The Energy Department’s delay in releasing a report on liquefied natural-gas exports puts in limbo for this year as many as 12 applications including projects backed by Dominion Resources Inc. and Sempra Energy. (SRE)
The department commissioned the study last year to assess the economic impact of exports on domestic energy use after granting Cheniere Energy Inc. (LNG) permission to ship gas from Louisiana. It said future permits won’t be issued until the study is completed.
The first part of the study is complete, and a second portion was scheduled to come out in the first quarter. That date was pushed back to late in the U.S. summer, which ends Sept. 22. A posting on the department website now says it will be “complete by the end of the year.”
“It is really unfortunate, but I don’t think anything happens until we see the results of that report,” said Bill Cooper, president of the Center for Liquefied Natural Gas, which advocates for gas shipments. The Washington-based group includes LNG producers, shippers and terminal operators.
“None of the applicants, I’m certain, want to see a delay in the regulatory process,” Cooper said in an interview.
The study was started after lawmakers led by Representative Edward Markey, a Massachusetts Democrat, and Senator Ron Wyden, an Oregon Democrat, said overseas sales might increase domestic energy prices.
The delay probably will push release of the Energy Department’s report until after the election in November.
“This is a complicated economic analysis assessing a dynamic market,” Jen Stutsman, an Energy Department spokeswoman, said in an e-mail. “We take our responsibility to issue these determinations seriously and want to make sure the necessary time is taken to get it right.”
Investors including Sempra Energy in partnership with Mitsubishi Corp. and Mitsui & Co. Ltd., Freeport LNG with Macquarie Group Ltd., and Dominion Resources, have applied for approvals from the Energy Department.
U.S. permits are required to sell gas to countries that aren’t free-trade partners with the U.S., a group that includes Japan and Spain.
As natural-gas prices soared in the last decade, energy companies sought permission to build import terminals. Hydraulic fracturing, or fracking, for natural gas has opened access to reserves that previously couldn’t be produced economically, driving prices to a decade low and letting companies shift gears and seek overseas buyers for the fuel.
In fracking, oil and gas companies shoot a mixture of water, sand and chemicals underground to crack shale rock formations and free fossil fuels trapped inside.
To contact the reporter on this story: Jim Snyder in Washington at email@example.com
To contact the editor responsible for this story: Jon Morgan at firstname.lastname@example.org
- Energy Department delays release of LNG export report (news.terra.com)
- Obama’s delay leaves LNG exports on hold though election (bizjournals.com)
- Politics are causing LNG export delays, attorney says (fuelfix.com)
- Freeport LNG inks deal to sell natural gas to Japanese utilities (fuelfix.com)
- U.S. Expected to Approve Expanded LNG Exports to Japan (mb50.wordpress.com)
- USA: Main Pass Energy Hub Files for LNG Export Licence (mb50.wordpress.com)
Rep. Tom McClintock (R-CA) introduced three amendments to the recently passed Energy & Water appropriations bill that would have eliminated a slew of business subsidies at the Department of Energy. Unfortunately, House Republicans once again teamed up with their Democratic colleagues to keep the corporate welfare spigot flowing.
From The Hill:
The largest spending cut proposal came from Rep. Tom McClintock (R-Calif.), which would have eliminated the Energy Efficiency and Renewable Energy account at the Department of Energy and used the $1.45 billion in savings toward deficit reduction. Like other Republicans, McClintock argued that this account needlessly spends money on questionable private investments that have not led to any measurable returns. But the House rejected McClintock’s amendment in a 113-275 vote, in which 113 Republicans voted for it but 107 Republicans joined every Democrat in opposition.
From a second article from The Hill:
Rep. Tom McClintock (R-Calif.) proposed ending all nuclear energy research subsidies to private companies, which would have saved $514 million and used that money to lower the deficit. But the House rejected that amendment in a 106-281 vote that divided Republicans 91-134. McClintock also proposed language cutting fossil energy research subsidies, which would have saved $554 million. But the House killed that amendment 138-249, as Republicans split again 102-123.
A few comments:
First, Democrats voted overwhelmingly to continue to subsidize commercial interests. And here I thought Democrats were concerned about the have and have-nots.
Second, Rep. McClintock deserves a round of applause for his efforts. These votes speak volumes about a member’s beliefs about the proper role of the federal government. A lot of members—especially Republicans—talk a good game when it comes to spending, limited government, free markets, etc. However, when the time comes to put their money where their mouths are, many choose to instead put other people’s money in the mouths of special interests.
For those taxpayers who are interested in seeing how their member voted, the following are the roll call tallies for McClintock’s amendments:
- Reduce the energy efficiency and renewable energy account by $1.45 billion: http://clerk.house.gov/evs/2012/roll311.xml.
- Reduce the construction and expansion account of nuclear energy by $514 million: http://clerk.house.gov/evs/2012/roll315.xml.
- Reduce the fossil energy research and development account by $554 million: http://clerk.house.gov/evs/2012/roll317.xml.
[See here for more on why energy subsidies should be eliminated.]
Update: Steve Ellis from Taxpayers for Common Sense alerted me to an amendment introduced by Dennis Kucinich (D-OH) and McClintock that would have shut down the Department of Energy’s Title 17 loan guarantee program. That’s the program that gave us Solyndra. The amendment failed 136-282 with 127 Republicans joining 155 Democrats to defeat the amendment. That the Republican-led House couldn’t get rid of the program that begot Solyndra is about as low as it gets.
