THE STRATEGIC ENERGY IMPERATIVE

[Senate Prints 116-45]
[From the U.S. Government Publishing Office]

116th Congress } { S. Prt.
COMMITTEE PRINT
2d Session } { 116-45
_______________________________________________________________________

__________

A MAJORITY STAFF REPORT

prepared for the use of the

COMMITTEE ON
ENERGY AND NATURAL RESOURCES

UNITED STATES SENATE

One Hundred Sixteenth Congress

Second Session

September 15, 2020

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Printed for the use of the
Committee on Energy and Natural Resources

Available via the World Wide Web: http://www.govinfo.gov

______

U.S. GOVERNMENT PUBLISHING OFFICE
41-357 WASHINGTON : 2020

COMMITTEE ON ENERGY AND NATURAL RESOURCES

LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming JOE MANCHIN III, West Virginia
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah MARIA CANTWELL, Washington
STEVE DAINES, Montana BERNARD SANDERS, Vermont
BILL CASSIDY, Louisiana DEBBIE STABENOW, Michigan
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
CINDY HYDE-SMITH, Mississippi MAZIE K. HIRONO, Hawaii
MARTHA McSALLY, Arizona ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee CATHERINE CORTEZ MASTO, Nevada
JOHN HOEVEN, North Dakota

Brian Hughes, Staff Director
Lucy Murfitt, Chief Counsel
Tristan Abbey, Senior Professional Staff Member and Senior Policy
Advisor for
Strategy & Economics
Renae Black, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel

C O N T E N T S

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Page
Letter of Transmittal............................................ V
Prologue......................................................... 1
Introduction..................................................... 1
Background....................................................... 2
Oversight Study.................................................. 3
Findings......................................................... 4
Recommendations.................................................. 5
Conclusion....................................................... 6
Acknowledgments.................................................. 7
References....................................................... 8

Appendices

Appendix I.--With Powers So Disposed............................. 11
Appendix II.--Text of the ``Japan-United States Strategic Energy
Partnership (JUSEP)'' and the ``Australia-U.S. Strategic
Partnership on Energy in the Indo-Pacific''.................... 18
Appendix III.--Various Letters................................... 20
Appendix IV.--CRS Memo on Strategic Petroleum Reserve............ 31

LETTER OF TRANSMITTAL

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United States Senate,
Committee on Energy and Natural Resources,
Washington, DC, September 15, 2020.
Dear Colleagues: Energy is the foundation of our economy
and our society. It is, all at once, a finished product, a
feedstock, a raw material, an input, an output, a value-added
good, a natural resource, a tradable commodity, and a precious
asset. It is critical infrastructure and emergency reserves,
financial collateral and competitive exports, and a source of
high-paying and high-skilled jobs. It helps us project military
force, enables other sectors of the economy, and provides heat
in the winter and cooling in the summer.
As the senior Republican member of the Committee for more
than a decade, I view the centrality of energy as a reason to
formulate energy policy in strategic terms. Just as lifting the
ban on oil exports reshaped global energy markets, so will
investing in zero-emission advanced nuclear technology change
the game. The most optimistic alternative scenarios of our
energy future depend on taking action today.
I call your attention to the findings and recommendations
contained in this report, prepared by the Committee's Majority
Staff. It makes the case that tools of ``strategic energy'' are
imperative during this time of geopolitical competition,
exacerbated by the COVID-19 pandemic and its associated
economic distress.
Sincerely,
Lisa Murkowski,
Chairman.

THE STRATEGIC ENERGY IMPERATIVE

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Prologue

On February 18, 2020, U.S. Government representatives met
in Tokyo with officials from a major Japanese trading company.
This company boasts of energy projects across Asia and invests
in major U.S. energy-related projects. Its multibillion-dollar
book of business spans commodities of all kinds. The American
delegation asked these Japanese energy businessmen whether they
had ever competed against the United States.
The answer was simple and clear: ``No.''

Introduction

As Chairman (since 2015) and Ranking Member (from 2009 to
2014) of the Senate Energy and Natural Resources Committee,
Senator Lisa Murkowski has built the case for developing
national energy policy through a strategic lens.¹
The State of Alaska's experience--with innovative development
techniques and technology, oil and gas exports, and critical
pipeline infrastructure--presaged many of the major issues
associated with the present century's North American energy
renaissance.²Chief among these issues are the role of the Federal
Government in domestic energy markets and the wisdom of
enabling U.S. engagement in global energy markets through
commodity trade. To assist in her oversight duties, Senator
Murkowski directed Committee senior professional staff member
Tristan Abbey to visit Australia and Japan in February 2020.
The purpose of the staff delegation, supported by the
Department of State and the Congressional Research Service, was
to examine the progress and efficacy of ``strategic energy
partnerships'' signed between the United States and key U.S.
allies. Two executive agreements, in particular, served as the
foci for the trip:

--the Japan-United States Strategic Energy Partnership,
announced on November 6, 2017; and
--the Australia-U.S. Strategic Partnership on Energy in the
Indo-Pacific, announced on February 23, 2018.³This report summarizes the findings of the staff
delegation's oversight study. Its recommendations also reflect
events that transpired after the trip, including the oil price
dispute between Russia and Saudi Arabia, the coronavirus
disease (COVID-19) pandemic, actions proposed and taken by the
Trump Administration, and the Senate passage of major
Committee-originated legislation.

