April 9, 2013

Questions for Energy Secretary Nominee Moniz

On March 7, President Obama nominated Ernest Moniz to be Secretary of Energy. The Energy Department (DOE) is outfitted with a $27 billion budget and 16,000 employees to implement programs in support of renewable, nuclear, and fossil fuel energy; energy efficiency; energy statistics; environmental cleanup; nuclear weapons; and the Strategic Petroleum Reserve. The Senate Energy and Natural Resources Committee will consider Moniz’s nomination on April 9.

Moniz is Professor of Physics and Engineering Systems at the Massachusetts Institute of Technology and Director of the MIT Energy Initiative and the MIT Laboratory for Energy and the Environment. He serves on the President’s Council of Advisors on Science and Technology, the Department of Defense Threat Reduction Advisory Committee, and the Blue Ribbon Commission on America’s Nuclear Future.

Here are some questions to explore how Moniz, as Secretary of Energy, might advise the President on managing America’s energy, environmental, and nuclear challenges.

Gambling Billions to Pick Energy Winners and Losers

President Obama will spend up to $150 billion on his “green” energy agenda between 2009 and 2014. Eighty percent of that is expected to fund renewable energy (wind, solar, biofuels), electric car, and high-speed rail programs. DOE has deployed much of this funding to subsidize the President’s preferred “green” energy technologies in an attempt to make them more competitive with our nation’s cheap, abundant, reliable fossil fuels. DOE has wasted billions of taxpayer dollars on Solyndra and numerous other bankrupt or faltering renewable energy companies in a disastrous attempt to pick winners and losers.

• Over the past four years, has DOE’s management of subsidies to renewable and alternative energy companies been a success or a failure? 

• A White House-commissioned report, a House Oversight and Government Reform Committee report, and a Government Accountability Office report all concluded that Energy Department officials seriously mismanaged the loan guarantee program responsible for green energy investments, exposing taxpayers to unacceptable financial risk and costing them billions. Do you agree? 

• As Secretary, what reforms, if any, would you advocate regarding DOE’s management of subsidies to renewable and alternative energy companies?

• The President would like to “double-down” on subsidies for renewable and alternative energy companies. As Secretary, would you seek additional funding to subsidize renewable and alternative energy companies, or has $120 billion been enough?

• In Europe, generous government subsidies to renewable energy have failed to provide it with enough of an advantage to win in the global marketplace. In response to a cascade of green energy insolvencies, Germany, Italy, and other European nations are slashing subsidies to solar companies to spare their taxpayers from losing billions more. Should we learn from the lessons of Europe, or ignore them?

Solyndra declared bankruptcy after receiving a $535 million loan guarantee from DOE. Political appointees pushed Solyndra financing despite opposition from career employees, before completed marketing and legal reviews were even available for consideration, and regardless of warnings by ratings agencies. Solyndra was “not ready for prime time,” one concerned Office of Management and Budget employee cautioned days before the government announced its financing deal with the solar panel maker.

• Do you consider deploying taxpayer funds to subsidize a project without adequate due diligence to be responsible management of public resources? 

• A revolving door of green energy venture capitalists and major political contributors to the Obama campaign filled important roles in the Energy Department and throughout the Administration. They were well positioned to influence the government’s green energy investments. What will be your requirements for senior staff at DOE and would conflicts of interest be disqualifying?  

• Larry Summers, the President’s former top economic advisor, noted during the unraveling of Solyndra that the government is a “crappy” venture capitalist. He wrote in response to an email from an investment executive who warned, “The allocation of spending in clean energy is haphazard; the government is just not well equipped to decide which companies should get the money and how much.” Do you agree with Summers and the investment executive? Or do you believe government is a good venture capitalist?

In 2011, you testified before the Senate Committee on Energy and Natural Resources that the growth rate of natural gas coming from shale gas plays in the U.S. was “remarkable in any context” and “really does represent a paradigm shift.” The same can be said for the amount of oil the U.S. is now able to access because of innovations in horizontal drilling and hydraulic fracturing technologies.

• Given this paradigm shift in America’s fossil fuel supply, and the jobs created by it, do you believe it is appropriate the federal government seek to increase taxes or over-regulate the fossil fuel industry to make it otherwise uncompetitive?

