Brookings: Experts - Charles K. Ebinger

Energy, Indigenous Communities and the Arctic Council

Wed, 17 Apr 2013 08:30:00 -0400

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April 17, 2013
8:30 AM - 2:00 PM EDT

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Owing to the vast economic opportunities and environmental, social, and geopolitical challenges it presents, the Arctic is emerging as an important topic of debate. With an estimated 25 percent of the world’s undiscovered oil and gas reserves, and with climate change making shorter maritime routes through Arctic waters possible, the rewards of successful economic development are plentiful. However, the remote, pristine frontier is home to some of the world’s harshest conditions making energy development, maritime trade and tourism increasingly difficult and dangerous. The Arctic is also home to indigenous communities whose livelihoods are likely to be challenged by both the effects of climate change and increasing external human activity in the region.

On April 17, the Energy Security Initiative at Brookings hosted a forum to discuss the implications of greater Arctic energy and natural resource development and assessed how the international community can best cooperate to ensure that such developments are done in an environmentally and socially sustainable manner. The forum begins with keynote remarks from Ólafur Ragnar Grímsson, president of Iceland, and Kuupik Kleist, a member of Parliament of Greenland and former Greenland prime minister. Other speakers included the incoming Chair of the Senior Arctic Officials of the Arctic Council, Patrick Borbey; David Hayes, deputy secretary of the U.S. Department of Interior; and Mead Treadwell, lieutenant governor of the State of Alaska.

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The Road Ahead for China’s Economy

Tue, 16 Apr 2013 09:00:00 -0400

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April 16, 2013
9:00 AM - 4:30 PM EDT

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Washington, DC 20036

In recent years, China has increasingly confronted new challenges in economic policy, including rising labor costs, low household consumption, rapid urbanization and inefficient domestic investment. While it is now widely acknowledged in Beijing that major structural adjustments are needed to address these issues, implementing serious reforms pose major challenges for the newly installed leadership.

On April 16, the John L. Thornton China Center at Brookings and China’s Caixin Media Group hosted a conference to examine the daunting challenges confronting China’s new leaders. The morning panels featured a discussion of the financial sector as well as the relationship between the domestic agenda for financial reform and China’s evolving strategy for outbound investment. The afternoon panels took a close look at the political obstacles to implementing major economic reform in areas such as tax policy, the household registration system and land transfers, as well as explore the impact of environmental and natural resource constraints on China’s economic growth.

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U.S.-Alberta Energy Relations: A Conversation with Premier Alison Redford

Tue, 09 Apr 2013 14:00:00 -0400

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April 9, 2013
2:00 PM - 3:30 PM EDT

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Brookings Institution
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Washington, DC 20036

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Recently, the U.S. Department of State released its draft Supplement Environmental Impact Statement (SEIS) on the Keystone XL pipeline, which, if approved by the Obama administration, would connect Canada’s oil sands with U.S. refineries in the Gulf Coast. The debate surrounding the pipeline has brought increased attention to the Canadian province of Alberta—which, with an estimated 170 billion barrels—is home to the world’s third-largest proven reserves of oil.

On April 9, the Energy Security Initiative at Brookings hosted Alison Redford, the premier of Alberta, for a discussion on the the Alberta-U. S. energy relationship, environmental efforts undertaken by her administration, and the Keystone XL pipeline.

Senior Fellow Charles Ebinger, director of the Energy Security Initiative, provided introductory remarks. Brookings Trustee Daniel Yergin, chairman of Cambridge Energy Research Associates, moderated the discussion with Premier Redford.

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Natural Gas Liquids: The “Other” Driver of the U.S. Oil and Gas Supply Resurgence

Charles K. Ebinger and Govinda Avasarala — Mon, 01 Apr 2013 14:36:00 -0400

The fundamental changes in the U.S. hydrocarbon production landscape are now widely acknowledged. Analysts and pundits liberally discuss the prospects for U.S. “energy independence” and becoming “Saudi America.” What is less understood and discussed, however, is the role that rapid increases in the production of Natural Gas Liquids (NGLs) will play in the U.S. hydrocarbon revolution and the important impacts of NGLs for the industry.

According to the Energy Information Administration (EIA), total domestic NGL production increased from just over 1.7 million barrels per day (mmbd) in 2005 to nearly 2.5 mmbd in October 2012. In the years to come, NGLs will be a critical component of the industrial sector’s ability to take advantage of the U.S. hydrocarbon resurgence, and will play a large role in the country’s ambitions for energy “self-sufficiency.” By 2025, EIA estimates that NGLs production will account for roughly one-quarter of U.S. liquids supply.

In this Natural Gas Briefing Document, the first in a new series of briefings by the Energy Security Initiative at Brookings (ESI) on developments in the natural gas market, the authors explain what NGLs are and why they are important, before exploring some important considerations for policymakers interested in capitalizing on this economic opportunity.

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Govinda Avasarala

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The Department of Energy’s Strategy for Exporting Liquefied Natural Gas

Charles K. Ebinger — Tue, 19 Mar 2013 15:00:00 -0400

Mr. Chairman, Ranking Member Speier, and distinguished Subcommittee members:

Thank you for inviting me here to share my views on U.S. LNG export policy. My name is Charles Ebinger and I am Director of the Energy Security Initiative at the Brookings Institution. These views are mine alone and do not reflect the views of the Brookings Institution, which does not take institutional positions on any policy issue.

The Energy Security Initiative at Brookings has been studying this issue for the past two years, having published an assessment of the case for LNG exports in May 2012 in our report, Liquid Markets: Assessing the Case for Exports of Liquefied Natural Gas from the United States.[1] In that report, we focused on two determinants of whether the U.S. should allow exports of LNG: what is the feasibility of exporting LNG, and what are the implications? After assessing both factors, my co-authors, Kevin Massy and Govinda Avasarala, and I came to two primary conclusions: first, the negative implications of LNG exports from the lower 48 states, which we believe to be technically feasible, are marginal and outweighed by the benefits; second, as the lynchpin of the globalized economy the United States must continue to espouse free trade and avoid intervening in a global market. Ultimately we believe, as we stated in our report, “that the United States should neither act to prohibit nor to promote LNG exports.”

In the 10 months since the release of this report, more studies and information—some good, some misleading—have surfaced. More opinions are being voiced. Amid the increased volume of debate, however, my opinion has not changed. I still believe that the benefits of U.S. LNG exports are, on balance, a benefit to the United States; that the United States still has the responsibility and the incentive to be an advocate for free trade; and that the U.S. government should not intervene in what should be a market-driven process.

I applaud this Committee for avoiding another acrimonious debate on the pros and cons of LNG exports by spending more time with both the implications of LNG exports and discussing some specifics reforms that might help rationalize the permitting process while clearly protecting the public interest.

Part 1: Implications

Any discussion surrounding the implications of U.S. LNG exports will focus on several considerations including the implications for domestic natural gas and electricity prices, the impact on other consumers of natural gas, and the impact on international prices and geopolitics.

Wellhead Prices

There have been a number of studies that have examined the impact of U.S. LNG exports on domestic prices. When analyzing them, policymakers should identify which study’s assumptions most resemble the existing natural gas market and its likely direction, and which models are most reflective of the complex nature of domestic and global natural gas trade. For instance, assuming realistic volumes of natural gas exports as well as a reasonable supply response by natural gas producers are two critical considerations. It is also important to note that the supply curves in the various studies reflect different interpretations of the economics of marginal production.

Under the most reasonable assumptions (in this case assuming 6 bcf/day of exports), most reports forecast that natural gas prices will be between 2 and 11 percent higher in 2035 than if the U.S. did not export LNG.[2] There are a number of factors that insulate domestic prices from dramatic increases in price as a result of exports. First, as will be discussed later, there is a market-determined limit on how much the United States can economically export, depending on domestic prices, the international gas market, and the global market for competing fuels. Second, the size of the resource base is substantial, an important factor because the EIA estimates that roughly 63% of the gas required to meet demand for LNG export will come from increased domestic production.[3] Finally, the domestic natural gas sector is very efficient and producers are able to respond rapidly to marginal increases in the domestic price.

Figure 1: Study-by-study comparison of the Average Price Impact from 2015-2035 of 6 bcf/day of LNG exports (unless otherwise noted)

Study	Average Price without Exports ($/MMBtu)	Average Price with Exports ($/MMBtu)	Average Price Increase (%)
EIA*	$5.28	$5.78	9%
Deloitte	$7.09	$7.21	2%
Navigant (2010) (2 bcf/day of exports)**	$4.75	$5.10	7%
Navigant (2012)***	$5.67	$6.01	6%
ICF International***	$5.81	$6.45	11%

* Price impact figure for EIA study reflects the reference case, low-slow export scenario.
** Navigant (2010) did not analyze exports of 6 bcf/day.
*** Navigant (2010 and 2012) and ICF International studies are based on Henry Hub price.
Source: EIA, Deloitte, Navigant, ICF International
Power Sector Implications

LNG exports are likely to have a modest impact on electricity prices as well. In the power sector, natural gas has historically been used as a back up to coal and nuclear base-load generation. For such gas used at the margin, the increase in electricity prices as a result of LNG exports will be limited by its competitiveness relative to other fuels: as soon as it becomes more expensive than the alternative for back up generation, power producers will move away from gas. According to ICF International, a $0.64/MMBtu increase in the price of natural gas will result in an electricity price increase of between $1.66 and $4.97/megawatt-hour (MWh), depending on how often gas is used as the marginal fuel for electricity. Deloitte estimates that the price increase of electricity will not be more than $1.65/MWh. EIA estimates that electricity price impacts will be marginal as well (between $1.40/MWh and $2.90/MWh) except in the “high rapid” export scenario. By contrast, the EIA Annual Energy Outlook 2013 estimates that, in its reference scenario, the average price of electricity (across all fuels) in 2035 will be $101/MWh, showing clearly the small impact that the rise in domestic electricity prices will have on consumers.[4]

