I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
25
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452 May 19, 2015 Senator Deb Fischer 383 Russell Senate Office Building Washington, D.C. 20510 Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12) Dear Senator Fischer, This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest. Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus. I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO: The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE). In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.” 14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest. 15 ___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010). BUT .... Page of 1 4
Transcript
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452
May 19, 2015
Senator Deb Fischer 383 Russell Senate Office BuildingWashington, D.C. 20510
Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Senator Fischer,
This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.”14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest.15
___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010).
BUT ....
Page ! of !1 4
Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any applications to authorize the import or export of natural gas, including LNG, from and to nations which have entered into a free trade agreement with the U.S. requiring national treatment for trade in natural gas – i.e. Free Trade Agreement countries, or FTA countries. As such, applications for authorization to export natural gas to FTA countries is required, by the NGA, to be “granted without modification or delay.”16 ___________________________ 16 15 U.S.C. §717b(c) “(c) Expedited application and approval process For purposes of subsection (a) of this section, the importation of the natural gas referred to in subsection (b) of this section, or the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be deemed to be consistent with the public interest, and applications for such importation or exportation shall be granted without modification or delay.”
I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate Planner, I learned early on to clearly document the basis for my work; the assumptions that defined the system, facility, equipment, process or economic assessment that went to my boss and the Board of Directors to justify millions of dollars in capital investment. What I have seen in the documents I have read is that they lack a precise definition that transparently explains decisions having major impact on the public, local communities, the national economy, or nation security.
The irony of making decisions and recommendations without a definition of public interest is clear in The Department of Energy Office of Fossil Energy’s FE Docket No. 11-128-LNG (Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has concluded that the opponents of the DCP Application have not demonstrated that the requested authorization will be inconsistent with the public interest and finds that the exports proposed in this Application are likely to yield net economic benefits to the United States.
Likely to yield net economic benefits—that’s it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCP’s Application:
[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. § 717b(a). This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest. DOE/FE must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.26
___________________________
25 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. § 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. 26 See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Ass’n v. ERA, 822 F.2d 1105, 1111 (D.C. Cir. 1987).
Page � of �2 4
While section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define “public interest” or identify criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that it evaluates when reviewing an application for export authorization. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.27
DOE/FE’s prior decisions have also looked to certain principles established in its 1984 Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of imported [or exported] natural gas .... The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204-111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports “based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.”31 In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FE’s review of export applications has continued to focus on: (i) the domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. ___________________________
27 See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27. 28 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 29 Id. at 6685. 30 Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, at 71,128 (1989). 31 DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690. 32 See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).
These justifications appear to be “circular logic’ defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they will continue to supply fuels when earnings and dividends fall to critical levels, share price plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page � of �3 4
Up to now, I have believed that Congress—specifically the Senate Committee on Energy and Natural Resources—has the rightful authority to conduct such an inquiry, as both FERC and DOE carry out the laws that Congress passes, laws which are spawned in your committee.
Now, having discovered a conundrum which would make the results of any such investigation meaningless, given the lack of a precise definition and standard for national interest or public interest, I suggest the Senate come up with suitable, complete and relevant definitions, and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and to explain their business strategies in context with their definition of Corporate Citizen. That will be an interesting juxtaposition with what you declare to be in the national and public interest. From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies going out of business as a result of sustained low commodity prices manipulated by competitive forces in other parts of the world. I also believe that it is incumbent upon us to change the paradigm from growing “upward” to growing in breadth with diversification, from the “traditional” and “conventional” to the “innovative” and “sustainable.” We must make our national resources immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industry—clear expectations—when we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability. We have brought it upon ourselves by a laissez-faire attitude with industry behaving according to free market conventions. We have allowed a lack of innovation through our investment tax credits and other subsidies. Now we must level the playing field, force innovation and let true competition see that “the cream will rise to the top.” Oil certainly is no longer “black gold.”
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude supply and price, or to shift our national policies and human energies away from such conflicts. I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452
May 19, 2015
Senator Ben Sasse B40E Dirksen Senate Office BuildingWashington, D.C. 20510
Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Senator Sasse,
This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.”14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest.15
___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010).
BUT ....
