Moniz warns US oil producers of carbon limits

OREANDA-NEWS. August 01, 2016. US oil and natural gas producers must prepare for a "deep decarbonization" of the economy even as natural gas use picks up in the interim, US energy secretary Ernest Moniz said today.

Potential increases in global temperatures as a result of carbon emissions "suggest you have to do enterprise risk management in your businesses," Moniz said at a meeting of the National Petroleum Council in Washington. The council serves as an oil and gas advisory committee to the US Department of Energy (DOE). ExxonMobil chief executive Rex Tillerson took over as the council chairman today.

A gas-weighted transformation of the US electricity sector will help the US to achieve the goals it assumed in the Paris climate deal — reducing annual greenhouse gas emissions by 26-28pc by 2025 from 2005 levels. But a longer term decarbonization push, by 2050, eventually will affect the power generation, transportation and industrial sectors, Moniz said.

The US administration for now hopes to merely launch a dialog with industry leaders on possible ways to achieve the decarbonization, in part out of recognition that a new president will occupy the White House next January, Moniz said. The administration will lay out a scoping document before the council later this year and "if the next administration and the council are on the same page," the document could serve as a basis for decarbonization policies, Moniz said.

The future direction of the US climate policy depends on the outcome of the November presidential election. Democratic presidential candidate Hillary Clinton has pledged to continue the policies President Barack Obama has unveiled in the past year, including methane emission limits on producers. By contrast, Republican presidential candidate Donald Trump has said he would withdraw the US from the Paris climate agreement and scrap many greenhouse gas regulations.

Council members asked during the meeting if the low-carbon economy would be compatible with a goal of achieving abundant, reliable and affordable energy resources. Those characteristics "are in the DNA of the energy sector," Moniz said, adding that the administration's energy innovation agenda would encourage cost reductions and achieve technological breakthroughs.

The administration at the same time recognizes notable achievements of the US oil and natural gas industry and its key role in the economy, Moniz said. US domestic crude oil production, at 9.43mn b/d last year, exceeded imports for the first time in decades, Energy Information Administration data show, even though the trend likely will reverse this year. The agency expects natural gas use in US power generation to overtake coal this year. And even the comparatively small volumes of LNG export volumes from the US Gulf coast have exerted an outsize influence on the structure of the global natural gas market, Moniz said.