Industrial Sector Implications

I am similarly skeptical about the negative consequences of exports on our industrial sector. Some of the more vocal industry opponents to LNG exports contend that price increases will reverse the trend of manufacturing investment returning to the United States. I firmly disagree with this assessment. For starters, I don’t believe that multi-billion dollar industrial investments in factories that will be a part of the capital stock for decades will be rendered unprofitable by single-digit percent changes to natural gas prices. As one analyst put it, “if your margins are so thin that [modest price increases] could break them, then there isn’t much benefit to putting up a plant here. Conversely, if it is so beneficial to do it here, then a small change in price probably won’t undermine those benefits.”[5]

For the petrochemical sector, the picture is even more positive. The prospects of large volumes of new supply suggest that the industrial sector’s competitiveness is stable regardless of U.S. export policy. Today the ratio of the price of oil to the price of natural gas is over 25:1. This is well over the 7:1 oil-to-gas price ratio at which the American Chemistry Council (ACC) believes U.S. petrochemical and plastics producers to be globally competitive. European and Asian petrochemical producers use oil-based products such as naphtha as a feedstock, as they lack access to cheap natural gas liquids (NGLs). Increased drilling will likely result in the greater production of the NGLs. This is one of the principal reasons why petrochemical producers are looking to return to the United States, after spending much of the previous decade relocating facilities overseas. According to a March 2011 report by the ACC, a 25 percent increase in ethane—a natural gas liquid—production will yield a $32.8 billion increase in U.S. chemical production.[6] To the extent that increased gas production linked to exports results in increased production of natural gas liquids, they will benefit the petrochemical industry.

International/Geopolitical Implications

Before diving too deep into the international pricing and geopolitical implications of U.S. LNG exports, it is worth reviewing the structure of the global LNG market, which is informally separated into three markets: North America, the Atlantic Basin (mostly Europe), and the Pacific Basin (including Japan, South Korea, Taiwan, China, and India). These markets are separated because of important technical differences that impact the pricing structure for LNG in each market. The North American natural gas market is competitive and prices are traded in a transparent and open market. The Atlantic Basin is dominated by European LNG consumers such as the United Kingdom, Spain, France, and Italy, and is a hybrid of a competitive U.K. market that was liberalized in the mid-1990s and a Continental European market that is partially dependent on oil-linked, take-or-pay contracts. In recent years, the U.K. hub, the National Balancing Point (NBP), has traded at a premium to the U.S. hub, known as the Henry Hub. The Pacific Basin is a more rigid market that depends heavily on oil-indexed contracts that are more expensive than those used in the Atlantic Basin. While they have no central trading hub, the Pacific Basin consumers such as Japan and South Korea currently import LNG based on a pricing formula known informally as the Japan Crude Cocktail, the average price of custom-cleared oil imports into Tokyo. Many Pacific Basin contracts have a built-in price floor and price ceiling depending on the price of oil.

Without exporting any natural gas, the U.S. shale gas “revolution” has already had a positive impact on the liquidity of global LNG markets. Many LNG cargoes that were previously destined for gas-thirsty U.S. markets were diverted and served spot demand in both the Atlantic and Pacific Basins. The increased availability of LNG cargoes has helped create a more competitive LNG market for other consumers. This in turn has helped apply downward pressure to the terms of oil-linked contracts resulting in the renegotiation of some contracts. In 2010 short-term and spot contracts represented 19 percent of the total LNG market, up from only a fraction one decade earlier. This trend is particularly prominent in Europe, where in 2012 nearly half of its gas supply came on a spot-price basis (see Figure 2). As will be discussed later, this trend in the European market towards cheaper oil-indexed rates and increased spot consumption has not only benefited European economies but is also helping loosen the stranglehold of Gazprom, Russia’s state gas company, on our east and west European allies and trading partners.

Figure 2: European Gas Supply by Contract Type (%), 2012

Source: Societe Generale

Although increases in domestic gas production have initiated some changes within the international gas market, any dramatic alterations to the existing structure will depend on the volume that is actually exported. With roughly 37 bcf/day of liquefaction capacity in the global market today, it is unlikely that the U.S. will export a significant portion of the nearly 30 bcf/day worth of applications currently proposed to the Department of Energy. Building an LNG facility requires billions of dollars in investment and years of planning. Prospective exporters must also undergo an intricate and thorough regulatory process and must be reasonably certain that the economic opportunity for any investment exists for two or more decades.

Given these sobering realities, I don’t see very many LNG projects—our estimates predict 4-6 bcf/day’s worth—being constructed before their economic opportunity and early-mover advantage is eroded by increased domestic gas prices (resulting from more gas consumption in the electricity and industrial sectors, sources of demand that are emerging faster than export facilities), decreasing international gas prices, and a more balanced global LNG market. This last point about LNG market equilibrium is critical. Our forecast suggests that from 2015 to 2020, the global LNG market will swing to a surplus, mostly aided by the nine Australian projects that already have or are close to reaching final investment decision (see Figure 3) as well as other new supplies from East and West Africa. Further, pipeline gas (particularly into China), and a stubborn coal market will also compete with gas in global energy markets, particularly those in Asia. Furthermore, as we move beyond 2025, the possibility of other countries—again, China in particular—developing their own shale gas reserves could begin to have an impact on international gas trade.

Figure 3: Global LNG Supply/Demand Balance, 2015-2020 (bcf/day)

Source: Brookings, IEA, EIA, Morgan Stanley, JP Morgan, Credit Suisse

U.S. LNG exports will therefore have a beneficial but not transformational impact on international LNG prices. The market is still largely dependent on long-term contracts and much of the new liquefaction capacity emerging in the next decade (largely from Australia) has already been contracted for at oil-indexed rates.[7] The incremental LNG volumes supplied by the United States at floating Henry Hub rates will be small in comparison. Indeed, importing U.S. LNG at Henry Hub rates includes a number of other costs, such as the cost to liquefy the gas and the cost to ship it on specialized tankers. (Depending on the type of contract, regasification is another cost that can be borne by either the buyer or the seller.) These costs range depending on the transportation distance and the size of vessel. As a reference point, it is estimated that shipments of LNG from the U.S. Gulf Coast to Japan will cost $5-6/MMBtu.[8] These additional costs dramatically reduce the arbitrage opportunity available to exporters.

There is also no guarantee that all U.S. exports will be supplied at floating U.S. prices. LNG export facilities are multi-billion dollar investments that require revenue certainty. Moreover, many of the export facilities are owned by producers of natural gas. John Watson, Chevron’s Chief Executive, said earlier this week that his company’s investments in LNG export facilities does not mean that natural gas will be available to consumers at U.S. rates.[9] Most producers prefer selling long-term supply contracts to reduce the price risk to their investments.

A large increase in U.S. LNG exports will have the potential to increase U.S. foreign policy interests in both the Atlantic and Pacific basins. Unlike oil, natural gas has traditionally been an infrastructure constrained business, giving geographical proximity and political relations between producers and consumers a high level of importance. Issues of “pipeline politics” have been most directly visible in Europe, which relies on Russia for around a third of its gas. Previous disputes between Moscow and Ukraine over pricing have led to major gas shortages in several E.U. countries in the winters (when demand is highest) of 2006 and 2009. Further disagreements between Moscow and Kiev over the terms of the existing bilateral gas deal have the potential to escalate again, with negative consequences for E.U. consumers. The risk of high reliance on Russian gas has been a principal driver of European energy policy in recent decades. Among central and eastern European states, particularly those formerly aligned with the Soviet Union such as Poland, Hungary, and the Czech Republic, the issue of reliance on imports of Russian gas is a primary energy security concern and has inspired energy policies aimed at diversification of fuel sources for power generation. From the U.S. perspective such Russian influence in the affairs of these democratic nations is an impediment to efforts at political and economic reform. The market power of Gazprom, Russia’s state-owned gas monopoly, is evident in these countries. Although they are closer to Russia than other consumers of Russian gas in Western Europe, many countries in Eastern and Central Europe pay higher contract prices for their imports, as they are more reliant on Russian gas as a proportion of their energy mixes.

In the larger economies of Western Europe, which consume most of Russia’s exports, there are efforts to diversify their supply of natural gas. The E.U. has formally acknowledged the need to put in place mechanisms to increase supply diversity. These include market liberalization approaches such as rules mandating third-party access to pipeline infrastructure, and commitments to complete a single market for electricity and gas by 2014, and to ensure that no member country is isolated from electricity and gas grids by 2015.

Despite these formal efforts, there are several factors retarding the E.U.’s push for a unified effort to reduce dependence on Russian gas. National interest has been given a higher priority than collective, coordinated E.U. energy policy: the gas cutoffs in 2006 and 2009 probably contributed to the acceptance of the subsea Nord Stream pipeline, which carries gas directly from Russia to Germany. Germany’s decision to phase out its fleet of nuclear reactors by 2022 will result in far higher reliance on natural gas for the E.U.’s biggest economy. The environmental imperative to reduce carbon emissions—codified in the E.U.’s goal of essentially decarbonizing its power sector by the middle of century—mean that natural gas is being viewed by many as the short-to medium fuel of choice in power generation. Ironically, in the near term the phase out of nuclear power has lead to greater reliance on both domestic coal as well as imported coal from the United States.