- McClintock: Obama’s Subtle War On Tea Parties – A Warning (constitutionclub.org)
- NTU urges “YES” votes on the following Amendments to H.R. 5325: (ntu.org)
By John R. Siegel
(Barrons) By 2017 the U.S. could be the largest exporter of liquefied natural gas in the world, surpassing leading LNG exporters Qatar and Australia. There is one big “if,” however. America can produce more gas, export a surplus, improve the trade deficit, create jobs, generate taxable profits and reduce its dependence on foreign energy if the marketplace is allowed to work and politics doesn’t get in the way.
In May 2011 Cheniere Energy received an Energy Department license to export LNG from its Sabine Pass LNG import terminal in Louisiana. Cheniere subsequently reached long-term deals with the U.K.’s BG Group, Spain’s Gas Natural and India’s GAIL. Cheniere is targeting operation in 2016 and plans to export up to 730 billion cubic feet of LNG annually, roughly 3% of current U.S. gas production.
Sabine Pass originally was built as an import facility to alleviate projected U.S. gas shortages. Shale-gas technology changed that assumption radically. Now Sabine Pass is attractive because it already possesses much of the infrastructure for an export plant: LNG storage tanks, gas-handling facilities and docking terminals. Only a liquefaction plant is needed to convert natural gas into LNG. Overall, Cheniere can create its export terminal for half the investment required for a new one.
With world oil over $100 per barrel, equivalent to $17 per million BTUs of gas, versus domestic natural gas at $2.10 per million BTUs, the opportunity is obvious: Cheniere can deliver its gas to Asia or European customers well below current market prices.
Six developers with existing import terminals are following the Sabine Pass model. And Cheniere has another project in Corpus Christi. With the expansion of the Panama Canal, Gulf LNG projects can economically target the lucrative Asia market. By 2017, the U.S. could be exporting upwards of 13 billion cubic feet of LNG per day.
But exporters must overcome growing opposition to LNG exports by environmentalists and industrial users of natural gas. Exporters must also get multiple permits from environmentally conscious federal officials. And Rep. Ed Markey (D.-Mass.) has proposed legislation to bar federal approval of any LNG export terminals until 2025. Those who most fear global warming don’t want anyone anywhere to use more fossil fuel, even “cleaner” natural gas.
It is uphill for the anti-gas crowd. High oil prices are driving a transition to natural gas, even as fuel for trucks and cars. In the U.S., the T. Boone Pickens Plan would displace gasoline and diesel fuel for compressed natural gas in large trucks. Pickens estimates savings of two million barrels per day of oil imports if the nation’s fleet of 18-wheelers converts to CNG. The Pickens Plan might fail legislatively because it calls for subsidies to fuel the transition. But if CNG’s nearly $2-per-gallon price advantage over gasoline continues, the concept will evolve via natural market forces, as it should.
THE ENERGY DEPARTMENT SAYS natural gas has grown its market share in the U.S. in the past three years from 28% to 30%. Globally, the trend is similar, and LNG is integral to the global supply chain.
Despite the recession, global LNG demand has been growing at a 6% to 8% annual clip for the past 10 years. When demand collapsed in 2009, prices in Asian markets fell 50% to about $5 per million BTUs. But the price drop was also driven by the rapid growth in U.S. shale gas. U.S. natural-gas supply — flatlined for a decade at 19 trillion to 20 trillion cubic feet annually — increased 15% in the past three years due to the shale-gas revolution. Technology advances created a supply perturbation. As U.S. gas prices plunged, LNG cargoes bound for the U.S. had no market.
Global LNG markets are growing again. By late 2010, the main Asian consumers — Japan, Korea and Taiwan — were seeking more LNG, while new customers such as Thailand were entering the market. The Japan tsunami put a call on LNG imports to supplant Japan’s nuclear shutdowns, and with increasing demand, Asian markets rebounded to the $15-per-million-BTU range. After the tsunami, Germany plans to close its nuclear plants. Most of Germany’s (and all of Europe’s) new supply will be gas-fired. Given the choices, would Europe rather grow its gas supply from Russia, North Africa or the U.S.? The policy implications should be obvious, even to the U.S.
Estimates of the job benefits from U.S. LNG projects depend on a variety of assumptions. Roughly 25,000 direct construction jobs would be created if all the projects are built. Increasing the U.S. natural-gas production base by another 13 billion cubic feet might translate to 450,000 direct and indirect jobs and $16 billion in annual tax revenue for federal and state coffers.
It’s easier to forecast improved trade balances. Exporting 13 BCF per day of LNG could generate about $45 billion annually. Reaching Pickens’ goals could offset another $70 billion annually of oil imports.
Exporting energy, however, rubs a lot of people the wrong way. Pickens wants cheap natural gas for his 18-wheelers and opposes LNG exports. Industrial gas users argue that a vibrant LNG industry would propel domestic gas prices higher. A study by Deloitte said that exporting six 6 BCF per day of LNG would raise wellhead gas prices by 12 cents per million BTU (about 1% on a retail basis). Advocates of “energy independence” argue that exporting LNG would tie U.S. natural gas prices to global markets.
The Energy Department’s Office of Fossil Energy is considering whether exporting LNG is in the public interest. In the meantime — shades of Keystone XL — the department has effectively put a moratorium on new LNG export licenses.
Energy’s decision-making process balances the extent to which exporting LNG drives up prices with the economic benefits of increased production and energy exports. The price assessment comes at a time when U.S. gas fetches the same price in constant dollars as it did in 1975. Producers are now shutting down production and lowering exploration budgets. The shale-gas “job machine” is now in reverse.
