"Thank you for that kind introduction, William. I am pleased to see so many of you here and very grateful to the Brookings Institution for the opportunity to be here today.
"Let's go right to the heart of the matter. According to the Energy Information Administration, last July saw U.S. domestic energy production reach over 7 quadrillion Btu. This is the highest monthly total on record.
"Let me repeat that: We are producing more energy today than ever before.
"And this dramatic increase in production from all sources of energy has resulted in a dramatic sea change in our nation's energy trade. In the process, we are creating jobs, lowering prices we're reducing our trade deficit.
"Think of where we are right now: we are selling coal to the Netherlands, Morocco, and Germany; distillate fuel to France, Chile, and Argentina; petroleum coke to Turkey and China; gasoline to Colombia, Brazil, and Panama; jet fuel to Britain, Israel, and Nigeria; natural gas to Canada and Mexico; natural gas liquids to Switzerland, Honduras, and Aruba.
"And I could go on, I know you know these facts well, and I did not come here today simply to recite facts. No, I am here because as good as this story is, these developments have transpired in spite of the federal government, not because of it, as the president frequently seems to imply.
"The rules of engagement on energy trade were written long ago for a now bygone world in which scarcity, not abundance, was the prevailing mindset. A hodgepodge of regulations has accumulated over the better part of a century like barnacles on the hull of a ship.
"Let's briefly sketch out the maze.
"The State Department reviews cross-border oil pipelines, such as Keystone XL, but petroleum products, crude oil, and condensate fall under the Commerce Department.
"The Energy Department grants export licenses for natural gas, but then the Commerce Department permits exports of natural gas liquids -- and the Federal Energy Regulatory Commission regulates cross-border natural gas pipelines. Coal and renewable energy products flow with ease to our trading partners, while nuclear exports are tightly regulated -- as they should be.
"Even many professionals in the energy sector are unaware of the role federal trade promotion agencies play in this area. The Export-Import Bank, the Overseas Private Investment Corporation, the Trade and Development Agency, and other entities all advance the U.S. energy trade.
"In legal terms, we're talking about laws such as the Natural Gas Act of 1938; the Atomic Energy Act of 1954; the Energy Policy and Conservation Act of 1975; and then executive orders that stretch all the way back to the Eisenhower administration.
"A recent workshop at the Center for Strategic & International Studies encouraged participants to think about the regulation of energy exports in terms of the underlying chemistry. The chemical formulation for methane is CH4 -- so you've got one carbon atom and four hydrogen atoms. This natural gas can be sold to Canada and Mexico through a pipeline without much of a regulatory hurdle, but if you want to build a facility that liquefies gas for seaborne transport to Japan, then you need a license from the Energy Department to export it and another approval from the FERC to build your facility. That process we know can take years.
"If you are absolutely determined to build an LNG facility, you're in luck. Go to Australia and get involved with one of the liquefaction projects that our government is helping to finance over there.
"On the other hand, if you take a methane molecule and attach two carbon atoms and four more hydrogen atoms -- giving you C3H8, also known as propane -- then the Commerce Department will grant you an export license without much of a delay at all.
"But you don't want to fiddle with the formula too much, though, or you might end up with a barrel of crude oil, the export of which is generally prohibited -- unless, of course, you process it through a refinery, in which case you can export it as diesel. You can also ship the crude to Canada, where apparently the laws of chemistry apparently do not apply.
"The regulatory edifice that governs the export of American-made energy is antiquated and, at times, I'd even suggest-- absurd. There is no perfection under the sun, but surely we can do better than this.
"Today, I am releasing a white paper entitled A Signal to the World: Renovating the Architecture of U.S. Energy Exports. And it follows on the Energy 20/20 blueprint and the LNG white paper I released last year.
"I have two goals with this paper. The first is to highlight facts. Consensus about the facts is the basis for productive dialogue. My second goal is to help frame a conversation about the state of U.S. energy exports, the "architecture of the energy trade.'
"Although certain aspects of the energy export story have been in the public eye for quite some time, I am not aware quite honestly of another report that shows the full picture through a single lens.
"Alongside the paper, I am releasing a number of reports from the nonpartisan Congressional Research Service. They contain a great deal of information, some of which is not generally available, about various aspects of the U.S. energy trade. The facts tell me that we must modernize the regulations that govern energy exports, demonstrating to the world that we are committed -- committed to leading on issues of energy, the environment and trade.
"I am not proposing comprehensive energy export legislation. I believe the executive branch has the statutory authority to implement most of these ideas on its own and if the President needs help from the legislative branch, he will always have an open partner on the Energy Committee in me. I am willing to introduce small, targeted bills to move the ball forward as needed. I do however want to advance several key principles and they are three-fold.
"First, there are parts of this antiquated architecture where exports are effectively banned. I think we should think carefully about the conditions in which those bans were put into effect and consider whether they still serve the public interest, if they ever did.
Two energy sources in this area come to mind: crude oil and condensate.
"I raised the prospect of crude oil exports this past summer at the EIA's Annual Conference. At the time, I said the debate would come sooner than we expected. Here we are today.
