosed a net worth of between $5.4 million and $18.1 million. In a letter filed with the Office of Government Ethics, Moniz said that if he is confirmed by the Senate, he would resign his board seats, and would refrain for one year from participating in matters pertaining to companies with which he financial relationships.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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