Energy’s price study, released in January, found that exporting six BCF per day would increase wellhead prices by 50 to 60 cents per million BTU by 2026. The study has a myriad of assumptions and scenarios, the most fundamental of which is future gas production. In 2007, Energy predicted the U.S. would be importing 12.3 BCF a day of LNG by 2030 due to falling gas production. But primarily because of the shale-technology phenomenon, wellhead prices have tumbled from $6.25 six years ago, even as demand increased by eight BCF per day. That demand figure is larger than the six BCF assumption of the Energy study. The Energy Department is not particularly to blame, as most forecasters got it just as wrong on gas production.
Ideally, the Energy Department should move quickly and recognize free-market principles. And the administration could send a clear policy signal that natural gas is integral to the country’s energy future and that exporting LNG is good economics and consistent with its 2010 State of the Union address to double U.S. exports over five years and create two million new jobs. But Energy is moving slowly, and administration signals on natural gas are mostly lip service. The economic-benefits study should have been done by the end of March. But last week, Energy delayed its release until late summer, and said there is no timeline to review results and develop policy recommendations. Translation: after the election.
While we are fantasizing, the government could stop singling out the job-creating energy industry for higher taxes, emphasize cost/benefit analysis before adding further regulation to energy production, and get out of the business of regulating LNG exports altogether, which smacks of protectionism. To that end, should we also give veto authority to the Agriculture Department over grain exports (to lower corn prices) and the Commerce Department over auto, airplane and smartphone exports?
JOHN R. SIEGEL is the president of J.J. Richardson, a registered investment advisor that manages a hedge fund in Bethesda, Md.
Dow Jones & Company, Inc.
By gCaptain Staff On April 8, 2012
- USA: Jordan Cove Submits Non-FTA LNG Export Application (mb50.wordpress.com)
- USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal (mb50.wordpress.com)
- USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project (mb50.wordpress.com)
- Macquarie Vies To Sell U.S. LNG To India (mb50.wordpress.com)
- USA: Golden Pass LNG Plans Re-Exports (mb50.wordpress.com)
- USA: ETE Units File with FERC for Proposed Lake Charles Liquefaction Project (mb50.wordpress.com)
- Cheniere: Sabine 1,2 Train Construction Start in H1 2012 (USA) (mb50.wordpress.com)
(Reuters) – The U.S. Strategic Petroleum Reserve is not quite as strategic as it used to be.
As President Barack Obama moves closer to an unprecedented second release of the U.S. emergency oil stockpile in a bid to bring down near-record fuel prices, experts say dramatic logistical upheavals in the U.S. oil market over the past year may now make such a move slower and more complicated.
Moving to tap the four giant Gulf Coast salt caverns that hold 700 million barrels of government-owned crude would still almost certainly knock global oil futures lower, delivering some relief at the pump for motorists and helping Obama in the November election if he can prevent gasoline from rising above $4 a gallon nationwide.
On Thursday, prices fell by as much as $3 a barrel after Reuters reported that Britain was set to agree to release stockpiles together with the United States later this year. UK officials said the timing and details of the release would be worked out prior to the summer, when prices often peak.
But the logistics of getting that crude oil to willing refiners are more complicated than ever.
The reversal of a major Texas-to-Oklahoma pipeline will lower the distribution capacity of the SPR’s largest cavern, according to John Shages, who oversaw the U.S. oil reserves during the Bush and Clinton administrations. A resurgence in domestic oil output and the potential closure of the East Coast’s biggest refinery is curtailing demand for crude.
There is little doubt that SPR oil would eventually find buyers, since it is basically auctioned to the higher bidder. But it may move more slowly than the government hopes.
“The logistical system in the United States is shifting,” said Guy Caruso, the former head of the Energy Information Administration. “That probably is going to cause SPR officials to rethink how that oil would be distributed especially in an extreme scenario.”
The mechanics of the release may prove almost as tricky for Obama as rallying international support for a second intervention in as many years, or fending off attacks from Republicans who will likely brand it as a pre-election gimmick.
The U.S. shale oil boom and rising imports of Canadian oil sands crude have transformed the U.S. energy landscape, with industry now scrambling to move a glut of oil from the center of the country down to the U.S. Gulf Coast — reversing historical trends that were the basis for the SPR’s original planning.
The nation’s emergency oil stockpile, created by Congress in the mid-1970s after the Arab oil embargo, was designed to transport oil primarily via pipeline from the Gulf to refineries in the area and to buyers further north.
“The fact that pipelines go south and not north is a major change,” says Edward Morse, global head of commodities research at Citigroup and a former energy expert at the State Department.
The Department of Energy says the SPR can distribute crude to 49 refineries with a capacity of more than 5 million barrels per day — about one-third the U.S. total — and five marine terminals. It is designed to be capable of releasing oil within two weeks of an order, and to sustain a rate of 1 million bpd for as long as a year and a half, enough to meet 5 percent of U.S. demand.
Today it can discharge oil at a maximum rate of 4.25 million bpd, just below its 4.4 million bpd design capacity, a department official said. The reduction was due to a damaged storage tank.
Industry analysts, however, are skeptical.
Morse says that the maximum rate now appears unachievable, and that logistical problems constrained the government’s release of 30 million barrels of oil last summer — its largest ever — in response to the disruption of Libyan oil supplies.
Oil from the reserves must compete with crude already being transported via pipeline or tanker, often on crowded waterways, so there may not be enough capacity in the system to immediately take in millions of additional barrels of oil.
The Energy Department released an average of 743,000 bpd last August.
The department said it conducts thorough assessments of commercial capabilities to move oil from the reserves on a routine basis and remains confident it could supply the market with 4.25 million bpd if needed.