Finally, the prospects for European countries to replicate the unconventional gas “revolution” that has resulted in a glut of natural gas in the United States look uncertain. Several countries, including France and the U.K., have encountered stiff public opposition to the techniques used in unconventional gas production, while those countries, such as Poland and Hungary, that have moved ahead with unconventional-gas exploration have generally seen disappointing early results. Ukraine is also at a very early stage in developing its potential shale reserves. Collectively, these factors suggest that the prospects for reduced European reliance on Russian gas appear dim.

The one factor that has been working to the advantage of advocates of greater European gas diversity has been the increased liquidity of the global LNG market, discussed above. Russia’s dominant position in the European gas market is being eroded by the increased availability of LNG. Qatar’s massive expansion in LNG production in 2008, coupled with the rise in unconventional gas production in the United States as well as a drop in global energy demand due to the global recession, produced a global LNG glut that saw many cargoes intended for the U.S. market diverted into Europe. As mentioned previously, with an abundant source of alternative supply, some European consumers, mainly Gazprom’s closest partners, were able to renegotiate their oil-linked, take-or-pay contracts with Gazprom.

Increased LNG exports will provide similar assistance to strategic U.S. allies in the Pacific Basin. By adding supply volumes to the global LNG market, the U.S. will help Japan, Korea, India, and other import-dependent countries in South and East Asia to meet their energy needs. The desire on the part of Pacific Basin countries for the U.S. to become a gas supplier to the region has been underlined by the efforts of the Japanese government, which has attempted to secure a free-trade agreement waiver from the United States to allow exports. As with oil price-linked Russian gas contracts in Europe, U.S. LNG exports—to the extent they occur on a floating Henry Hub basis, have the potential to weaken the market power of incumbent LNG providers to Asia, increasing the negotiating power of consumers and decreasing the price. As U.S. foreign policy undergoes a “pivot to Asia,” the ability of the U.S. to provide a degree of increased energy security and pricing relief to LNG importers in the region will be an important economic and strategic asset.

Beyond the basin-specific considerations of U.S. LNG exports, they will provide a source of predictable natural gas supply that is relatively free from unexpected production or shipping disruption. With Qatar representing roughly one-third of the global LNG market, a blockade or military intervention in the Strait of Hormuz or a direct attack on Qatar’s liquefaction facilities by Iran would inflict chaos on world energy markets. While the United States government will be unable to physically divert LNG cargoes to specific markets or strategic allies that are most affected (gas allocation will be made by the market players), additional volumes of LNG on the world market will benefit all consumers. Further still, even if the volumes exported from the United States aren’t large, there is an ideological geopolitical benefit to U.S. LNG exports. Exports will provide certainty to allies and economic partners around the world that the United States is a steadfast advocate for free trade.

Part 2: Policy Solutions

In that context, I believe a prudent policy is to continue to allow exports. However, there will be a need to reform the existing rules pertaining to LNG exports in order to reduce the risk and uncertainty that is hurting both producers and consumers.

So what does such a policy look like? For starters, I disagree with the two most extreme proposals of a volumetric cap, or a policy where the U.S. automatically approves all applications. Both are treacherous to implement and may increase, rather than decrease uncertainty. A balanced approach is one that doesn’t increase the cost of exporting, but accurately reflects the cost of building a facility at the beginning of the process. I suggest a policy that requires a prospective exporter to have successfully gone through FERC’s pre-filing process and have a portion of its supply contracts signed before being eligible to be considered by DoE for an application to export to non-FTA countries. Both requirements are costly and will encourage only serious projects to move forward.

There will also need to be more clarity on the “public interest” determination, which is currently too vague and creates investor uncertainty. One possibility is to allow the “public interest” to be dependent on the aforementioned two stipulations. In other words, if a company completes its pre-filing process and contracts out a given percentage of its capacity, the exports are deemed to be in the public interest.

One final consideration is to have an audit of natural gas export policy every five years. This would be an important information-gathering exercise. Such an audit would identify what happened to domestic natural gas supply, demand, and prices, and international markets during each five-year period.

I would like to thank the Subcommittee for giving me the opportunity to provide my views on this important issue, particularly in helping move the debate forward. I look forward to taking the Committee’s questions.

[1] Charles Ebinger, Kevin Massy, and Govinda Avasarala, “Liquid Market: Assessing the Case for Exports of Liquefied Natural Gas from the United States,” The Brookings Institution, May 2012. (Brookings 2012) (http://www.brookings.edu/research/reports/2012/05/02-lng-exports-ebinger)

[2] Brookings 2012, pg. 33; Pricing studies include “Effect of Increased Natural Gas Exports on Domestic Energy Markets,” Energy Information Administration, January 2012; “Made in America: the economic impact of LNG exports from the United States,” Deloitte, December 2011; “Resource and Economic Issues Related to LNG Exports,” ICF International, August 17, 2011; “Market Analysis for Sabine Pass LNG Export Project,” Navigant Consulting, August 23, 2010.; and “Jordan Cove LNG Export Project Market Analysis Study,” Navigant Consulting, January 2012. Note that Navigant Consulting’s study of the Sabine Pass LNG project forecasted the pricing implications of 2 bcf/day.

[3] Brookings 2012, pg. 33

[4] Brookings 2012, pg. 34.

[5] Comment by Kevin Book, Managing Director, Research, ClearView Energy Partners, at “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas,” on May 2, 2012 at the Brookings Institution in Washington, D.C. (http://www.brookings.edu/~/media/events/2012/5/02%20lng%20exports/20120502_lng_exports.pdf)

[6] American Chemistry Council, “Shale Gas and new Petrochemicals Investment,” March 2011.

[7] Brookings 2012, pg. 39

[8] For two estimates, see Ken Medlock, “U.S. LNG Exports: Truth and Consequences,” James A. Baker III Institute for Public Policy, Rice University, August 10, 2012 (http://bakerinstitute.org/publications/US%20LNG%20Exports%20-%20Truth%20and%20Consequence%20Final_Aug12-1.pdf); and Robert Smith, “Asian Natural Gas: A Softer Market is Coming,” Presentation to the U.S. EIA International Natural Gas Workshop, Washington, D.C., August 23, 2012.

[9] Ed Crooks, “Chevron explores first Canada gas exports,” Financial Times, March 12, 2013. (http://www.ft.com/intl/cms/s/0/aaa61d84-8b3e-11e2-b1a4-00144feabdc0.html#axzz2NeqtOvnR)

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Charles K. Ebinger

Publication: Subcommittee on Energy Policy, Health Care, and Entitlements, House Committee on Oversight and Government Reform

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The Case for U.S. Liquefied Natural Gas Exports

Charles K. Ebinger and Govinda Avasarala — Thu, 28 Feb 2013 00:00:00 -0500

The recent natural gas ‘revolution’ in the United States has encouraged a nationwide shift in its energy consumption patterns. An abundance of unconventional natural gas (with help from a patchy economic recovery) has allowed for sustained low natural gas prices. With prices currently hovering just over $3/mmBtu, many energy consumers – most notably power generators, manufacturing and petrochemical producers, and potential consumers of natural gas for transportation – are turning their attention to natural gas. But one natural gas consumer is generating the most controversy for its demand for the new bounty: natural gas exporters.

In May 2012, we co-authored a report, ‘Liquid Markets: Assessing the Case for Exports of Liquefied Natural Gas’. In that study, we argued that the US government should neither prohibit nor promote liquefied natural gas (LNG) exports and that, by allowing the free market to allocate gas to its most economically efficient end-uses, the United States will reap both economic and geopolitical benefits. We still firmly support that conclusion. As we stated then: ‘As a principal advocate and beneficiary of a global trading system characterized by the free flow of goods and capital, the United States has a long-term economic and political incentive to refrain from intervention in the market wherever possible.’

The Protectionist’s Argument

As the policy currently stands, prospective exporters must submit applications to the US Department of Energy (DoE) for the right to export LNG to countries that have a free-trade agreement (FTA) with the United States and to those that do not. DoE is required to approve any application to export LNG to FTA nations ‘without delay’. With respect to countries that do not have an FTA with the United States, DoE reviews each proposal and can only deny the application if it finds that exports are not in the public interest. (It is important to note that aside from South Korea, the United States does not have an FTA with any major LNG importing nation.) To date 17 projects have applied to DoE to export a total of more than 24 billion cubic feet of LNG a day (bcf/d) to countries that do not have a free-trade agreement with the United States. Only one of these projects – Cheniere Energy’s Sabine Pass terminal – has received full approval from DoE to export to non-FTA nations; it has also received regulatory approval and is expected to begin exports from its Louisiana terminal by 2016.

Opponents of Cheniere’s project and other prospective LNG exports are a diverse group. Some industrial gas consumers, manufacturers, and petrochemical producers argue that LNG exports will hurt the competitive advantage provided to them by abundant, cheap domestic natural gas feedstocks, a benefit not enjoyed by their Asian and European competitors. Dow Chemical, the industrial giant that is one of the more vocal industry critics of LNG exports, frequently asserts that the natural gas ‘revolution’ will trigger a manufacturing renaissance, which it estimates will add $90 billion in new investments to the US economy. ‘We are all for exporting natural gas. We just want to see it exported in solid form instead of liquid form’ said Andrew Liveris, Dow’s CEO at CERA Week, an industry conference, in 2012.

