The US should evaluate the allocation of decision-making authority for the permitting and siting of natural gas pipelines to find possible ways to shorten lead times and reduce uncertainty for investors, the International Energy Agency recommended in its latest 5-year review of US energy performance and policies.
The Trump administration has adopted an “energy dominance” strategy for the US that includes a strategy to revisit or rescind many environmental regulations applicable to broad domestic energy segments, it noted in its executive summary. For the oil and gas industry, this has included rescinding hydraulic fracturing regulations on federal lands and announcing plans to lower regulatory requirements to cut methane emissions from production, IEA said.
The energy dominance agenda also includes a focus on expanding US energy exports, it said. “However, future production growth and exports depend on a complementary buildout of oil and gas pipelines,” the executive summary said.
“Though the government has made efforts to streamline federal licensing for energy infrastructure (including rapid approval of projects such as the Keystone XL oil pipeline), there remain cases of midstream infrastructure struggling to keep pace with shale production growth due to permitting setbacks, local opposition, and court challenges,” it said. “Timely siting of gas pipelines will also benefit efforts to reduce associated gas flaring rates from oil production.”
IEA Executive Director Fatih Birol, during a joint press conference Sept. 12 at the US Department of Energy with US Energy Sec. Rick Perry, said, “More than one third of global gas production growth in the next 5 years will come from the US. In the next 5 years, 81% of new [LNG] exports will come from this country.” But quicker approval of pipeline projects could increase US production further and reduce flaring of gas associated with crude oil production, Birol said.
Perry said IEA’s latest US policy review highlights the country’s success in the last 5 years and predicts that US crude oil exports could nearly double in the next 5 years. “Rather than drive down fossil fuel emissions by regulation, we’re doing it by innovation,” he said. “Thanks to that, we produce every kind of fuel more effectively and abundantly than ever before.”
Outlines US challenges
Challenges include integrating intermittent and convention fuels, addressing government roles at various levels in regulation, Perry said. “Americans want us to be thoughtful and move ahead in areas where we can make a difference and I think we have. We’re doing all this with a nice dose of common sense,” he said.
IEA’s latest US policy review noted that the country has been a cornerstone of the organization through its participation as a founding member. The US has participated in global oil stock releases through its Strategic Petroleum Reserve, which is the world’s largest stock of emergency crude, its executive summary said.
US crude oil inventories are well in excess of its obligation to hold 90 days of net oil imports, although in recent years the federal government has authorized sales from the SPR over the coming decade, it continued. After those sales, the SPR will still be well above the IEA’s 90-day obligation.
“As the US quickly becomes a net exporter of petroleum liquids by the early 2020s, however, its IEA stockholding obligation will rapidly decline toward zero,” the IEA report’s executive summary said. If the US draws its SPR levels further down, there could be a challenge to the IEA crude oil stock system’s future effectiveness, particularly in the case of a large collective action, if the US no longer holds a substantial SPR, it warned.
“We’re aware of US activities about selling part of its SPR, and that’s up to its government. Our recommendation has been that stocks should be sufficient to respond to supply emergencies,” Birol said.
IEA’s 2019 US Energy Policy Review also recommended that the country:
• Set effective and streamlined regulations to enable it to remain a global leader in emissions reduction and clean technologies.
• Integrate variable renewable energy by pursuing market regulations that leverage geographic diversity of resources, availability of transmission capacity, and flexible resources such as energy storage.
• Conduct regular and comprehensive assessments of risks and vulnerabilities to foster preparedness, and to maintain reliability and resilience in the face of new challenges.
Asked if he sees an IEA role in helping Eastern and Central European countries diversify their gas supply sources, Birol pointed out that the continent could have a 100 billion-cu m gas supply shortage by 2025.
“We’re seeing the US becoming a serious option for helping Eastern and Central Europe diversify their supplies,” he said. “An unexpected consequence has been that several of these countries have successfully renegotiated contracts with their existing suppliers.”
Contact Nick Snow at [email protected].