Many analysts doubt that much would ever be needed at once.
“Absent a serious disruption of great magnitude, it is inconceivable that the U.S. would draw down its inventory of SPR at the maximum rate,” said Shages, who now runs his own firm, called Strategic Petroleum Consulting, LLC.
Even so, the system now has less flexibility.
The move to reverse the flow of the 350,000 bpd Seaway Pipeline to move crude oil from Cushing, Oklahoma, where there is a glut, to Gulf Coast refineries will almost certainly hurt the distribution capability of the SPR’s Bryan Mound storage tank in Freeport, Texas, says Shages.
Bryan Mound is the largest of the four sites, capable of holding about a third of the SPR’s total crude. About 43 percent of last year’s release came from Bryan Mound, data show.
After operator Enterprise Products completes the process of reversing the line by June, it will be limited to shipping crude via two Gulf of Mexico terminals and a system of local pipelines into Houston area refineries.
But Bryan Mound will still be able to discharge crude at a rate of 1.25 million bpd, according to an energy department official.
“When the pipeline is reversed, the distribution capability of crude from the SPR site will still be nearly 25 percent more than the site’s maximum drawdown rate, ensuring more than sufficient distribution capability,” the official said.
The Capline from Louisiana to Illinois, the largest such south-to-north pipeline, in theory has plenty of spare capacity since it has been running at less than a quarter of its 1.2 million bpd — but that is because a glut of Canadian and North Dakota crude is already sating the big Midwest refiners.
Meanwhile Gulf Coast plants are filling up on growing output from the Eagle Ford shale in Texas, reducing import demand. Because most U.S. crude oil cannot legally be exported, SPR supplies will typically only displace seaborne imports.
U.S. crude oil imports into the Gulf Coast region, known as Padd 3, fell 8 percent last year to below 5 million bpd, the lowest level since the 1990s.
Last year, at least some of the crude released from the SPR traveled further afield, beyond the Gulf Coast.
Tesoro, whose only refineries are on the West Coast, bought 1.2 million barrels, while East Coast refiner Sunoco bought 1.4 million barrels. Obama issued 44 waivers to the Jones Act to allow companies to use non-U.S. tankers for shipments last year.
But the East Coast looks a less likely market this year. Sunoco is set to close its 335,000 bpd Philadelphia refinery before June if it does not find a buyer. That could cut the region’s capacity to less than 700,000 bpd.
Ultimately the rate of release means little if you cannot get the oil quickly to those who need it most, says Mark Routt, a senior oil market consultant at KBR Advanced Technologies.
“To say that you have this drawdown capability, but you’re putting oil in places it doesn’t need to go, isn’t really helpful to the market,” Routt said.
- Tapping oil from the SPR may be trickier than ever (business.financialpost.com)
- Is China’s SPR soaking up all the oil? (business.financialpost.com)
- Is The SPR Release Already Priced Into Oil Prices? (zerohedge.com)
- Obama, the politics of the SPR and energy (lack of) exploration! (politicsandfinance.blogspot.com)
- U.S. lawmakers worry about East Coast refining capacity – Financial Post (business.financialpost.com)
- Seaway – Echo terminal link planned (mb50.wordpress.com)
- A Brief History of the U.S. Strategic Petroleum Reserve [OIL LOANS, OIL SALES] (ibtimes.com)
Energy Firms Promote Exports, but Manufacturers Fear Their Costs Will Climb
U.S. officials will soon weigh in on a fight between companies that want to export some of America’s fast-growing supply of natural gas and big manufacturers that oppose the exports because they rely on cheap domestic gas.
In the next few weeks, Washington’s number-crunchers are set to estimate whether exports would cause U.S. prices to swell—a finding they will use in deciding the fate of more than a half-dozen projects across the nation.
The battle, which pits manufacturers such as Dow Chemical Co. against energy producers like ConocoPhillips, shows how the boom in U.S. fossil-fuel production is upending markets and forcing policy makers into decisions they didn’t imagine facing just a few years ago.
Natural gas is pumped at a hydraulic fracturing operation in Pennsylvania’s Marcellus Shale in July.
Once seen as a likely significant importer of natural gas—before the boom in domestic shale-gas production provided enough to meet demand—the U.S. is now emerging as a potential supplier of the fuel to nations overseas thanks to the newly tapped sources in shale.
Companies are setting their sights on markets in Europe and Asia where natural gas fetches three to four times the price in the U.S. According to Platt’s, natural gas in Japan and South Korea fetches more than $16 per million British thermal units, compared with a benchmark price of a little more than $3 per million BTUs in the U.S. The companies are looking to spend billions of dollars on new terminals that could ship out about 17% of U.S. daily production, or about 11 billion cubic feet per day, according to the Energy Department. But Dow Chemical and others say allowing exports will crimp the supply available to U.S. users and drive up prices here.
To send natural gas across the oceans, companies must supercool the fuel to minus 260 degrees and convert it to liquid form so it can be loaded onto tankers. Building massive coastal facilities to make liquefied natural gas requires multiple permits from Washington.
The Energy Department is looking at whether exports will drain U.S. supplies and inflate domestic prices. The Energy Information Administration, part of the department, is expected to deliver its analysis in a few weeks.
If the department finds export terminals will raise the domestic price of natural gas and fail to serve the country’s best interests, it could block applicants from exporting to most nations except those with free-trade agreements with the U.S. That could doom the projects.
Sen. Ron Wyden (D., Ore.), whose state includes one of the proposed terminals, says he is concerned U.S. consumers and businesses will get “short shrift” if natural gas supplies are shipped abroad.