"The basics are simple. The shale plays in the Bakken and Eagle Ford are yielding so-called LTO, or light tight oil. Our refining capacity is concentrated in the Gulf Coast and is geared primarily towards heavier grades of crude.
"Now, as many analysts have pointed out -- at the EIA, IHS Global, and elsewhere -- various mechanisms exist for moving LTO out into the market. It can be shipped to lighter grade refineries on the East Coast, for example, or blended with heavier grades. It can be shipped to Canada. Refineries of course can also be modified to accommodate lighter grades.
"With minimal exceptions, the export of crude oil is prohibited by law. There will come a time, however, when we will have an unsustainable glut of this light crude. It may be next year; it may even be a matter of months. The free market works wonders, but it can't work magic.
"Condensate is a by-product of oil and gas production. These hydrocarbons are extremely light oil and come out of plays like the Eagle Ford. They can be refined and exported as natural gas liquids, but otherwise trade is prohibited.
"Most commentators assume that Congress and the Administration will be slow to address this issue. Opponents of oil exports will of course raise the specter of rising gasoline prices -- I think, to scare off elected officials.
"As many of you, I have spent the past several months thinking about this export issue. The point of deliberation is to arrive at an answer. Hung juries may be the default here in Washington, but they don't sell well in Alaska I am calling for ending the prohibition on crude oil and condensate exports. The current system is inefficient and may lead to supply disruptions that we can ill afford. Lifting the ban will send a strong signal to energy markets that as a nation we are serious -- we are serious as a country--about our emerging role as a major hydrocarbon producer.
"I believe the Administration retains enough statutory authority to lift the ban on its own. Although the President has the authority to declare it in the national interest to lift the ban, another path is for the Department of Commerce to approve an application for export of crude oil or condensate under a provision in the law permitting the application if it can be demonstrated that those fuels "cannot reasonably be marketed' here in the United States. A mismatch then in our nation's refining capacity has already emerged and common sense suggests that the mismatch should meet these qualifications.
"If the Administration is unwilling to act on its own, or if that statutory authority needs further modification, I am prepared to introduce legislation to modernize the law.
"Opponents of trade will be quick to assert, too often without citing any evidence, that exports of crude oil will raise gasoline prices for American consumers. This claim is wrong, but it must be dealt with immediately and it must be dealt with head on. I have said repeatedly -- and I mean it -- that the goal must be to make energy more affordable. If we want to bring down gasoline prices, then we should be opening up federal lands to energy production, not close them off. I can think of a few places in Alaska that could be opened up immediately for new oil production, which would lower gasoline prices.
Small but rising amounts of crude are already exported to Canada, as is permitted by statute. We have seen no crisis in gasoline prices here at home.
"Modernizing the export architecture would reduce volatility by making world energy markets more efficient.
"We don't see a looming "run" on the crude oil bank.
"Lifting the prohibition on crude oil exports will serve to increase domestic oil production, and the entry of this oil onto global markets will put downward pressure on international prices. All things equal, this combination will help the American consumer.
"I want to be abundantly clear: I think the status quo is not beneficial to the American people. We must act before the crude oil export ban causes problems in U.S. oil production, which will raise prices and hurt American jobs.
"Second, it is important that we do no harm. These are the areas where regulatory review is already effectively streamlined. Thus far coal exports appear to be keeping pace in world markets. Although efforts to forestall this expansion in trade must be opposed, I also see no problem with the regulatory structures surrounding renewables, natural gas liquids, and petroleum products. The Commerce Department already covers those and I believe is doing a commendable job.
"Third, and finally, we should look for efficiencies in areas where existing regulations could be more effectively implemented. Whether the State Department is the appropriate agency in which to vest authority for cross-border oil pipelines is certainly a fair question to ask. The course of its review of the Keystone XL has been counterproductive and, frankly, I think it has unduly strained our relationship with Canada.
"The Department of Energy's slow-walking of LNG export licenses is another area that I think is worthy of examining. Secretary Moniz appears to have quickened the pace of approvals, the queue is quite full. Licenses still take far too long to review, especially when, as appropriate, the projects still must go through a rigorous safety review at the FERC.
"The U.S. has long been a leader in the nuclear technology trade. I am particularly excited about small modular reactors, which have received a great deal of attention in terms of research and development. Current designs can provide strong nuclear safeguards and maintain our commitment to international security.
"Already, policymakers in Riyadh and Manama speak of the Bakken and Eagle Ford; in Tokyo and New Delhi, they watch the Marcellus and Permian; in Budapest and Moscow, they wonder about the Utica and Monterey.
"It is hard to put a price on that. Inaction also has a cost. Failing to renovate the crude oil export architecture could very well lead to disruptions in supply and production.
"Ultimately, we can only have this conversation because of our energy resurgence -- an opportunity borne of technological prowess and true American grit. American-made energy is the safest and most environmentally responsible energy on Earth. If any nation is exporting energy to the world -- bringing electricity to those without power, heat to those in the cold -- the United States then, should be that leader."