Page ! of !1 4
Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any applications to authorize the import or export of natural gas, including LNG, from and to nations which have entered into a free trade agreement with the U.S. requiring national treatment for trade in natural gas – i.e. Free Trade Agreement countries, or FTA countries. As such, applications for authorization to export natural gas to FTA countries is required, by the NGA, to be “granted without modification or delay.”16 ___________________________ 16 15 U.S.C. §717b(c) “(c) Expedited application and approval process For purposes of subsection (a) of this section, the importation of the natural gas referred to in subsection (b) of this section, or the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be deemed to be consistent with the public interest, and applications for such importation or exportation shall be granted without modification or delay.”
I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate Planner, I learned early on to clearly document the basis for my work; the assumptions that defined the system, facility, equipment, process or economic assessment that went to my boss and the Board of Directors to justify millions of dollars in capital investment. What I have seen in the documents I have read is that they lack a precise definition that transparently explains decisions having major impact on the public, local communities, the national economy, or nation security.
The irony of making decisions and recommendations without a definition of public interest is clear in The Department of Energy Office of Fossil Energy’s FE Docket No. 11-128-LNG (Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has concluded that the opponents of the DCP Application have not demonstrated that the requested authorization will be inconsistent with the public interest and finds that the exports proposed in this Application are likely to yield net economic benefits to the United States.
Likely to yield net economic benefits—that’s it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCP’s Application:
[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. § 717b(a). This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest. DOE/FE must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.26
___________________________
25 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. § 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. 26 See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Ass’n v. ERA, 822 F.2d 1105, 1111 (D.C. Cir. 1987).
Page � of �2 4
While section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define “public interest” or identify criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that it evaluates when reviewing an application for export authorization. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.27
DOE/FE’s prior decisions have also looked to certain principles established in its 1984 Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of imported [or exported] natural gas .... The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204-111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports “based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.”31 In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FE’s review of export applications has continued to focus on: (i) the domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. ___________________________
27 See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27. 28 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 29 Id. at 6685. 30 Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, at 71,128 (1989). 31 DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690. 32 See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).
These justifications appear to be “circular logic’ defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they will continue to supply fuels when earnings and dividends fall to critical levels, share price plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page � of �3 4
Up to now, I have believed that Congress—specifically the Senate Committee on Energy and Natural Resources—has the rightful authority to conduct such an inquiry, as both FERC and DOE carry out the laws that Congress passes, laws which are spawned in your committee.
Now, having discovered a conundrum which would make the results of any such investigation meaningless, given the lack of a precise definition and standard for national interest or public interest, I suggest the Senate come up with suitable, complete and relevant definitions, and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and to explain their business strategies in context with their definition of Corporate Citizen. That will be an interesting juxtaposition with what you declare to be in the national and public interest. From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies going out of business as a result of sustained low commodity prices manipulated by competitive forces in other parts of the world. I also believe that it is incumbent upon us to change the paradigm from growing “upward” to growing in breadth with diversification, from the “traditional” and “conventional” to the “innovative” and “sustainable.” We must make our national resources immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industry—clear expectations—when we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability. We have brought it upon ourselves by a laissez-faire attitude with industry behaving according to free market conventions. We have allowed a lack of innovation through our investment tax credits and other subsidies. Now we must level the playing field, force innovation and let true competition see that “the cream will rise to the top.” Oil certainly is no longer “black gold.”
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude supply and price, or to shift our national policies and human energies away from such conflicts. I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452
May 19, 2015
Representative Jeff Fortenberry 1514 Longworth House Office BuildingWashington, D.C. 20510
Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Representative Fortenberry,
This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.”14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest.15
___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010).
BUT ....
Page ! of !1 4
Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any applications to authorize the import or export of natural gas, including LNG, from and to nations which have entered into a free trade agreement with the U.S. requiring national treatment for trade in natural gas – i.e. Free Trade Agreement countries, or FTA countries. As such, applications for authorization to export natural gas to FTA countries is required, by the NGA, to be “granted without modification or delay.”16 ___________________________ 16 15 U.S.C. §717b(c) “(c) Expedited application and approval process For purposes of subsection (a) of this section, the importation of the natural gas referred to in subsection (b) of this section, or the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be deemed to be consistent with the public interest, and applications for such importation or exportation shall be granted without modification or delay.”