“If you see natural gas prices go into the stratosphere, it would make it difficult for other industries to create jobs in the United States,” Mr. Wyden said in an interview.
Among those taking a hit would be chemical companies, which use natural gas as a raw material in car parts, bottles, cleaners, mattresses and other products. Dow Chemical, one of the most outspoken critics of the export proposals, says the U.S. would be better off using its cheap natural gas for domestic manufacturing instead of exports.
“When natural gas is used as a chemical raw material, it creates eight times the value compared to other uses, and fuels higher-paying jobs, exports of finished goods and the vitality of the manufacturing sector,” Dow spokeswoman Kasey Anderson said.
Energy companies say there is plenty of natural gas in the U.S. to meet domestic demand and support exports at the same time. They say building the giant export facilities would create construction jobs and boost long-term employment by encouraging a faster rise in U.S. natural-gas output.
“American consumers are best served when markets rather than regulators determine outcomes,” said Cheniere Energy Inc. spokesman Andrew Ware.
While concern over price increases “gets the most airplay,” the Energy Department is also examining potential benefits of exports, such as creating jobs and offsetting the large U.S. trade deficit, said Chris Smith, the department’s assistant secretary for oil and gas.
Cheniere, which wants to start construction in 2012 on an export facility in Louisiana, is the only company to have cleared the Energy Department hurdle on exports. It got approval to export to most nations in May, before opponents had fully geared up to resist such plans. Cheniere has already signed long-term contracts to supply natural gas to the U.K.’s BG Group PLC, Spain’s Gas Natural Fenosa and GAIL (India) Ltd.
Many companies that are seeking permission to export natural gas had planned to import it just a few years ago. Then U.S. production rose 18% between 2005 and 2010, with the bulk of the increase coming from gas trapped in rock formations known as shale.
Import terminals are now gathering dust. Earlier this year, a terminal owned by Dominion Resources Inc. south of Baltimore had to buy a shipment of natural gas from overseas just to keep its equipment running.
With natural gas prices in the U.S. at multiyear lows, power companies can generate electricity more cheaply and pass the savings to consumers.
A study by Navigant Consulting Inc. found three of the export projects the government is studying could together increase domestic prices by 17% in 2020, with the impact declining over time as more natural gas is produced.
Deloitte, which looked at a separate set of three projects, said the long-term rise in prices would be much smaller.
Charles Ebinger of the Brookings Institution says the impact of exports on prices is “virtually an impossible question” because there are so many hard-to-measure variables. One is whether the popular drilling technique known as hydraulic fracturing continues to grow—boosting natural-gas supply and keeping prices down—or gets bogged down in safety questions.
Write to Tennille Tracy at email@example.com
- An emerging player (mb50.wordpress.com)
- Natural gas glut fuels export debate (mysanantonio.com)
- Gas Natural Fenosa Deals with Cheniere Energy to Buy US Shale Gas Sourced LNG (mb50.wordpress.com)
- USA: Cheniere Plans Corpus Christi LNG Export Terminal (mb50.wordpress.com)
- Angola LNG Looks to Sell Liquefied Natural Gas to Non-U.S. Buyers (mb50.wordpress.com)
- Democrats debate amongst themselves: Should we curb natural gas exports? (hotair.com)
- Natural gas is poised for a rebound (business.financialpost.com)
By Joe Stephens and Carol D. Leonnig
Linda Sterio remembers the excitement when President Obama arrived at Solyndra last year and described how his administration’s financial support for the plant was helping create hundreds of jobs. The company’s prospects appeared unlimited as Solyndra executives described the backlog of orders for its solar panels.
Then came the August morning when Sterio heard a newscaster announce that more than a thousand Solyndra employees were out of work. Only recently did she learn that, within the Obama administration, the company’s potential collapse had long been discussed.
“It’s not about the people; it’s politics,” said Sterio, who remains jobless and at risk of losing her home. “We all feel betrayed.”
Since the failure of the company, Obama’s entire $80 billion clean-
technology program has begun to look like a political liability for an administration about to enter a bruising reelection campaign.
Meant to create jobs and cut reliance on foreign oil, Obama’s green-technology program was infused with politics at every level, The Washington Post found in an analysis of thousands of memos, company records and internal e-mails. Political considerations were raised repeatedly by company investors, Energy Department bureaucrats and White House officials.
The documents reviewed by The Post, which began examining the clean-technology program a year ago, provide a detailed look inside the day-to-day workings of the upper levels of the Obama administration. They also give an unprecedented glimpse into high-level maneuvering by politically connected clean-technology investors.
They show that as Solyndra tottered, officials discussed the political fallout from its troubles, the “optics” in Washington and the impact that the company’s failure could have on the president’s prospects for a second term. Rarely, if ever, was there discussion of the impact that Solyndra’s collapse would have on laid-off workers or on the development of clean-
“What’s so troubling is that politics seems to be the dominant factor,” said Ryan Alexander, president of Taxpayers for Common Sense, a nonpartisan watchdog group. “They’re not talking about what the taxpayers are losing; they’re not talking about the failure of the technology, whether we bet on the wrong horse. What they are talking about is ‘How are we going to manage this politically?’ ”
The administration, which excluded lobbyists from policymaking positions, gave easy access to venture capitalists with stakes in some of the companies backed by the administration, the records show. Many of those investors had given to Obama’s 2008 campaign. Some took jobs in the administration and helped manage the clean-
Documents show that senior officials pushed career bureaucrats to rush their decision on the loan so Vice President Biden could announce it during a trip to California. The records do not establish that anyone pressured the Energy Department to approve the Solyndra loan to benefit political contributors, but they suggest that there was an unwavering focus on promoting Solyndra and clean energy. Officials with the company and the administration have said that nothing untoward occurred and that the loan was granted on its merits.
