E&E News: Saudi attacks 'a teachable moment' — Murkowski

Senate Energy Chairwoman Lisa Murkowski is using this week's attacks on key Saudi Arabian oil processing facilities to try to tamp down congressional enthusiasm for tapping the Strategic Petroleum Reserve (SPR) to pay for non-energy purposes.

During yesterday's closed-door GOP luncheon, the Alaskan Republican cited the Saudi attacks — which temporarily knocked about 5% of the world's daily oil production offline — to remind her colleagues and Vice President Mike Pence about the SPR's intended purpose as an insurance policy against price shocks. 

"My point on the SPR is that we can't even have a conversation about if we should in an event like this if you already spent it," she told reporters. "The fact that I have laid my body down in front of the train to protect it all these years, we have room to make decisions."

Murkowski for years has bristled at Congress' tendency to tap the SPR to pay for unrelated purposes, including budget deals, health care, water infrastructure and transportation legislation (E&E Daily, July 19).

According to a Congressional Research Service report in June, Congress has mandated the sale of 271 million barrels of SPR oil through fiscal 2028.

Murkowski, who argues that SPR revenues should be dedicated to energy security purposes, is responsible for the sale of 7 million of those barrels.

They were used to cover a shortfall in the 2017 tax overhaul from her provision to open the Arctic National Wildlife Refuge to oil drilling. As Energy chairwoman, SPR revenues are one of the few pay-fors that Murkowski controls.

However, some of the revenues from SPR sales over the years are to be reinvested in shoring up the aging and dilapidated facilities.

The Trump administration has repeatedly called for selling off the SPR in its annual budget requests, only to be rebuffed.

President Trump last weekend announced he had authorized the use of the SPR in response to the Saudi attacks. During yesterday's GOP luncheon, Murkowski reiterated her positions.

"I basically pointed out the fact that we've seen the most significant disruption on the world global market, and yet the impact, whether to the markets or to the price of oil, it's been surprisingly minimal," she told E&E News after leaving the lunch.

Murkowski also credited policies set by Congress and the Trump administration to increase domestic production, including lifting the crude oil export ban in 2015.

"This is the most severe disruption of the global oil markets that we have ever seen, and we have a tool in our toolbox to respond if we should decide to use it," she said, calling it a "teachable moment."

Sen. John Barrasso (R-Wyo.) said yesterday that there is "huge value" in maintaining the SPR, which currently holds about 600 million barrels of crude.

However, he noted that the surge in U.S. oil production in recent years may diminish the future need for the SPR because of the Trump administration's "position of energy dominance."

"The need for it to be called upon, I think, is going to be less and less because just the volume of energy that we're producing," Barrasso told E&E News. "We're the No. 1 energy producer in the world."

Asked if he sees the SPR as an offset to help pay for the $287 billion transportation bill that passed his committee before the August recess, Barrasso echoed a favorite phrase of Murkowski's.

"We don't want this Strategic Petroleum Reserve to become an ATM," he said.

The need to tap the SPR appears to have diminished, given that Saudi Arabia said yesterday it expects normal oil production to resume within weeks.

But Sen. Angus King (I-Maine) said he would support tapping the reserve if gas prices continue to climb amid Mideast turmoil.

"I don't think we should react to small fluctuations, but if it's significant, that's something we should consider," he told E&E News.

Shipping standards

In a separate development, Murkowski yesterday raised concerns about upcoming international low-sulfur shipping fuel standards set to take effect next year.

In a letter to Energy Information Administration chief Linda Capuano, Murkowski urged vigilance in monitoring the effects of the International Maritime Organization's 2020 clean fuel rules, which will reduce sulfur limits from the current maximum of 3.5% to 0.5%.

"The consensus impact analysis of IMO 2020 has been far less clear than one might expect from markets set to adopt a global mandate," Murkowski wrote.

"While many experts argue that U.S. refiners will benefit overall because the American refining system is the most complex in the world, they also point to possible economic dislocations, technical challenges and unexpected market dynamics. It is also unlikely that refining centers around the world will simply cede the field to us over the long term."

Murkowski's position is at odds with more than a dozen GOP senators, who earlier this year urged Trump to support the standards. In doing so, they downplayed possible price hikes in diesel, jet fuel and heating oil that EIA has projected may occur (E&E News PM, April 29).

But her letter stops short of opposing the standards, which she notes could raise the price of diesel — the primary power source in much of rural Alaska.

"It is my hope that your agency closely monitors implementation of IMO 2020 with a careful eye to unintended consequences and disparate impacts," she wrote.

By:  Geof Koss and Jeremy Dillon
Source: E&E News