I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate Planner, I learned early on to clearly document the basis for my work; the assumptions that defined the system, facility, equipment, process or economic assessment that went to my boss and the Board of Directors to justify millions of dollars in capital investment. What I have seen in the documents I have read is that they lack a precise definition that transparently explains decisions having major impact on the public, local communities, the national economy, or nation security.
The irony of making decisions and recommendations without a definition of public interest is clear in The Department of Energy Office of Fossil Energy’s FE Docket No. 11-128-LNG (Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has concluded that the opponents of the DCP Application have not demonstrated that the requested authorization will be inconsistent with the public interest and finds that the exports proposed in this Application are likely to yield net economic benefits to the United States.
Likely to yield net economic benefits—that’s it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCP’s Application:
[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. § 717b(a). This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest. DOE/FE must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.26
___________________________
25 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. § 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. 26 See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Ass’n v. ERA, 822 F.2d 1105, 1111 (D.C. Cir. 1987).
Page � of �2 4
While section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define “public interest” or identify criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that it evaluates when reviewing an application for export authorization. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.27
DOE/FE’s prior decisions have also looked to certain principles established in its 1984 Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of imported [or exported] natural gas .... The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204-111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports “based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.”31 In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FE’s review of export applications has continued to focus on: (i) the domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. ___________________________
27 See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27. 28 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 29 Id. at 6685. 30 Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, at 71,128 (1989). 31 DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690. 32 See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).
These justifications appear to be “circular logic’ defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they will continue to supply fuels when earnings and dividends fall to critical levels, share price plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page � of �3 4
Up to now, I have believed that Congress has the rightful authority to conduct such an inquiry, as both FERC and DOE carry out the laws that Congress passes.
Now, having discovered a conundrum which would make the results of any such investigation meaningless, given the lack of a precise definition and standard for national interest or public interest, I suggest that Congress come up with suitable, complete and relevant definitions, and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and to explain their business strategies in context with their definition of Corporate Citizen. That will be an interesting juxtaposition with what you declare to be in the national and public interest. From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies going out of business as a result of sustained low commodity prices manipulated by competitive forces in other parts of the world. I also believe that it is incumbent upon us to change the paradigm from growing “upward” to growing in breadth with diversification, from the “traditional” and “conventional” to the “innovative” and “sustainable.” We must make our national resources immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industry—clear expectations—when we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability. We have brought it upon ourselves by a laissez-faire attitude with industry behaving according to free market conventions. We have allowed a lack of innovation through our investment tax credits and other subsidies. Now we must level the playing field, force innovation and let true competition see that “the cream will rise to the top.” Oil certainly is no longer “black gold.”
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude supply and price, or to shift our national policies and human energies away from such conflicts. I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452
May 19, 2015
Representative Adrian Smith 2241 Rayburn House Office BuildingWashington, D.C. 20510
Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Representative Smith,
This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.”14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest.15
___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010).
BUT ....
Page ! of !1 4
Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any applications to authorize the import or export of natural gas, including LNG, from and to nations which have entered into a free trade agreement with the U.S. requiring national treatment for trade in natural gas – i.e. Free Trade Agreement countries, or FTA countries. As such, applications for authorization to export natural gas to FTA countries is required, by the NGA, to be “granted without modification or delay.”16 ___________________________ 16 15 U.S.C. §717b(c) “(c) Expedited application and approval process For purposes of subsection (a) of this section, the importation of the natural gas referred to in subsection (b) of this section, or the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be deemed to be consistent with the public interest, and applications for such importation or exportation shall be granted without modification or delay.”
I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate Planner, I learned early on to clearly document the basis for my work; the assumptions that defined the system, facility, equipment, process or economic assessment that went to my boss and the Board of Directors to justify millions of dollars in capital investment. What I have seen in the documents I have read is that they lack a precise definition that transparently explains decisions having major impact on the public, local communities, the national economy, or nation security.
The irony of making decisions and recommendations without a definition of public interest is clear in The Department of Energy Office of Fossil Energy’s FE Docket No. 11-128-LNG (Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has concluded that the opponents of the DCP Application have not demonstrated that the requested authorization will be inconsistent with the public interest and finds that the exports proposed in this Application are likely to yield net economic benefits to the United States.