Supporting America’s Economy and Foreign Policy with Natural Gas Exports

The United States is awash in natural gas. It has close to a 100-year supply and will overtake Russia as the world’s largest producer in 2015. The U.S. will become a net exporter in 2016, generating economic benefits domestically and redrawing the energy landscape globally. That is, if President Obama and his Energy Secretary allow it. They have control over whether to issue natural gas export permits, and are currently reviewing 19 applications for permits to export liquefied natural gas (LNG). Exports of LNG will not only generate economic and trade benefits for the U.S. According to one analysis, a “boom in U.S. gas exports would help rebalance relationships between producers and consumers, largely to the advantage of America’s allies.”

• You chaired an MIT studyin 2011 that found: “A global ‘liquid’ natural gas market is beneficial to U.S. and global economic interests and, at the same time, advances security interests through diversity of supply and resilience to disruption. The U.S. should pursue policies that encourage the development of such a market, integrate energy issues fully into the conduct of U.S. foreign policy, and promote sharing of know-how for strategic global expansion of unconventional gas production.”
  • Do you agree that a policy the federal government should pursue to encourage development of a global LNG market is to permit exports of U.S. LNG?
  • If so, do you believe the quantity of U.S. LNG exports should be limited by the federal government or according to free market fundamentals? 
  • As Secretary, will you advise the President and otherwise take action to permit unfettered LNG exports from the U.S. to foreign countries?

• A major recommendation of the study was: “Natural gas issues should be fully integrated into the U.S. energy and security agenda, and a number of domestic and foreign policy measures should be taken, including integrating energy issues fully into the conduct of U.S. foreign policy, which will require multiagency coordination with leadership from the Executive Office of the President.” A bipartisan group of Senators introduced legislation to expedite U.S. LNG exports to allies including members of NATO and Japan. This bill would not only expand American economic opportunity and help lower our trade deficit, but also promote the energy security of key U.S. allies by helping reduce their dependence on oil and gas from countries like Russia and Iran. 
  • As Secretary, will you advise the President and other Washington Democrats to support legislation in order to integrate natural gas into U.S. foreign policy?
  • In what other ways will you demonstrate the leadership your report concluded was necessary to fully integrate natural gas into U.S. foreign policy?

Crying Wolf with the Strategic Petroleum Reserve

The Strategic Petroleum Reserve (SPR) was created for use only in emergencies to safeguard the U.S. economy and national security against severe oil supply disruptions. For example, if Iran blocked 20 percent of the world’s oil from flowing through the Strait of Hormuz, the U.S. may need to use crude oil from the SPR to substitute for a reduction in crude available on global markets. In 2011, the President withdrew 30.64 million barrels of oil in response to high gas prices. This reduced the ability of the SPR to replace imported crude in the event of a severe supply disruption, leaving American consumers even more vulnerable to emergency oil supply disruptions and gasoline price shocks. It also increased the amount of taxpayer money needed to refill the SPR — by around $1 billion after the President’s 2011 draw-down.

• As Secretary, would you advise the President, and pursue policies to ensure, that the SPR is not used in response to high gas prices or for other political purposes, but only to address unanticipated emergencies and severe supply disruptions?

• Currently, the SPR contains 696 million barrels of crude oil. As Secretary, would you advise the President to refill the SPR to its full capacity of 727 million barrels? 

Creating a “Carbon-Constrained” Economy

The nominee chaired an MIT study published in 2011 entitled The Future of Natural Gas. It sought to “inform the discussion around natural gas by addressing a fundamental question: “what is the role of natural gas in a carbon-constrained economy?”

• Why did you decide to look at natural gas’s role in a carbon-constrained economy as opposed to a non-carbon-constrained economy?

• What role do you think natural gas would play in a non-carbon-constrained economy?

The study found: “A [carbon dioxide] price for all fuels without long-term subsidies or other preferential policy treatment is the most effective way” to maximize the value to society of the “substantial” U.S. natural gas resource base. Last year, Moniz stated in an interview that the answer to the “problem” of climate change is to “put a price on carbon dioxide.” Last month, 53 Senators, including eight Democrats, voted to oppose the imposition of a price on carbon dioxide in the form of a carbon tax.