Mr. Liveris’ views are shared by some politicians in Washington. The most vocal opponent of LNG exports on Capitol Hill is Congressman Edward Markey of Massachusetts, the Minority Leader of the House Committee on Natural Resources. His campaign, ‘Drill Here, Sell There, Pay More: The Painful Price of Exporting Natural Gas,’ reflects his concern that exporting natural gas will mean ‘exporting our manufacturing jobs along with the fuel’. Congressman Markey’s views are shared – albeit with slightly more nuance – by Senator Ron Wyden of Oregon, the new Chairman of the Senate Committee on Energy and Natural Resources. Senator Wyden’s hesitations about LNG exports apparently stem from the speed at which new project proposals are coming forth, and he has called for a ‘timeout’ on approving projects until the implications of exports are better known. Part of his concern stems from how the legislation ‘rubber-stamps’ proposals to export LNG to FTA nations, an acute concern given that the United States is in negotiations to establish a Trans-Pacific Partnership trade agreement that may include major LNG importers. (It is also important to note that the Senator’s home state hosts one prospective LNG export facility that is opposed by many local groups.) Dow, Congressman Markey and Senator Wyden are joined in their opposition by many in the environmental community, who believe that shale gas production is harmful to the environment and that LNG exports would only increase US shale gas production.

Those in Favor

It is predictable that prospective exporters like Cheniere, Dominion Resources, and Sempra Energy all argue that natural gas exports will help, rather than hurt, the US economy. Exports, their argument goes, will require billions of dollars of investment in liquefaction plant infrastructure, new pipeline infrastructure, and will promote additional gas production, all of which would boost domestic employment. They maintain that any domestic price increases resulting from exports would be marginal and would not hamper the growth of domestic manufacturing. Prospective exporters are supported in their views by gas production companies, including Exxon Mobil (which has plans for petrochemical plant expansions and for an LNG export terminal), and the American Petroleum Institute (API), the oil and gas sector’s trade association.

Companies and groups in favor of exports make some noteworthy points. First, a host of reports by third party analysts have found that the pricing implications of exports are indeed modest. Studies from three consulting firms – Navigant, ICF International, and Deloitte – and the Department of Energy’s Energy Information Administration (EIA) have all found that under reasonable expectations for export volumes natural gas prices in 2035 would be between 2 and 11 percent higher if the USA does export LNG than if it does not. (Most analysts, including us, estimate that 4–6 bcf/day of LNG would be exported under reasonable market conditions.) These price increases should not sway the profitability of multi-billion dollar industrial investments. According to Kevin Book, Managing Director of ClearView Energy Partners, another consulting firm, ‘if your margins are so thin that [modest price increases] could break them, then there isn’t much benefit to putting up a plant here. Conversely, if it is so beneficial to do it here, then a small change in price probably won’t undermine those benefits.’

Even if one cannot fault the industrial sector for being worried about potential price increases, given the high natural gas prices experienced in the 2000s, the prospects of large volumes of new supply suggest that the industrial sector’s competitiveness is stable regardless of US export policy. Today the ratio of the price of oil to the price of natural gas is over 30:1, well over the 7:1 oil-to-gas price ratio at which US petrochemical and plastics producers are generally considered to be globally competitive. (Competing European and Asian petrochemical producers use oil-based products such as naphtha and fuel oil as feedstock, as they lack access to cheap natural gas.) Moreover, the majority of gas used for exports will come from new production, according to both Deloitte and the EIA. Increased drilling will likely result in greater production of natural gas liquids such as ethane, a valuable feedstock for industrial consumers. According to a study by the American Chemistry Council, an industry trade body, a 25 percent increase in ethane production would yield a $32.8 billion increase in US chemical production. To the extent that increased gas production linked to exports results in increased production of such natural gas liquids, they will benefit the petrochemical industry.

In addition to the economic benefits of more domestic natural gas production, LNG exports may have additional macroeconomic benefits, including to the balance of payments and foreign exchange. In December 2012 NERA, an economic consultancy, released a report commissioned by DoE modeling the macroeconomic implications of LNG exports under a variety of scenarios. The study found that in each scenario ‘the US would experience net economic benefits from increased LNG exports.’ To be sure, these are net economic benefits, and certain segments of the population are projected to be adversely affected by LNG exports. Both the benefits and the costs, however, are marginal. Welfare, represented in NERA’s report as the amount that households are made better or worse off over the time horizon modeled, is estimated to increase between 0.004 percent and 0.03 percent, depending on the scenario. The greatest achievable net increase in GDP as a result of exports is 0.26 percent of GDP.

Opponents of LNG exports were quick to dismiss NERA’s long-awaited report. Mr Liveris of Dow argued that the report ‘fails to consider the tremendous competitive advantage that affordable, abundant domestic natural gas offers to the nation’. In an official letter to Secretary Chu, Senator Wyden expressed concern that the model uses 2010 EIA demand data, which do not reflect new forecasts for greater industrial sector natural gas demand. While this is true, the model also uses 2010 supply data, which has been subsequently revised dramatically upward to illustrate the increases in domestic gas production.

Finally, there is an additional benefit to LNG exports that is unquantifiable: its impact on geopolitics. Additional volumes of US LNG will be beneficial to the global gas market, potentially helping US allies in Europe and Asia that are dependent on natural gas for energy. While US export volumes are unlikely to transform the fragmented structure of existing LNG trade, US exports will provide liquidity to natural gas consumers around the world, potentially improving the energy costs for consumers in LNG-dependent countries like Japan and India. The US natural gas ‘revolution’ has already helped the prospects for European gas consumers: Gazprom, Russia’s state-owned natural gas corporation, has been forced to revise many of its long-term contracts with European customers owing to the availability of cheaper spot-LNG cargoes once destined for the United States.

Free Markets

At a more fundamental level, the USA has a responsibility as a principal advocate for and beneficiary of free trade. Political interference and market intervention to prevent LNG exports will come at a cost. The USA would forego any economic benefits realized through free trade and its reputation as a supporter of a global market characterized by the free flow of goods and capital would be damaged. (This is without even considering the potential for legal action against such a decision in international fora such as the World Trade Organization.) In response to objections to exports from industrial consumers, Jack Gerard, the President and CEO of API, stated: ‘Restricting exports of energy as a “strategic resource” makes no more sense than unnecessarily restricting the export of chemicals, agriculture products or cars.’ Moreover, government intervention in the allocation of rents (banning exports is a de facto subsidy to domestic consumers) often comes with unintended consequences.

This Might all be Hot Air – or Gas

As Kenneth Medlock, a leading energy economist at Rice University argues, the debate surrounding natural gas exports may be misguided. ‘Allowing exports does not mean exports will occur in any particular volume,’ he explains. Solely attempting to quantify how much LNG the United States can export misses a more important point. If allowed to work, the domestic and international gas market will determine the economically efficient amount of exported LNG. As we stated in our 2012 report, ‘the economics of US LNG exports – both the costs associated with producing, processing, and transporting LNG, and the competitive nature of the global market – are likely to impose market-determined boundaries on their viability.’ Moreover, export facilities are capital-intensive projects, requiring financing contingent on a confidence that the arbitrage opportunity will exist for the life of an LNG facility. Increases in domestic natural gas prices as a result of marginal increases in demand will have a negative impact on the economics of additional export projects, thereby protecting domestic consumers from unlimited exports and price rises.

Determining how much LNG should be exported, therefore, is not the responsibility of the US government, which should neither prohibit nor promote exports. In refraining from intervention in the gas market, the government will ensure that US gas is allocated to its most efficient end uses, many of which will bring ancillary political and economic benefits to the United States and its partners and allies around the world.

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Note: Part of this essay is adapted from a May 2012 Brookings report, Liquid Markets: Assessing the Case for Exports of Liquefied Natural Gas

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Charles K. Ebinger
Govinda Avasarala

Publication: Oxford Energy Forum

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A 180 Degree Shift in Energy Policy?

Charles K. Ebinger — Wed, 13 Feb 2013 17:06:00 -0500

In his evocative State of the Union Address, President Obama opened the door for a new chapter in U.S. energy policy, a fact totally missed in the Republican Party’s muted response. The president stated that it is time to put the nation’s interests before an individual party’s interest and promised to engage in reasonable compromise. Sure, the president took credit for the dramatic reduction in CO2 emissions brought about shale gas replacing large volumes of coal in electricity production even though this has occurred as the result of market forces and not because of any championship by the White House. He also took credit for the dramatic expansion of wind and solar energy even though together they still account for less than 4% of primary energy production and set a goal to double them again over the next 15 years. The president also rightfully took credit for his administration’s success in doubling the nation’s CAFE standards which over time will reduce the nation’s oil imports by 2 million barrels of oil per day.

But this was just the warm-up to the real message in the president’s speech which was a quantum change in his policy toward the oil and natural gas industry. Gone were the blistering tirades on the tax credits enjoyed by big oil and gas “fat cats.” Gone were the highly partisan attacks on oil and natural gas lobbyists and their influence peddling on Capitol Hill. Instead, the president talked about the huge benefits that have accrued to the U.S. economy and energy security by the “natural gas boom.” Instead of calling for a go-slow policy on leasing oil and gas on federal lands and the attendant “fracking” that will occur—a policy favored by many of the president’s most staunch environmental supporters—President Obama reversed course saying that he would support “speeding up” new oil and natural gas lease sales on federal lands. If one contemplates how the unconventional oil and gas revolution over 96% of which has occurred on state or private land has done to transform the U.S. energy landscape, it is simply mind boggling to realize how much additional oil and natural gas may be found if the president puts his words into action.