Likely to yield net economic benefits—that’s it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCP’s Application:
[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. § 717b(a). This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest. DOE/FE must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.26
___________________________
25 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. § 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. 26 See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Ass’n v. ERA, 822 F.2d 1105, 1111 (D.C. Cir. 1987).
Page � of �2 4
While section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define “public interest” or identify criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that it evaluates when reviewing an application for export authorization. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.27
DOE/FE’s prior decisions have also looked to certain principles established in its 1984 Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of imported [or exported] natural gas .... The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204-111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports “based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.”31 In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FE’s review of export applications has continued to focus on: (i) the domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. ___________________________
27 See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27. 28 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 29 Id. at 6685. 30 Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, at 71,128 (1989). 31 DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690. 32 See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).
These justifications appear to be “circular logic’ defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they will continue to supply fuels when earnings and dividends fall to critical levels, share price plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page � of �3 4
Up to now, I have believed that Congress has the rightful authority to conduct such an inquiry, as both FERC and DOE carry out the laws that Congress passes.
Now, having discovered a conundrum which would make the results of any such investigation meaningless, given the lack of a precise definition and standard for national interest or public interest, I suggest that Congress come up with suitable, complete and relevant definitions, and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and to explain their business strategies in context with their definition of Corporate Citizen. That will be an interesting juxtaposition with what you declare to be in the national and public interest. From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies going out of business as a result of sustained low commodity prices manipulated by competitive forces in other parts of the world. I also believe that it is incumbent upon us to change the paradigm from growing “upward” to growing in breadth with diversification, from the “traditional” and “conventional” to the “innovative” and “sustainable.” We must make our national resources immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industry—clear expectations—when we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability. We have brought it upon ourselves by a laissez-faire attitude with industry behaving according to free market conventions. We have allowed a lack of innovation through our investment tax credits and other subsidies. Now we must level the playing field, force innovation and let true competition see that “the cream will rise to the top.” Oil certainly is no longer “black gold.”
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude supply and price, or to shift our national policies and human energies away from such conflicts. I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
Douglas A. Grandt PO Box 6603 Lincoln, NE 68506 (510) 432-1452
May 19, 2015
Representative Brad Ashford 107 Cannon House Office BuildingWashington, D.C. 20510
Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Representative Ashford,
This is my twelfth letter to you expressing deep concern about an imminent conflict between 1) Corporate Officers’ and Boards of Directors’ fiduciary duty in the face of insolvency, indeed their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret “in the national interest” and “in the public interest” to mean protecting and preserving all aspects of the commonwealth, the common-wealth, the common weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper Network’s recently published paper “TPP and Fast Track: What they mean for our Environment and our Country”. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section 3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of natural gas “will not be inconsistent with the public interest.”14 A public interest determination includes consideration of both environmental and economic impacts. Section 3(a) thus establishes DOE’s authority to deny an application requesting authorization to export natural gas to foreign countries upon a showing of inconsistency with the public interest.15
___________________________ 14 15 U.S.C. § 717b(a). “(a) Mandatory authorization order After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be consistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and conditions as the Commission may find necessary or appropriate, and may from time to time, after opportunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate.” 15 Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20, 2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept. 7, 2010).
BUT ....
Page ! of !1 4
Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any applications to authorize the import or export of natural gas, including LNG, from and to nations which have entered into a free trade agreement with the U.S. requiring national treatment for trade in natural gas – i.e. Free Trade Agreement countries, or FTA countries. As such, applications for authorization to export natural gas to FTA countries is required, by the NGA, to be “granted without modification or delay.”16 ___________________________ 16 15 U.S.C. §717b(c) “(c) Expedited application and approval process For purposes of subsection (a) of this section, the importation of the natural gas referred to in subsection (b) of this section, or the exportation of natural gas to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, shall be deemed to be consistent with the public interest, and applications for such importation or exportation shall be granted without modification or delay.”