Most documents that have been made public in connection with a congressional investigation relate to the period after the loan was granted. The process began in the George W. Bush administration but resulted in the first loan in the program being granted under Obama. As a result, many factors that led to Solyndra winning a half-billion-dollar federal loan remain unknown.
White House officials said that all key records regarding Solyndra’s loan approval have been released.
Officials acknowledged that some of the records provide an unvarnished view that they might have preferred to keep private — such as a senior energy adviser’s reference to a conference call about Solyndra as a “[expletive] show,” or a company investor writing that when Solyndra was mentioned in a meeting, Biden’s office “about had an orgasm.”
Officials said those unflattering disclosures reinforce their position that they are not hiding their actions and that, despite the blemishes, nothing suggests political considerations affected the original decision to extend the loan to Solyndra. They stressed that the administration disregarded advice to avoid political problems by replacing senior Energy Department managers and moving to abort Obama’s visit to Solyndra.
“Everything disclosed . . . affirms what we said on day one: This was a merit-based decision made by expert staffers at the Department of Energy,” White House spokesman Eric Schultz said in a statement.
Officials said that concern for workers was reflected in the administration’s decision to allow Solyndra employees to receive aid under a program for workers displaced by foreign competition.
“When Solyndra’s liquidity crisis became clear, the Department of Energy underwent a robust effort to find a viable path forward for the company,” the White House’s prepared statement said. “This administration is one that will fiercely fight to protect jobs even when it’s not the popular thing to do.”
Star power in D.C.
Like most presidential appearances, Obama’s May 2010 stop at Solyndra’s headquarters was closely managed political theater.
Obama’s handlers had lengthy e-mail discussions about how solar panels should be displayed (from a robotic arm, it was decided). They cautioned the company’s chief executive against wearing a suit (he opted for an open-neck shirt and black slacks) and asked another executive to wear a hard hat and white smock. They instructed blue-collar employees to wear everyday work clothes, to preserve what they called “the construction-worker feel.”
White House e-mails suggest that the original idea for “POTUS involvement” originated with then-Chief of Staff Rahm Emanuel. Emanuel, now mayor of Chicago, did not respond to a request for comment from The Post.
Well beyond the details of the factory photo op, raw political considerations surfaced repeatedly in conversations among many in the administration.
Just two days before the visit, Obama fundraiser Steve Westly warned senior presidential adviser Valerie Jarrett that an appearance could be problematic. Westly, an investment fund manager with stakes in green-energy companies, said he was speaking for a number of Obama supporters in asking the president to postpone the visit because Solyndra’s financial prospects were dim and the company’s failure could generate negative media attention.
“The president should be careful about unrealistic/optimistic forecasts that could haunt him in the next 18 months if Solyndra hits the wall,” Westly wrote. Westly did not respond to a request for comment from The Post.
Similar concerns arose repeatedly among officials inside the White House. One staffer at the Office of Management and Budget suggested to a colleague that the visit could “prove embarrassing to the administration in the not too distant future.” Even Ron Klain, Biden’s chief of staff, acknowledged “risk” in the trip.
But administration officials ultimately waved off the jitters, after assurances from Energy Department officials that their policy was sound and that Solyndra’s troubles would be fleeting. After Obama’s trip, the administration hung a photo from his visit on a wall in the West Wing, to underscore good things to come.
Solyndra’s financial picture did not improve, however, and by year’s end the company was crumbling. Its investors pitched bailout plans, seeking help from what a Solyndra executive referred to as the “Bank of Washington” — his apparent term for U.S. taxpayers. The Energy Department rebuffed the plans, at least initially.
In late 2010, Solyndra board member Steve Mitchell told his associates that Energy Department officials had conceded that additional financing was necessary yet said in private meetings that they lacked the political muscle to deliver it. “The DOE really thinks politically before it thinks economically,” Mitchell concluded. A spokesman for Mitchell said he would have no comment for this article. An Energy Department spokesman said that all decisions regarding the loan were based on merit.
Solyndra eventually realized that it had to lay off workers to stay afloat — no small step for a company that the president had backed to create jobs in a recession. But records indicate that the Energy Department urged company officials to delay the move until after the contentious November 2010 midterm elections, which imperiled Democratic control of Congress.
Despite the effect that timing might have on workers, one e-mail among company investors ended the discussion by asserting: “No announcement till after elections at doe request.” An Energy Department spokesman did not respond to requests for comment for this article.
More than once, investors wrote that the administration appeared to be making particular decisions to avoid looking “bad.” A December 2010 e-mail between administration officials’ staffers seemed to confirm the suspicions, concluding that “a meltdown” at Solyndra “would likely be very embarrassing for DOE and the Administration.”
An outside energy adviser foresaw serious political damage, writing to senior West Wing officials in February to warn that because federal loans went to companies linked to Obama donors, a wave of Republican attacks “are surely coming.” He recommended that Obama consider replacing Energy Secretary Steven Chu and his deputies, perhaps with a bipartisan management team.
A Solyndra board member, in a memo, described at length mistakes he thought that company founder Christian Gronet had made, saying that some of the stories about his actions “border on moronic” and that Gronet’s missteps had sparked an executive mutiny. Gronet survived, the board member suggested, only because of his close relationship with Energy Department leaders and because he had “star power in D.C.”