Industry critics will counter that the president’s threat to use executive actions to attack climate change if Congress fails to act represents regulatory overreach which will only add to energy production costs. However, such a view misses the president’s willingness to horse trade by allowing new oil and gas production on federal lands while at the same time creating an “Energy Security Trust” which would use a portion of the enhanced oil and natural gas royalties accruing from the accelerated opening of federal lands to fund research to get our cars and trucks running on non petroleum fuels. If this was not an open endorsement for the natural gas industry to replace diesel in our 18-wheel trucks, locomotives, delivery vehicles, and marine transportation then it is hard to imagine what else the gas industry could want from the president.

Sure there is much more to be done and critical questions remain about other aspects of the president’s energy agenda such as his approval of the Keystone Pipeline, his position on natural gas and crude oil exports, and his views toward the future of the coal and nuclear power industries. Specifically, there will need to be more clarity over whether his energy policy will support new research on carbon capture and sequestration from both natural gas and coal power plants, R&D for small scale modular nuclear reactors, and implementation of the recommendations of his blue ribbon commission on long-term nuclear waste storage. Finally there is the critical issue of whether the administration will take on the maritime lobby and support repeal of the Jones Act bringing great relief to New England consumers and their dependence on imported oil while finding a market for the growing surplus of oil on the Gulf Coast.

In his SOTU address, President Obama opened the door to the oil and gas industry to be part of the nation’s great energy future. It is now time for industry to step forward, meet the president halfway, and help reindustrialize America.

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Charles K. Ebinger

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Energy and Climate: Black to Gold to Green

Charles K. Ebinger and Kevin Massy — Thu, 17 Jan 2013 00:00:00 -0500

The United States can use its oil and gas bonanza to put itself back at the forefront of global trade, and take a leadership role in climate change mitigation. Charles K. Ebinger and Kevin Massy drafted this memorandum to President Obama as part of Big Bets and Black Swans: A Presidential Briefing Book.

How can American energy exports to China and India be used to advance climate change mitigation?
How should President Obama address opposition to exporting oil and gas, and promote greater investments in green energy?
What are the geopolitical benefits of increasing American oil and gas exports?

Download Memorandum (pdf) | Download the Presidential Briefing Book (pdf)

TO: President Obama

FROM: Charles K. Ebinger and Kevin Massy

Your second term offers a significant opportunity for the United States to strengthen its economic and geopolitical position by taking advantage of near-term global demand for oil, gas and coal, while bolstering its competitive position in the longer-term global market for lower-carbon technology and taking a leadership role in the battle to address climate change.

Recommendation:

By adopting policies that encourage the development and export of U.S. hydrocarbons including oil, coal and gas, the United States can take advantage of the rising demand for these fuels in developing and emerging economies around the world. As a condition of greater exploration, production and trade in these fuels, the Federal Government should impose a modest but meaningful volumetric or carbon-based tax on their production, with the resultant revenues allocated specifically to the development of two technologies that are essential to global efforts to fight climate change: carbon capture and sequestration; and advanced batteries, both at the grid and vehicle scale.

Background:

While the global political economy is likely to throw up many surprises over the next 20 years, three things appear certain:

U.S. global power and influence will have to be shared with others, as emerging powers such as China and India gain economic and geopolitical influence. As highlighted by the recent National Intelligence Council Report, Global Trends 2030, the global political order will change to one in which “power will shift to networks and coalitions in a multi-polar world.”

• Asia will continue to experience rapid growth in energy demand, most of which will have to be met with fossil fuels under any scenario. China’s energy demand is set to grow by 60 percent between 2010 and 2030, while India’s demand is projected to more than double. Despite the development of renewable and low-carbon technologies such as wind, solar and nuclear, coal will continue to play a leading role in global energy supply, with consumption in Asia’s electric power sector alone projected to increase by 63 percent between 2011 and 2020. Asian demand for energy will more than compensate for a broad leveling off of energy demand and a reduction in carbon emissions among the OECD countries.

• Consequently, global carbon emissions will continue rising at an unsustainable rate as efforts to get an internationally binding agreement on emissions reductions stall and investments in low-carbon technologies falter in the economic downturn. In its most recent annual assessment, the IEA concluded: “Taking all new developments and policies into account, the world is still failing to put the global energy system onto a more sustainable path.”

These global trends are coinciding with large structural domestic changes in the United States. Facing weak economic growth prospects, a massive debt burden, fiscal constraints and a dysfunctional political system, the one bright spot for our country in recent years has been the unexpected boom in oil and gas production. U.S. oil production rose at its highest annual rate ever in 2012 to levels not seen in decades. Thanks to technical developments in hydraulic fracturing and lateral drilling, natural gas production and inventories are at all-time highs. While the natural gas bonanza and environmental concerns are leading to a reduced role for coal in the U.S. power sector, exports of the commodity — of which the United States is the largest resource holder — are also at record levels.

The oil and gas boom has had many commentators breathlessly heralding an era of U.S. energy independence. This is unlikely to materialize either practically or economically. Under even the most optimistic scenarios for domestic hydrocarbon production, the United States will continue to import millions of barrels of crude oil per day for the foreseeable future, albeit increasingly from our own hemisphere rather than the Middle East. And as long as the United States is connected to the global trading system, it will be subject to supply and demand shocks beyond its borders, meaning that price disruptions anywhere in the world will be passed on to U.S. consumers.

However, there is a way in which the U.S. can use its oil and gas bonanza to arrest both its relative economic and political decline to put itself back at the forefront of global trade and to take a leadership role in climate change mitigation.

Irrespective of actions by OECD countries, China, India and other emerging nations will burn oil, gas and coal in ever greater quantities for the foreseeable future. The main beneficiaries of this demand are likely to be the OPEC nations, Russia, Australia and other oil, gas and coal producers. Given its huge reserves of hydrocarbons, the United States could position itself as perhaps the principal beneficiary of this demand by adopting a near-term policy of full-scale, export-led oil, gas and coal development. Such a policy would involve the expedited permitting of oil and gas production and ancillary pipeline infrastructure projects and the enabling of crude oil and gas exports, which are currently subject to policy restrictions or prohibitions. The resultant surge in production and exports would strengthen both the country’s fiscal position through export revenues and job creation; and its political position through weakening the market power and the revenue generation of OPEC nations and Russia. It would also bring geopolitical benefits through the deepening of partnerships with key consumers such as China and India.

The obvious opposition to such a policy is on environmental grounds. With global warming an unavoidable and worsening reality, such a course of action is open to criticism of being irresponsibly self-interested. However, a policy of full-scale hydrocarbon development can be consistent with leadership on climate change if, as a strict condition of the rapid development and export of our oil, gas, and coal resources, the production of hydrocarbons is taxed, either on a volumetric or carbon-content basis. You should then allocate the revenues to a modern “Apollo Mission” effort toward the development of carbon capture and storage (CCS), and advanced batteries and storage technologies. CCS is a necessary technology for any meaningful reduction in climate change given the continued prominence of coal in the global power generation mix. Advanced battery and alternative fuel storage technologies are essential to make electric cars competitively viable and to give solar and wind power the reliability and scale they need to compete with fossil fuels. The policy will also work to move the domestic economy towards lower-carbon consumption in power generation and transportation and to prove the new technologies at scale.

Having gained a competitive advantage in green technologies, the United States can then become the dominant global producer and exporter of CCS technology, advanced batteries and other lower-carbon products and services, maintaining its competitive position in the global energy economy.

The implementation of this policy will not be easy. There is likely to be opposition to exports of oil and gas on the grounds of U.S. energy security and ideological opposition to new taxes. Such concerns should be addressed by greater efforts at public education on the importance of global trade to U.S. energy security and the domestic economic and geopolitical benefits of expanded production.

Conclusion:

In a business-as-usual scenario, the world will continue its hydrocarbondependent trajectory towards an unsustainable level of carbon emissions with the principal economic benefits accruing to other resource-rich nations. By adopting this “black-gold-green” policy, the United States could simultaneously realize the near-term economic and geopolitical benefits generated by the world’s near-term need for hydrocarbons while taking a leadership role in the development and deployment of the technologies that are able to meaningfully address climate change over the longer term.

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President Barack Obama’s Second Term: Big Bets and Black Swans

Thu, 17 Jan 2013 13:00:00 -0500

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January 17, 2013
1:00 PM - 3:00 PM EST

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

President Barack Obama begins his second term at a critical moment in world affairs, facing the many challenges that an unstable world—much of it in turmoil—presents. In response to these many challenges, Brookings Foreign Policy scholars have prepared a Presidential Briefing Book with memos to President Obama that detail the “Big Bets” that he should place in foreign policy, and the “Black Swans”—low probability, high impact events— that could unexpectedly dominate President Obama’s second term. The “Big Bets” include: a nuclear deal with Iran; a new approach to China; securing free trade agreements with Asia and Europe; outlining an Obama doctrine for the use and deployment of drones and cyberweapons; and establishing the United States as a leading energy exporter. The “Black Swans” include: a U.S.-China confrontation over Korea; revolution and war in China; the collapse of the House of Saud; the unraveling of the eurozone; the unraveling of the Palestinian Authority; and the impact of rising seas and climate change-related migration.

On January 17, Foreign Policy at Brookings hosted the launch of “Big Bets and Black Swans: A Presidential Briefing Book.” The first panel focused on the transformational policies that could shape a new global order. The second panel focused on the low probability, high impact events that might derail the president’s second term agenda. Vice President Martin Indyk, director of Foreign Policy, provided introductory remarks. David Gregory, host of NBC’s Meet the Press, moderated both panel discussions.