I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate Planner, I learned early on to clearly document the basis for my work; the assumptions that defined the system, facility, equipment, process or economic assessment that went to my boss and the Board of Directors to justify millions of dollars in capital investment. What I have seen in the documents I have read is that they lack a precise definition that transparently explains decisions having major impact on the public, local communities, the national economy, or nation security.
The irony of making decisions and recommendations without a definition of public interest is clear in The Department of Energy Office of Fossil Energy’s FE Docket No. 11-128-LNG (Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has concluded that the opponents of the DCP Application have not demonstrated that the requested authorization will be inconsistent with the public interest and finds that the exports proposed in this Application are likely to yield net economic benefits to the United States.
Likely to yield net economic benefits—that’s it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCP’s Application:
[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first having secured an order of the [Secretary of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by [the Secretary’s] order grant such application, in whole or part, with such modification and upon such terms and conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. § 717b(a). This provision creates a rebuttable presumption that a proposed export of natural gas is in the public interest. DOE/FE must grant such an application unless opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest.26
___________________________
25 The Secretary’s authority was established by the Department of Energy Organization Act, 42 U.S.C. § 7172, which transferred jurisdiction over imports and export authorizations from the Federal Power Commission to the Secretary of Energy. 26 See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Ass’n v. ERA, 822 F.2d 1105, 1111 (D.C. Cir. 1987).
Page � of �2 4
While section 3(a) establishes a broad public interest standard and a presumption favoring export authorizations, the statute does not define “public interest” or identify criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that it evaluates when reviewing an application for export authorization. These factors include economic impacts, international impacts, security of natural gas supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to record evidence developed in the application proceeding.27
DOE/FE’s prior decisions have also looked to certain principles established in its 1984 Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control and involvement in energy markets and to promote a balanced and mixed energy resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of imported [or exported] natural gas .... The federal government’s primary responsibility in authorizing imports [or exports] will be to evaluate the need for the gas and whether the import [or export] arrangement will provide the gas on a competitively priced basis for the duration of the contract while minimizing regulatory impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No. 0204-111. That delegation order, which authorized the Administrator of the Economic Regulatory Administration to exercise the agency’s review authority under NGA section 3, directed the Administrator to regulate exports “based on a consideration of the domestic need for the gas to be exported and such other matters as the Administrator finds in the circumstances of a particular case to be appropriate.”31 In February 1989, the Assistant Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FE’s review of export applications has continued to focus on: (i) the domestic need for the natural gas proposed to be exported, (ii) whether the proposed exports pose a threat to the security of domestic natural gas supplies, (iii) whether the arrangement is consistent with DOE/FE’s policy of promoting market competition, and (iv) any other factors bearing on the public interest described herein. ___________________________
27 See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27. 28 New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas, 49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines]. 29 Id. at 6685. 30 Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1 FE ¶ 70,259, at 71,128 (1989). 31 DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690. 32 See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).
These justifications appear to be “circular logic’ defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they will continue to supply fuels when earnings and dividends fall to critical levels, share price plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page � of �3 4
Up to now, I have believed that Congress has the rightful authority to conduct such an inquiry, as both FERC and DOE carry out the laws that Congress passes.
Now, having discovered a conundrum which would make the results of any such investigation meaningless, given the lack of a precise definition and standard for national interest or public interest, I suggest that Congress come up with suitable, complete and relevant definitions, and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and to explain their business strategies in context with their definition of Corporate Citizen. That will be an interesting juxtaposition with what you declare to be in the national and public interest. From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies going out of business as a result of sustained low commodity prices manipulated by competitive forces in other parts of the world. I also believe that it is incumbent upon us to change the paradigm from growing “upward” to growing in breadth with diversification, from the “traditional” and “conventional” to the “innovative” and “sustainable.” We must make our national resources immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon you do what you can to influence your colleagues to guide the petroleum industry to provide a choice of transportation fuels, which will also enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industry—clear expectations—when we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability. We have brought it upon ourselves by a laissez-faire attitude with industry behaving according to free market conventions. We have allowed a lack of innovation through our investment tax credits and other subsidies. Now we must level the playing field, force innovation and let true competition see that “the cream will rise to the top.” Oil certainly is no longer “black gold.”
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude supply and price, or to shift our national policies and human energies away from such conflicts. I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