Gronet’s attorney, Miles Ehrlich, said in a statement last week that Gronet did his best but acknowledged that there had been internal debate about the business strategies he chose.
Political calculus was especially on display in an e-mail early this year between administration staffers who calibrated the damage that could result from pushing back Solyndra’s collapse by a few months at a time.
“The optics of a Solyndra default will be bad whenever it occurs,” an OMB staff member wrote to a colleague. “If Solyndra defaults down the road, the optics will arguably be worse later than they would be today. . . . In addition, the timing will likely coincide with the 2012 campaign season heating up.”
Solyndra executives and investors were attuned to the value of playing politics. Memos from Solyndra’s lobbying firm, McBee Strategic Consulting, stressed the need to “socialize” with leaders in Washington and to mobilize a lobbying effort described variously as quiet, surgical and aggressive.
Dinner in Vegas
Beyond the West Wing, the documents provide a vivid glimpse into high-level machinations inside the world of clean-energy entrepreneurs.
Solyndra’s strongest political connection was to George Kaiser, a Democratic fundraiser and oil industry billionaire who had once hosted Obama at his home in Oklahoma. Kaiser’s family foundation owned more than a third of the solar panel company, and Kaiser took a direct interest in its operations.
With the 2010 midterm elections just days away, Kaiser flew to Las Vegas to help the party cause. He was a guest at a private fundraising dinner for Senate Majority Leader Harry M. Reid (Nev.), but the real attraction at the event was its headliner — Obama. Realizing he might have an opportunity to talk with the president, Kaiser’s staff prepped him with talking points about Solyndra.
Kaiser did not have to angle for Obama’s attention. Organizers seated him next to the world’s most powerful man — for two hours.
“OK, I’ll admit it. It was pretty intoxicating,” Kaiser effused in an e-mail to an associate at 5:30 the next morning. “Charming and incisive as always. Casual conversation; not speechifying.”
Kaiser did not squander his time. While he avoided the use of the word “Solyndra,” according to the account he later gave to colleagues, he complained to the president about Chinese manufacturers dumping cheap solar panels on the U.S. market and pressed Obama’s deputy chief of staff about the need for a Buy American Act for federal agencies. The company was intent on making the federal government a major customer — part of what a Solyndra investment adviser called the “Uncle Sam” strategy — and the new act would give Solyndra an advantage.
Kaiser, who has declined interview requests, said through spokesman Renzi Stone that he has not discussed Solyndra’s loan “with the U.S. government.” Other e-mails show that he rejected requests to take a more forceful role in advocating for the company.
Nonetheless, records show that Kaiser, a frequent visitor to the White House, was in contact with officials at Solyndra and its biggest investors, and advised them on leveraging the power of the West Wing.
“Why don’t you pursue your contacts with the WH?” Kaiser advised a Solyndra board member in October 2010.
Nonprofit law specialists said that Kaiser’s focus on Solyndra was striking, because he had no official role at the company and had no personal investment in the corporation. After amassing a fortune in the oil and banking industries, Kaiser had endowed a nonprofit corporation that bore his name, but he did not sit on its board.
The nonprofit corporation, known as the George Kaiser Family Foundation, had its own investment fund, which owned a third of Solyndra. Mitchell, a Solyndra board member, was the fund’s manager.
Despite those walls between Kaiser and Solyndra, e-mail exchanges show that Mitchell repeatedly sought Kaiser’s counsel and in one instance requested “authority” to make a major move.
Nonprofit experts stressed that once Kaiser donated his money to charity — and thereby qualified for millions of dollars in tax breaks — the money was no longer his under federal law.
Kaiser arrived in Las Vegas on the Friday night of the fundraiser, carrying a photo of himself and the president, which Obama signed for him. Over the evening, the oilman’s conversation moved from social chatter to business.
“I talked in general about the Chinese and solar but didn’t want to get too specific with him,” Kaiser told associates. “I did talk to him about the Chinese subsidy over the past nine months and the effect it was having on U.S. solar and wind manufacturers. . . . I thought that a more aggressive trade policy with the Chinese was essential. . . . [Obama] said that these issues would be addressed aggressively at the G-20.”
As for majority leader Reid, Kaiser confided in his e-mails: “Harry was mushy nice . . . Barack said privately that Harry would win by a small margin. I hope he’s right.”
Stone said last week that the dinner was only the second time Kaiser had met the president and that there was nothing wrong with Kaiser taking an interest in the foundation and its investments. While the foundation’s board respected Kaiser’s advice, its members made all the financial decisions, he said.
Today, a handful of Solyndra employees remain at its Silicon Valley factory, helping wind down operations. Of the 1,100 workers who lost their jobs, an estimated 90 percent remain unemployed, such as Sterio. She’s relying on help from relatives to make payments on her home, where she lives with her ailing husband and four grandchildren.
Solyndra has failed to attract a buyer who would keep the plant operating, so it is trying to unload its assets piecemeal to pay off its debts. The first $75 million recovered is expected to go to Kaiser’s nonprofit organization and other investors; it is unclear how much will be left for taxpayers.
Along with selling its microscopes and industrial robots, the company in November auctioned off the 30-foot-long blue banner that served as a backdrop for Obama’s factory visit.
Winning bidder Scott Logsdon, a laid-off Solyndra worker who’s been lucky enough to land a new job, snapped up the sign for $400. He’s hoping that with all of the political attention Solyndra’s failure has received, the value of the sign will appreciate by Election Day.
It reads: “Solyndra . . . Made in the USA.”
Research director Alice Crites contributed to this report.