Background

The United States in Global Energy Markets
In 2019, the United States switched its status from ``net
energy importer'' to ``net energy exporter,'' according to the
U.S. Energy Information Administration (EIA).⁴ The
nation accomplished this feat of basic accounting economics by
producing more energy, importing less energy, and exporting
more energy.
As recently as its Annual Energy Outlook (AEO) 2014, EIA
projected in its Reference Case that exports would not exceed
imports at any point through the year 2040. This projection
steadily evolved in an optimistic direction. In AEO 2015, EIA
projected a long period of oscillation between net imports and
net exports from 2029 to 2040. In AEO 2016, EIA projected
sustained net exports, without oscillation, from 2029 to 2040.
In AEO 2017, EIA projected net exports from 2026 to 2047,
switching to net imports until 2050, the end of a new and
longer projection period. In AEO 2018, EIA projected sustained
net exports from 2022 to 2050. In AEO 2019 and AEO 2020, EIA
projected sustained net exports from 2020 to 2050.⁵Essentially, the most widely referenced energy
futures scenario (i.e., the EIA Reference Case) did not project
an imminent switch to net energy exports until the approximate
year it occurred. This curious situation in no way should be
interpreted as a criticism of the EIA. Projection is not
prediction. Rather, the point illustrates the intensity and
depth of the American energy expansion, which has caught the
world by surprise.
Committee Activity
Though chiefly concerned with domestic policy, the
Committee has held numerous hearings on the topic of the United
States in global energy markets.⁶ Dr. Fatih Birol,
executive director of the International Energy Agency, has
presented the World Energy Outlook to the Committee on three
occasions: in January 2018, February 2019, and March 2020. The
Committee held hearings on general energy and resource markets
in April 2015, January 2016, and February 2019; on evolving
natural gas markets in January 2015, September 2018, and July
2019; on global oil markets in December 2015 and July 2018; on
U.S. crude oil exports in January 2014 and March 2015; on North
American resources in July 2017; and U.S. leadership in nuclear
energy in May 2016 and April 2019; on critical minerals, which
are inextricably linked to energy markets, in January 2014, May
2015, March 2017, July 2018, May 2019, and September 2019; and
on the Strategic Petroleum Reserve (SPR) in October 2015 and
October 2019.⁷The Committee has developed key pieces of legislation
related to enhancing the U.S. position in global energy
markets. In January 2015, the Senate passed the bipartisan
Keystone XL Pipeline Approval Act (S. 1, 114th Cong. (as passed
by Senate, Jan. 29, 2015)), which would have provided federal
approval to a significant oil pipeline project crossing the
border with Canada; it was vetoed by President Obama. Chairman
Murkowski championed the legislative repeal of the de facto ban
on U.S. crude oil exports, which was achieved December 2015
(Consolidated Appropriations Act, 2016, Pub. L. No. 114-113,
129 Stat. 2242 (2015)). In September 2018, the Nuclear Energy
Innovation Capabilities Act (Pub. L. No. 115-248, 132 Stat.
3154 (2018)) was enacted into law.
In April 2016, the Senate passed the Energy Policy
Modernization Act (EPMA; S. 2012, 114th Cong. (as passed by
Senate, Apr. 20, 2016)). This bipartisan bill included
provisions Sec. Sec. 2201-2203 (Id. at Sec. Sec. 2201-2203)
to expedite Department of Energy (DOE) authorizations to export
liquefied natural gas (LNG) from the United States, publicly
disclose the destinations of those cargoes, and foster greater
collaboration on energy data with Mexico and Canada. As passed
by the Committee, EPMA included a provision to require DOE to
notify Congress prior to any future test sales from the SPR and
provided for modernization of the SPR itself. The test sale
provision was enacted into law in November 2015 as part of the
Bipartisan Budget Act (Pub. L. No. 114-74, 129 Stat. 584, 588
(2015)), which also created the SPR's Energy Security and
Infrastructure Modernization Fund. In August 2019, the
Committee passed the Small Scale LNG Access Act of 2019 (S.
816, 116th Cong. (as reported by S. Comm. on Energy and Natural
Resources, July 16, 2019)).
Most recently, the Committee passed the bipartisan American
Energy Innovation Act (S. 2657, 116th Cong. (as reported by S.
Comm. on Energy and Natural Resources, Nov. 19, 2019)), which
is pending on the Senate calendar. This bill includes
provisions from the Nuclear Energy Leadership Act (S. 903,
116th Cong. (2019)), which passed the Senate in July 2020 as an
amendment to the National Defense Authorization Act for Fiscal
Year 2021 (S. 4049, 116th Cong. 2020)), and from the American
Mineral Security Act (S. 1317, 116th Cong. (2019)).