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Another Untapped Resource: Mine the Uranium Now!

Charles K. Ebinger — Thu, 10 Jan 2013 16:45:00 -0500

What a sad state of affairs our nation has reached when powerful political groups such as the Sierra Club and other interest groups can cloud issues with false statements and scare tactics which have no basis in factual reality. Whether it is opposition to Dominion Resources’ shale gas export project at Cove Point in Maryland or uranium mining development in southwestern Virginia, the Sierra Club seems to ignore findings by competent regulatory authorities that resources such as shale gas can revitalize American manufacturing by providing cheap industrial feedstocks and nuclear energy, which does not contribute to global climate change. It can be developed safely and in a manner that provides high paying jobs for local individuals as well as valuable foreign exchange for our nation’s ailing economy.

Critics of uranium mining in Virginia where large reserves are available state that mining this resource in Virginia is “an experiment” since there is no place in Canada or Australia (two large uranium producers) where an active uranium mine is operating in a wet climate that is also subject to an occasional hurricane. Apparently these propagandists are unaware that a large volume of uranium mining in Australia sits in the path of almost yearly typhoons while uranium mines in Gabon sit in the middle of rain forests while those in South Africa lie directly in the path of violent weather in the Indian Ocean littoral. A lot of Canadian uranium production lies in fragile Arctic tundra environments while the prospects for new uranium mining in Greenland and Alaska are hardly in hospitable environments. Uranium mining and prospecting also occurs in other fragile rain forest environments in Brazil.

Today the United States has more commercial nuclear reactors (104) in operation than any other country in the world. We are also the world’s largest producer of enriched uranium, providing valuable services not only to power plants around the world but also to medical and advanced research reactors at universities and medical research facilities. Ironically, however, for many years our nuclear edifice has depended on large volumes of imported uranium both because it is usually economically less expensive than domestic uranium to produce and because, owing to environmental opposition, most uranium mines have had to close down. The market for uranium is complex. A grass roots world class uranium mine which could be developed in Virginia often takes as much as 15 years to develop fully and can cost $5-10 billion. Because of this long lead time, uranium prices can gyrate wildly with large fluctuations when there is any disruption in the market such as a strike at a major producing facility. Consequently before making such an investment, investors need to make sure that there will be a market for this uranium (both domestically and internationally) when it comes on line, or, since uranium often comes in association with other valuable minerals such as gold, that there is enough of the other mineral to cover costs as the uranium mine is developed.

While the U.S. market for new nuclear power plants in the U.S. is currently modest, this may well change the day the United States finally decides to place a price on carbon to reduce dangerous CO2 emissions. To meet domestic uranium demand, currently there is only one (Nevada) major operating mine in the United States. To meet the needs of the current generation of reactors especially as they receive life extensions, as well as a booming potential export demand in India, China, the Middle East and elsewhere, is it not imprudent to open a world class mine that would vastly reduce our dependency on imported uranium while creating valuable jobs at home? While Virginia has a proud tradition of states’ rights, it is also the home of Washington, Jefferson, Madison and Monroe--men of vision who saw the potential to turn warring parochial constituencies into a great nation composed of many diverse people when woven together would form a great nation. Come on Virginia, rise to the occasion and help once again meet the needs of a great nation.

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Charles K. Ebinger

Bad Tax Policy Makes Bad Energy Policy

Charles K. Ebinger — Mon, 07 Jan 2013 10:00:00 -0500

Despite the fact that all renewable energy, minus hydropower, is projected to account for less than 10% of U.S. energy supply by 2040, Congress and the administration once again have shown themselves to be pusillanimous and are refusing to stand up to an industry which, in the absence of an extension of tax credits, cannot compete in the marketplace despite years of subsidies, paid courtesy of the American taxpayer. Under the new fiscal deal, the wind industry will receive $12 billion over the next decade, not including the higher electricity costs that consumers will pay for state mandates requiring that a portion of future electricity supply come from high cost renewable energy resources. The situation is even more egregious in regards to offshore wind projects such as Cape Wind in Nantucket Sound where the project was designed and justified based on the premise that it would lower the utility costs of hard pressed New England consumers who will now see their utility bills escalate dramatically. The Congressional/administration decision to make qualifying for these tax credits even less onerous than before is another stark example of the abnegation of public fiscal accountability. Whereas previously to receive a tax credit wind projects had to be completed and in operation by the end of the calendar year, under the revised rules, new wind farms will be able to claim either a production tax credit or an investment tax credit analogous to what just expired as long as the project breaks ground in 2013. The fact that we already have completed windmills that are not tied to the grid gives little reason to be sanguine that this loophole will not be exploited.

The wind industry and its lobbyists argue that wind farms will generate so much tax revenue (federal, state and local) that they will more than pay for the tax credits . In this regard, it is ironic that, according to the American Wind Energy Association’s own statistics, nearly 80% of the nation’s wind farms are in Congressional districts represented by Republicans as are 67% of the factories producing turbines and other components of electric wind generating facilities. To be fair to the wind industry, it was not the only recipient of a basket of goodies from the Congress and the administration. Electricity made from biomass, tidal and ocean power, technical improvements in hydroelectric facilities and landfill methane all got their tax cuts extended.

While it may be argued that given the size of our fiscal debacle, including our unfunded future entitlement liabilities, all these subsidies represent a drop in the financial bucket. What is truly sad is that this whole debate over subsidies has occurred against the backdrop of a transformation in the North American (U.S. and Canada) energy economies which offer the United States and our Canadian neighbors unique political and economic opportunities. Given this energy bonanza, we can use our new unconventional oil and gas reserves to: (1) eliminate our oil import dependency, saving over $425 billion dollars a year; and (2) revitalize American manufacturing and industrial exports, using cheap unconventional natural gas liquids (propane, butane, pentane, etc.) as fuel, while exporting some of the remainder of our vast gas resources, thereby breaking the stranglehold of Russian gas on our European allies while also assisting other allies and trading partners such as Korea, India and Japan in meeting their rising energy requirements.

Mr. President, the time has come to lead this nation towards a bright energy future using the unconventional oil and natural gas that nature has provided us. Specifically, it is time to sit down with the governors of New York and Connecticut to end the bottlenecks keeping shale gas production and transport from reaching New England. As the region of the country still most susceptible to high oil prices, nothing would do more for national energy security than to build a pipeline network that would allow oil and gas from the Marcellus to flood into New England. Second, it is time to give approval for the Keystone XL pipeline, sending a clear message to all concerned that your administration will move after sound environmental reviews to expedite the construction of all the requite pipelines that will need to be built to maximize our unconventional oil and natural gas and to get them to market. Third, with demand for LNG in the Pacific growing exponentially, it is time not only to accelerate the export of natural gas from the lower 48 states but also from Alaska. For too long, the promises made to Alaskans at the time of statehood and the Land Claims Settlement Act have gone unfulfilled. Alaska should no longer be treated as some sort of colony or as a vast national park but rather as part of the nation’s great resource heritage, albeit with the proper environmental oversight by both the federal and state governments.

Mr. President, the fiscal debate exhibited American parochialism and the lack of statesmanship by both our great political parties at their worst. It is now time for you to move this nation away from the perception held by some that our future energy situation can be met fully by renewables, energy conservation and end use efficiency. Of course, these are all important but with every leading energy forecast suggesting that for at least the next 30-40 years the world will remain dependent on fossil fuels which we have in untold abundance, it’s time to get on with the job, find ways to strip out CO2 from our oil, coal and gas production and to utilize what we can while sequestering the rest proving once again the very essence of American Exceptionalism.

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Charles K. Ebinger

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Human Resource Development in New Nuclear Energy States

Wed, 12 Dec 2012 12:00:00 -0500

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December 12, 2012
12:00 PM - 1:00 PM EST

Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

With the United Arab Emirates, Jordan and Turkey continuing to pursue civil nuclear energy programs, the Middle East is likely to play host to the first new civil nuclear energy states of the 21st century. After a long hiatus, the likely entry of several new states into the global nuclear power sector presents a number of unprecedented challenges, including the development of the institutional and human capacity to run their programs competently and sustainably.

On December 12, the Energy Security Initiative at Brookings hosted a discussion of its latest research paper, “Human Resource Development in New Nuclear Energy States: Case Studies from the Middle East.” Based on case studies from three countries in the Middle East, the paper offers a series of recommendations on human resource related risks for emerging market nations looking to enter the civil nuclear sector. Following the presentation of the report’s findings and recommendations, Senior Fellow Charles Ebinger, director of the Energy Security Initiative, moderated a discussion with its authors.

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Human Resource Development in New Nuclear Energy States: Case Studies from the Middle East

John P. Banks, Kevin Massy and Charles K. Ebinger — Tue, 20 Nov 2012 09:47:00 -0500

With the United Arab Emirates, Jordan, and Turkey all continuing pursuit of civil nuclear energy programs, the Middle East is likely to play host to the first newcomer civil nuclear energy states of the 21st century. After a long hiatus, the likely entry of several new states into the global nuclear power sector presents a number of unprecedented challenges. To meet these challenges, it is essential that new nuclear energy states develop the institutional and human capacity to run their programs competently and sustainably. Against this backdrop, this paper assesses human resource development (HRD) in the United Arab Emirates (UAE), Jordan, and Turkey against these two criteria.