• Do you believe a carbon tax would be the most effective way to maximize the value to society of U.S. natural gas resources? If so, please explain what you mean?

• Do you believe a carbon tax would be the most effective way to maximize the value to society of U.S. coal and oil resources? If so, please explain what you mean?

• Do you currently support a carbon tax in any form imposed by the federal government?

• As Secretary, would you advocate for the federal government to impose a carbon tax in any form?

A major recommendation of the study is that U.S. carbon dioxide reduction policy should be “designed to create a ‘level playing field,’ where all energy technologies can compete against each other in an open marketplace conditioned by legislated CO₂ emissions goals.”

• Former Environmental Protection Agency Administrator Lisa Jackson stated that her agency’s role was to “level the playing field”against fossil fuels.
  • Do you agree with Ms. Jackson’s statement?
  • Do you believe your study, which used identical language, influenced Ms. Jackson’s rhetoric?
  • As Secretary, would you view DOE’s role as leveling the playing field against fossil fuels?

• Secretary of Energy Steven Chu stated that we must “boost the price of gasoline to the levels in Europe.” Gas prices approximately doubled over four years, culminating in the highest annual average gas price ever($3.60 per gallon) in 2012. 
  • Do you agree with Secretary Chu that we should pursue policies to boost the price of gasoline to the levels in Europe?
  • Do you believe overseeing a rise in gas prices to the highest annual average gas price ever is a failure or an achievement?
  • As Secretary, will you advise the President and otherwise pursue policies to raise gas prices, lower them, or keep them the same?

• In an interviewlast year, Moniz stated: “If we start really squeezing down on carbon dioxide over the next two decades, that [price] could double, it could eventually triple. I think inevitably if we squeeze down on carbon, we squeeze up on the cost, it brings along with it a push towards efficiency, it brings along with it a push towards clean technologies in a conventional pollution sense, it brings along with it a push towards security, because after all, the security issues revolve around carbon-bearing fuels. Now, I think it’s very important that any funds associated with that be recycled efficiently to productive uses, and to address distributional questions because the poor may get hit harder. There’s a lot of work to do there but I think in the end if you take one simple thing, that’s the direction I think we need to go in.”
  • Do you support doubling, tripling, or otherwise raising prices for energy generated from coal, oil, and gas in order to push the American people into more expensive, less reliable, energy technologies?
  • As Secretary, would you advise the President and otherwise pursue policies to squeeze down on the carbon and squeeze up on the cost of energy in order to push the American people into your preferred technologies? Or, in acknowledgement of the paradigm shift in our nation’s fossil fuel resources, would you pursue policies focused on providing the American people with affordable, reliable energy from our abundant fossil fuel resources?
  • You stated that it’s “very important” that any funds from a carbon tax be “recycled efficiently to productive uses, and to address distributional questions.” Do you disagree with the 58 Senators, including 13 Democrats, who voted last month to oppose a proposal to ensure that revenue from any carbon tax be returned to the U.S. public through deficit reduction, reducing other rates and other direct benefits? In your opinion, who should decide how best to spend revenues from a carbon tax imposed on the American people? 

In 2011, you testified before the Senate Committee on Energy and Natural Resources that natural gas would provide a “bridge” to a low-carbon future. You stated that “with increasingly stringent carbon dioxide emissions reductions, natural gas would eventually become too carbon intensive, which highlights the importance of a robust innovation program for zero-carbon options.”

• What carbon dioxide emissions reductions policies do you estimate would result in natural gas becoming too carbon intensive? Do you support or oppose such policies?

• In highlighting the importance of a robust innovation program for zero-carbon options, do you mean a program to innovate technologies that allow the use of coal, oil and gas resources with zero-carbon emissions, or one to innovate technologies that allow the use of renewable and alternative energy resources with zero-carbon emissions, or both?  

• Have you considered that natural gas will no longer serve as the bridge to a low-carbon future because the paradigm has shifted so that America’s cheap, abundant, reliable fossil fuel resources are themselves now the future of U.S. energy generation?