- Group Launches Ad Criticizing Solyndra Loan (foxnews.com)
- New ad ties Solyndra to Obama’s ‘wasteful cronyism’ (politicalticker.blogs.cnn.com)
- Energy Sec.: No Apologies For Solyndra (abcnews.go.com)
- Obama administration ignored warnings about Solyndra (thehindu.com)
- Solyndra: Energy Dept. sought to delay layoffs (cbsnews.com)
- Emails Reveal Early Solyndra Concerns (myfoxny.com)
- House panel approves subpoena on Solyndra loan (seattletimes.nwsource.com)
(Reuters) – An Obama administration appointee at the Energy Department pressed White House analysts to sign off on a $535 million loan to Solyndra even though his wife worked for the failed solar panel maker’s law firm, according to internal emails made public on Friday.
The revelation adds new drama to a political battle over the administration’s backing for Solyndra, which has filed for bankruptcy and has been raided by the FBI. The newly disclosed emails reveal “a disturbingly close relationship” between the White House, campaign donors and wealthy investors relating to Solyndra, a senior congressional Republican said.
The emails show frequent inquiries from Steven Spinner, who was an adviser to the Energy Department on its use of economic stimulus funding to spur clean energy technology, on the Solyndra loan, according to a report in the New York Times.
On September 29, the Energy Department had posted a “fact check” on Spinner’s involvement in the Solyndra case on its website, explaining that he started his job after the company received conditional approval for its loan application.
The department said Spinner “was recused from engaging in any discussions on decisions affecting specific loan applications in which his spouse’s law firm was involved out of concern for the appearance of a conflict of interest.”
Allison Spinner is a partner at the law firm Wilson Sonsini Goodrich & Rosati, which represented Solyndra.
Energy Department spokesman Damien LaVera said on Friday that the department’s ethics officer had cleared Spinner to “oversee and monitor the progress of applications,” although he was not allowed to make decisions on loans or their terms.
LaVera added that Allison Spinner had “agreed not to participate in or receive any financial compensation from her law firm’s work on behalf of any loan program applicant.”
Allison Spinner did not work on the Solyndra matter and the firm created an “ethical wall” between her and any of its work on Energy Department issues while her husband worked for the government, according to Courtney Dorman, a spokeswoman for Wilson Sonsini Goodrich & Rosati said.
While Steve Spinner was at the department, Allison Spinner had agreed to not work on Energy Department issues for clients, and the firm did not discuss or disclose related issues or documents with her, Dorman said.
Steven and Allison Spinner did not respond to requests for comment.
‘BREATHING DOWN MY NECK’
The White House, which has aggressively defended decisions made on the loan guarantee, turned over the emails on Friday to the House of Representatives Energy and Commerce Committee, which has been probing the loan for the past eight months.
“The paper trail released by the White House portrays a disturbingly close relationship between President Obama’s West Wing inner circle, campaign donors, and wealthy investors that spawned the Solyndra mess,” Representatives Fred Upton, the panel’s chairman, and Cliff Stearns, the head of the investigation, said in a statement.
The emails show Spinner discussed the pending final decision often with Solyndra officials, Energy Department colleagues, and the White House budget office, the New York Times said.
“I have the O.V.P. and W.H. breathing down my neck on this,” Spinner wrote, referring to the office of the vice president and the White House in an email to an Energy Department loan officer.
Spinner, who advises clean tech companies in San Francisco, was an Obama fundraiser during the 2008 presidential campaign, the newspaper said.
Other emails showed top Treasury Department officials were alarmed about an Energy Department decision to restructure the company’s debt earlier this year, when it ran out of cash.
The plan allowed some $75 million in private investment to be ranked ahead of the government in the event of bankruptcy. That private fund was backed by a prominent Obama fundraiser, George Kaiser.
IN THE DARK
Mary Miller, Treasury’s assistant secretary for financial markets, emailed the White House budget director two weeks before Solyndra filed for bankruptcy, complaining the Energy Department had kept Treasury in the dark.
The loan was provided by Treasury’s Federal Financing Bank but was guaranteed and monitored by the Energy Department.
Treasury Department lawyers did not think the law allowed for the government loan to be subordinated, Miller said in an August 17 email to Jeffrey Zients, deputy director of the White House Office of Management and Budget.
“In February, we requested in writing that DOE seek the Department of Justice’s approval of any proposed restructuring. To our knowledge, that has never happened,'” Miller said in the email, excerpts of which were provided by House Republicans.
She also complained that “DOE has not responded to any requests for information about Solyndra” despite requests dating to July 2010.
But emails provided by the administration showed that top staff at the Energy Department discussed the concerns with the chief financial officer of Treasury’s Federal Financing Bank.
“Ultimately, DOE’s determination that the restructuring was legal was made by career lawyers in the loan program based on a careful analysis of the statute,” an Energy Department spokesman said.
A Treasury spokesman declined to elaborate on the contents of Miller’s email.
The House Energy and Commerce Committee has now requested Treasury turn over all documents related to the Solyndra loan guarantee.
The panel has collected tens of thousands of pages of documents from the Energy Department and White House, and has requested information from two private investors in Solyndra.
The committee has also asked the Energy Department for information on 27 other guarantees backing about $16 billion in loans. The panel is slated to hold another hearing on its findings next Friday, October 14.
- Energy Official With Solyndra Links Pressed for U.S. Loan (businessweek.com)
- Feds were warned about Solyndra loan (seattletimes.nwsource.com)
- Energy Department Wanted to Give More Money to Solyndra, Emails Show (foxnews.com)
- More Solyndra E-mails Detail Role of Second Obama Fundraiser (swampland.time.com)