With widely varying economic, political, and social contexts, each of the three countries under review has different HRD requirements and objectives. However, while each country has unique challenges related to its individual circumstances, it is also possible to identify areas of relative success and concern with regard to leading HRD practices.

With a high level of sovereign wealth and a well-formulated, well-articulated strategy for the implementation of civil nuclear power, the UAE has the most comprehensive approach to HRD among the countries under review. The principal challenges for the UAE relate to its ability to reconcile the extensive needs of its civil nuclear program and the objectives of recruiting the requisite number of qualified nationals into training programs and professional positions. Jordan faces more challenges than the UAE with regard to preparedness for a civil nuclear program. While the country has a large educated population the country has far fewer financial resources. Further, some of the biggest obstacles with regard to its nuclear program are the result of a lack of public-sector coordination and communication. Finally, while Turkey has struggled to develop commercial-level nuclear power, its nuclear-related education programs have been established for decades. With no commercial-scale operational experience, however, the host country may be vulnerable to a situation of information asymmetry its regulator may not have sufficient expertise and capacity to competently oversee the construction and operation of the new design they have chosen for construction.

Based on the conclusions from the three country case studies, the paper offers a series of recommendations on competence and sustainability-related HRD risks for the three reviewed countries and emerging market nations looking to enter the civil nuclear sector.

These recommendations are:

• HRD should be a central part of a new nuclear energy state’s strategy

• HRD programs should place a large emphasis on safety culture

• Quality control initiatives should include merit-based recruitment, international benchmarking and vendor involvement

• Stakeholder engagement should be a core element of new nuclear energy programs’ HRD strategies

• HRD strategies should be designed around the operational needs of the nuclear industry rather than around high-profile academic programs

• New nuclear energy states adopting new reactor technologies should allocate additional HRD time and resources to become an “intelligent customer”

• National quota policies should be flexible to the needs of new nuclear programs

• Regional cooperation should not be relied upon as the primary or major source for HRD in the nuclear sector

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Norway’s Oil and Gas Policy and the Arctic

Fri, 09 Nov 2012 12:00:00 -0500

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November 9, 2012
12:00 PM - 1:00 PM EST

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

In June 2012, Norway’s Ministry of Petroleum and Energy announced its most recent licensing round for oil and gas exploration blocks. Of the 86 blocks on offer, 72 were in the Barents Sea, north of the Arctic Circle. The concentration of exploration blocks in the Norwegian Arctic underscores the extent to which the country views the Arctic as critical to its future as a leading energy provider.

On November 9, the Energy Security Initiative at Brookings hosted Ola Borten Moe, Norway’s minister for Petroleum and Energy for a discussion of Norway’s investment in Arctic oil and gas exploration and production. He also addressed Norway’s perspective on the importance of the Arctic as the next global energy frontier.

Vice President Martin Indyk, director of Foreign Policy at Brookings, provided introductory remarks. Senior Fellow Charles Ebinger, director of the Energy Security Initiative, moderated a discussion with Minister Borten Moe.

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Norway’s Oil and Gas Policy and the Arctic

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20121109_norway_arctic_energy

The Energy-Poor BRIC

Charles K. Ebinger and Govinda Avasarala — Fri, 19 Oct 2012 00:00:00 -0400

Editor's Note: The following op-ed, which was originally published in The Indian Express, is an adaptation of the chapter “India and the other BRICs: Energy and the implications for economic growth,” in the Economist Intelligence Unit report Empowering Growth: Perspectives on India’s Energy Future.

Economic aspirations in Brasilia, Moscow, New Delhi and Beijing are inextricably linked to the strength of their national energy sectors. As the economies of the BRIC nations continue to grow, their energy demand will rise sharply. According to data from the US government’s Energy Information Administration, by 2025 the BRICs, led by China, will account for nearly 38 per cent of global primary energy demand, up from 27 per cent in 2005. Some of its members will manage surging energy demand better than the others. Owing to their advantageous resource endowments and the nature of their energy consumption, Brazil and Russia are relatively energy-secure nations. In 2011, Russia and Brazil were the second and ninth largest producers of oil respectively. Last year, Russia was the world’s fifth-largest producer of coal and the world’s largest producer and exporter of natural gas. For its part, Brazil is almost entirely dependent on hydropower for electricity generation, and recent offshore oil discoveries may soon catapult it into the ranks of major oil exporters. China and India are less self-sufficient, but superior infrastructure and a centralised government position China better to meet its rising energy demand. India has the most unstable energy condition in the BRIC club, and possibly the most uncertain energy future of all.

The scale of the energy dilemma is not new, nor are the problems and the solutions. Indian policymakers were aware of the country’s crippling energy shortages decades before the mass blackouts that occurred this July. Policymakers know that power plants are starved of coal and natural gas, that subsidies promote waste and inefficient consumption and that electricity theft is rampant. Pricing reform and better enforcement of electricity theft are still two critical solutions.

To its credit, recent reforms announced by the government suggest that policymakers are refocused on modernising India’s energy policy. However, these same politicos have in the past implemented marginal reforms, while neglecting to implement transformative reforms that truly attract investment. Today, policymakers would be well served not to repeat such an error. The emerging global energy landscape and the new wave of consumers promise a sustained period of expensive energy.

The new global energy gluttons, a group that includes Indonesia, Malaysia, Saudi Arabia, Kuwait and the UAE, are still considered lynchpins of global supply, but are concurrently grappling with surging domestic demand. As a result, export volumes from these nations are in decline. For example, take Saudi Arabia, which accounted for one-fifth of India’s oil imports in 2011-12. Between 1991 and 2010, global demand for oil increased by 31 per cent, and Saudi Arabia’s production increased by more than one million barrels per day. During this same period (albeit with some fluctuations), however, exports from the kingdom remained flat at 6.6 million barrels per day. The natural gas market provides a similar picture: in the mid-1990s Indonesia and Malaysia accounted for roughly half of global LNG exports. Today, both countries are planning import facilities to meet growing demand. Kuwait and the UAE, both considered energy-rich nations, import LNG from as far away as Trinidad & Tobago to satisfy demand.

If nothing else, this trend should crystallise for Indian policymakers the urgency of major pricing reforms. In the short term, the oil price will reflect the prevailing macroeconomic and geopolitical winds at any given time. In the long term, however, most analysts forecast a consistent increase in the price of oil. Similarly, the long-term trend suggests that natural gas prices will remain high. Although GAIL is contracted to receive shipments of LNG from the United States at cheaper US prices, such a contract structure will be the exception, not the norm. Unlike Cheniere, GAIL’s American LNG supplier, most LNG producers are major oil and gas companies that need financing arrangements that justify investments in the exploration and production of natural gas, as well as the construction of multi-billion dollar gas liquefaction facilities. These financing realities suggest that oil-indexed contracts are likely to remain an integral component in global LNG trade. Although macroeconomic headwinds in China have depressed coal prices this year, pricing reform in Indonesia and surging demand in southeast Asia suggest that coal prices will also remain competitive in the future.

In this context, insufficient reforms will be costly. First, the surging cost of imported gas and coal, coupled with stagnant domestic production, have not only left power plants idle and bankrupted State Electricity Boards (SEBs), but they have also burdened the banking sector with a portfolio of non-performing loans. Government efforts to bailout SEBs without dramatic changes to electricity pricing will hinder any lingering incentives to invest in new generation, transmission and distribution projects and may raise the borrowing costs for any new investments. The new oil pricing reality is of greater concern. Reform will not dramatically change India’s import dependence on oil; even increased production will not make India self-sufficient. But now, amid ballooning fiscal deficits and jittery financial markets, market-determined prices are necessary to rid the government and the oil companies of unsustainable subsidies on their deficit-laden balance sheets.

Will such initiatives be too little, too late for India? Will its slowing growth and meandering energy and economic policies result in India becoming the first “fallen angel” among the BRIC nations, as Standard & Poor’s, a rating agency, warned in a June 2012 report? Perhaps not. Recent pro-reform messages from Delhi are promising. But unlike China, where the government can make unpalatable energy decisions relatively quickly, or Russia and Brazil, where they don’t need to because of the abundance of energy resources, India has a government that historically has been incapable of fully executing painful energy reforms. If India is to continue as a vibrant emerging market, it will have to tackle its energy-security weaknesses immediately. If it cannot, BRIC may lose an “I”.

Authors

Charles K. Ebinger
Govinda Avasarala

Publication: The Indian Express

Japan’s Energy Future

Fri, 05 Oct 2012 13:00:00 -0400

Event Information

October 5, 2012
1:00 PM - 2:30 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Following a summer of protests over the safety of nuclear power—prompted by last year’s Tohoku earthquake, tsunami, and nuclear crisis—the Japanese government recently released a much-awaited energy strategy. The new plan from the governmental Council on Energy and the Environment called for a “zero-nuclear” Japan, phasing out all nuclear power by the year 2040. However, the Japanese Cabinet abstained from fully endorsing the zero-nuclear option, and a small number of new nuclear reactors remain under construction. Obscured by an array of competing priorities and economic, political, and energy security considerations, Japan’s energy future seems unclear.

On October 5, the Center for Northeast Asian Policy Studies (CNAPS) and the Energy Security Initiative at Brookings hosted a discussion on Japan’s energy future, including the shifts in Japan’s energy policymaking, the different energy scenarios for Japan and the challenges of developing alternative sources of renewable energy. Panelists also addressed the implications of a nuclear phase-out for Japan’s export industries, global energy markets, climate change goals, and trade in liquid natural gas.

