Department of Energy (DOE) Secretary Ernest Moniz told a House panel on Tuesday that the Obama administration was concerned about the condition of the nation's natural gas distribution systems. He urged lawmakers to create a program to accelerate the replacement of old pipelines.
Meanwhile, Moniz said lifting the nation's ban on crude oil exports was unlikely to lead to increased domestic production due to continuing low world crude oil prices. He added that energy reforms in Mexico may lead to more exciting opportunities in that country's electricity sector, rather than in hydrocarbons.
Last April, the administration released its Quadrennial Energy Review (QER), which outlined its suggestions for upgrading the nation's energy transmission, storage and distribution (TS&D) infrastructure (see Daily GPI, April 21). That followed plans by the House Committee on Energy and Commerce to create a comprehensive energy bill and bring it to the House floor for consideration later this year (see Daily GPI, Feb. 11).
During his testimony before the House Energy and Power Subcommittee, Moniz said one of the most urgent legislative actions outlined in the QER was for DOE to establish a program to give states an incentive for replacing aging gas distribution lines. The program is estimated to cost $2.5-3.5 billion over a 10-year period.
"We recommend a fund that would allow for competition for accelerating the modernization of natural gas distribution infrastructure, for both environmental and safety reasons," Moniz said. "Clearly the federal government should not, and cannot, pay for what may be a quarter trillion dollar bill, but what we recommend is acceleration in which the federal government could help absorb any rate increase for low income families."
The QER analysis estimated the total cost for replacing cast iron and bare steel pipes prevalent in local distribution company systems to be $270 billion.
At one point, Rep. Joe Barton (R-TX) asked Moniz if he thought lifting the current ban on U.S. crude oil exports would lead to lower world crude oil prices.
"In a country like ours, which still imports 7 million b/d, the question would be whether [lifting the ban] did or did not stimulate any appreciable additional production," Moniz said. "Internally, there would be an issue as to how rents are shared between, say, refiners and producers. But in economy-wide terms, the real issue is whether there is more production, and certainly in today's market it's hard to imagine that happening."
Moniz also touched on the sweeping energy reforms taking place in Mexico. Last year, Mexico's Congress enacted legislation introduced by President Enrique Pena Nieto to reform the nation's energy policies and break some of the monopolistic power of state-owned Petroleos Mexicanos (Pemex). Among the reforms was a directive allowing outside investment in Mexico's energy sector (see Daily GPI, Aug. 7, 2014; May 2, 2014).
Last week, the Mexican government gave its approval for 19 prequalified companies -- including subsidiaries of Chevron Corp., ExxonMobil Corp., Hess Corp. and Marathon Oil Corp. -- to bid on 14 offshore exploratory blocks in the shallow Gulf of Mexico (see Daily GPI, May 26). Similar contracts for development of Mexico's shale formations are still pending (see Daily GPI, May 1).
"The energy reform in Mexico offers tremendous opportunities for us, [especially] in the hydrocarbon sector," Moniz said. "Our companies are going to Mexico in the current auctions and are prepared to offer lots of technical assistance to get involved in the shale plays as well."
But Moniz added that "reform of the electricity sector may actually offer qualitative new opportunities," a position he said was shared by Mexico's Secretary of Energy, Pedro Joaquin Coldwell. "The reform will bring our systems of regulation and standards much more into alignment -- as we have with Canada, where we have a completely integrated electricity system. We are looking forward to that. It's going to be a major focus."