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Emerging Power Crisis in India

Charles K. Ebinger and Govinda Avasarala — Wed, 01 Aug 2012 00:00:00 -0400

Editor's Note: This piece was originally posted on The Brookings Institution's Up Front blog. It has been edited for publication on foreignpolicy.com.

Exacerbating the lack of supply is India's desperate need for investment in its electricity transmission and distribution (T&D) network. T&D losses of electricity supply in India are still roughly 25 percent, an abysmally high rate for an emerging economy. These losses are only aggravated by rampant electricity theft and poor billing and collection standards. (Anyone who has ever been to an Indian city will be familiar with the tangle of jury-rigged wires leading from electricity pylons to houses and apartments.)

Improving the performance and efficiency of this sector will require immense investment. The International Energy Agency, the OECD's energy think tank, predicts that India will need to invest a whopping $632 billion between now and 2035 to meet the demands of its growing populace.

Read the full article »

Authors

Charles K. Ebinger
Govinda Avasarala

Publication: Foreign Policy

Image Source: Parivartan Sharma / Reuters

The Challenges and Opportunities of Arctic Energy and Resources Development

Tue, 12 Jun 2012 13:00:00 -0400

Event Information

June 12, 2012
1:00 PM - 5:00 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, DC 20036

The Arctic is emerging as an important region in global affairs and a promising frontier for energy development. With an estimated 25 percent of the world’s undiscovered oil and gas reserves, and with climate change making shorter maritime routes through Arctic waters possible, the region is attracting increased attention for its commercial potential. However, the effects of climate change and increased human activity in the region are likely to pose important challenges to its fragile ecosystem and indigenous communities.

On June 12, the Energy Security Initiative at Brookings hosted a discussion marking the start of an 18-month research project on the challenges and opportunities of Arctic development. Panelists discussed the various international approaches to Arctic energy and natural resource development as well as energy and natural resource development in Alaska.

After each panel, participants took audience questions.

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20120612 arctic energy uncorrected transcript

Participants

Panelists

Jim Ayers

President

Julie Gourley

Senior Arctic Official

Peter Harrison

Director of the School of Policy Studies

Carlos Pascual

Special Envoy and Coordinator for International Energy Affairs

Alexander Pelyasov

Director, Center for Northern and Arctic Economies

Steve Phelps

Manager, Exploration and Appraisal

Amy Sparck Dobmeier

Senior Advisor, Government and Community Affairs

Five Major Energy Problems the Next President Has to Face

Charles K. Ebinger and Govinda Avasarala — Mon, 11 Jun 2012 00:00:00 -0400

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Editor's Note: For Campaign 2012, Ted Gayer wrote a policy brief proposing ideas for the next president on climate change. The following paper is a response to Gayer’s piece from Charles Ebinger and Govinda Avasarala. Katherine Sierra also prepared a response arguing that the introduction of a carbon tax would encourage the United States to tackle greenhouse gas emissions and help the nation regain its international leadership on the issue.

In addition to the sort of fiscally sensible climate policies Ted Gayer recommends, the next president’s energy plan will need to consider five major events that disrupted energy markets in the past four years: the Arab Spring, the Fukushima nuclear accident in Japan, the shale gas “revolution,” the shift in the global macroeconomic landscape, and the ever-closer peril of climate change.

The first of these, the Arab Spring, vividly displayed U.S. consumer exposure to the world oil market. Despite importing only marginal quantities of Libyan crude oil, the United States witnessed a spike in gasoline prices following the Libyan uprising. This exposure to global supply shocks cannot be reduced without a sustained effort to cut domestic oil consumption.

The Obama administration has been effective in paving a long-term plan for reducing oil consumption in the transportation sector, which accounts for roughly 70 percent of domestic oil demand. Unfortunately, most of its efforts to curb the country’s oil demand will provide only marginal benefits in the near term. For example, the administration’s goal of putting 1 million electric vehicles on the road by 2015 is ambitious and laudable, but it is also miniscule when compared with the country’s existing fleet of vehicles, which number more than 260 million. Similarly, natural gas vehicles face large short-term barriers. A natural gas fueling infrastructure is not yet in place, and the technical challenges will require economic concessions, as well as changes in consumer preference.

While President Obama has enacted new stringent vehicle efficiency standards, to be implemented by 2017, one other major policy tool would help curb demand: a gasoline tax. Given the extent to which the transportation sector is dependent on gasoline, a gasoline tax would help reduce not only consumption but also the deficit. In addition, it would provide an incentive to develop alternative fuels and could even be used for investment in mass transit infrastructure.

However, the United States will still need to secure supplies in the midterm. And, for the first time, the prospect of a substantial shift in the source of oil imports is a reality. U.S. oil production is increasing rapidly. The National Petroleum Council projects that tight oil production—crude oil produced from shale plays through hydraulic fracturing—alone will reach as much as 3 million barrels a day by 2035. Production of Canada’s oil sands is expected to top 3 million barrels a day by 2020, according to Canada’s National Energy Board, and Brazil’s oil sector is poised to reach 2 million barrels a day of exports by 2020, according to estimates from Petrobras. With the liberalization of Mexico’s oil sector, the hemisphere could come close to being oil independent over the next decade. The next president must not let any of these opportunities slip away.

Second, the accident at the Fukushima nuclear power plant in Japan has changed the energy landscape. For one thing, it has reignited the skepticism surrounding the safety of nuclear power. In the United States, despite recent regulatory approval for a new reactor technology, the industry’s future remains far from sanguine. Only one reactor is currently under construction, and another handful are still in the pipeline. To help galvanize the industry, the next president must decide what to do with America’s civilian nuclear waste. Although an expert panel assembled by Secretary of Energy Steven Chu has come to some useful conclusions, its recommendations will mean nothing if the next president does not move to pick real sites, establish real time frames for implementation, and appropriate real dollars to get the job done. As part of this exercise, the next administration should look seriously at the prospects of using the Waste Isolation Pilot Plant (WIPP) in New Mexico as the preferred site.

Third, the Fukushima accident has also significantly tightened global gas markets. Japan, which already pays a significant premium for liquefied natural gas (LNG), has been forced to buy more natural gas to make up for the power shortage following the earthquake. The situation is only expected to get worse as all of Japan’s nuclear reactors will be idled over 2012 while safety checks and stress tests continue. If current public opposition prevails, some may never be restarted again.

The unfortunate situation in Japan highlights, albeit indirectly, another energy policy decision for the next president: it pertains to the shale gas “revolution,” which has led to a domestic glut of natural gas and depressed prices. As a result, a number of companies have expressed interest in exporting natural gas in the form of LNG to take advantage of higher international prices—which raises the question of whether such exports should be encouraged. The next administration should continue to allow the Department of Energy to evaluate each such project on the basis of the national interest. Proposals for caps and bans would distort markets and would encourage a tighter market for natural gas, some of which goes to produce products that American consumers import.

Fourth, the next president will face a dramatic eastward shift in energy consumption. While Middle Eastern oil is becoming less and less important to North America, nations in Asia such as China, India, South Korea, and Japan will find the Gulf of greater strategic significance. The energy-hungry emerging economic powers of China and India are nurturing relationships with the region’s major energy producers—notably Saudi Arabia, Qatar, and Iran. Moreover, increasing efficiency and a rise in domestic and regional production means that the energy bond between the United States and the Middle East may weaken, providing a power vacuum that may be filled by China and India.

Fifth, the transition in policy discussions from “climate change” to “clean energy” or “the green economy” indicates that the importance of global warming on the national agenda is waning. However difficult, the next president must reset the conversation to focus not on the economic benefits of “green jobs” but on ensuring that the United States is on a clear path to a low-carbon future. Although bound to be controversial, this step would ensure the next president’s legacy.

On this issue of clean energy, President Obama has been vague, and his administration has not been forthright in explaining that the United States will continue to remain dependent on fossil fuels for years to come. While encouraging renewable energy, the next administration must acknowledge that meeting the globally recognized carbon abatement targets is impossible unless it proves that carbon capture and sequestration from natural gas and coal is both technically and commercially viable. This is the challenge that should galvanize the country while it continues to support advanced research and development in advanced energy technologies such as battery storage. Here, the next president must make clear why it is important for the government to support alternative energy technologies.

The next presidential term will begin during a time of great uncertainty in the energy and environmental landscape. Much of this uncertainty has been caused by the five aforementioned global shocks. By incorporating the externalities of these shocks into his energy policy, the next president could position the United States toward a more energy-secure future.

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Authors

Charles K. Ebinger
Govinda Avasarala

Campaign 2012: Climate Change and Energy

Mon, 11 Jun 2012 10:00:00 -0400

Event Information

June 11, 2012
10:00 AM - 11:30 AM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, DC 20036

As the struggling economy and demand for jobs consume the American public’s attention, climate policy has become a second-tier political issue. Although most economists advocate for putting a price on greenhouse gases through a carbon tax or cap-and-trade program, there is little political appetite to do so. Will the next president be able to make climate and energy policy a national priority, perhaps as a component of fiscal reform, or will he seek alternative energy policies? In the context of increasing global energy needs, how can the United States ensure its energy independence?

On June 11, the Campaign 2012 project at Brookings held a discussion on climate change and energy, the seventh in a series of forums that identify and address the 12 most critical issues facing the next president. Darren Samuelsohn of POLITICO moderated a panel discussion with Brookings experts Ted Gayer, Katherine Sierra and Charles Ebinger, who presented recommendations to the next president.

After the program, panelists took questions from the audience.

You can follow the conversation on this event on Twitter using the hashtag #BIClimate or on our @BICampaign2012 Twitter feed.

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