Oversight Study

``Strategic energy'' is defined in this report as the
imperative for the United States to enhance national economic
security by ensuring that American energy thrives in global
markets.⁸Strategic Energy Partnerships
There is no formal definition of ``strategic energy
partnership.'' It is essentially a memorandum of understanding,
typically unfunded, generally non-binding, undeniably
optimistic, and highly principled. (Such agreements are
reminiscent of bilateral ``strategic energy dialogues'' between
the United States and a range of nations, including Brazil,
Egypt, the United Arab Emirates, Ukraine, Poland, Saudi Arabia,
and India. Both partnerships and dialogues tend to be broader
than memoranda of understanding and/or cooperation focused on
energy-related research and development.)⁹ The
administration in office at any particular time determines the
extent to which the United States will ``engage'' with a
specific partnership. Some whither, some prosper, and some
simply disappear.¹⁰In sum, strategic energy partnerships are malleable
instruments of the executive branch, not mandated creatures of
statute.
The staff delegation traveled to conduct oversight on two
such partnerships: (1) the Japan-United States Strategic Energy
Partnership, signed on November 6, 2017; and (2) the Australia-
U.S. Strategic Partnership on Energy in the Indo-Pacific,
signed on February 23, 2018.¹¹Itinerary
In Tokyo (on February 17-18, 2020), the staff delegation
met with representatives of the Ministry of Economy, Trade and
Industry; the Agency for Natural Resources and Energy; the
Japan International Cooperation Agency; the Japan Bank for
International Cooperation; the New Energy and Industrial
Technology Development Organization; the Ministry of Foreign
Affairs; the Japan Oil, Gas and Metals National Corporation;
and several commercial and academic entities.
In Canberra (on February 20-21, 2020), the staff delegation
met with representatives of the Department of the Prime
Minister and Cabinet; the Department of Foreign Affairs and
Trade; Department of Industry, Science, Energy, and Resources;
Geoscience Australia, the Department of the Treasury; the
Department of Defence; the Office of National Intelligence; and
several commercial entities.

Findings

This oversight study supports the following findings:

1. Strategic energy partnerships, in practice, fall short of
their theoretical potential. Despite robust
politico-economic foundations anchored by enduring
security alliances, U.S. strategic energy
partnerships with Australia and Japan exist
primarily in the ethereal form of papers and
conferences. Officials could not identify a
significant project developed under either
agreement. The recent bilateral agreement allowing
Australia to purchase 1.5 million barrels of U.S.
crude oil for storage in the Strategic Petroleum
Reserve, in order to comply with its International
Energy Agency obligations, is a positive
development, but is mostly an accounting
matter.¹² Prospective projects with
Japan in Southeast Asia, including fostering
``rules-based electricity markets'' in the Lower
Mekong region and the prospect of a regasification
terminal to facilitate LNG imports into Vietnam,
remain aspirational and speculative.

2. The dearth of concrete results emerging from strategic
energy partnerships can be attributed primarily to
an imbalance between lofty aspirational vision and
paltry functional resources. Federal agencies have
few tools to assist U.S. energy companies with
accessing global markets. Commercial advocacy,
feasibility studies, market analysis, and reverse
trade missions are useful instruments, but lack the
heft of direct lending, loan guarantees, and
insurance that can be provided by export credit
agencies and development finance institutions.
Though most often unfavorably compared to China's
well-resourced Belt and Road Initiative,
constrained U.S. official financing capabilities
are also surpassed by those of Italy, Germany,
India, the United Kingdom, France, and South
Korea.¹³ 3. Congressional action is required to operationalize
``strategic energy'' as a concept and to ensure the
success of strategic energy partnerships. Executive
branch agencies are largely favorably disposed, in
theory, to advancing strategic energy. In practice,
however, there exists a fundamental tension between
minimizing risks and maximizing returns, on the one
hand, and undertaking strategic projects that
present greater risk over a longer period of time,
on the other. Legislative re-direction will be
required. Congress has led the way before. For
example, Chairman Murkowski's efforts to repeal the
outdated prohibition on exporting U.S. crude oil
enabled the record-breaking levels of oil exports
described in the background section of this report,
building on incremental executive actions allowing
exports of processed condensate.¹⁴
Bipartisan and bicameral pressure on the U.S.
International Development Finance Corporation
succeeded in reversing its outdated policy
prohibiting support to civil nuclear energy
projects, following enactment into law of a
provision allowing it to support energy projects in
upper-middle-income and high-income Eurasian
economies (beyond its low-income remit).¹⁵
Even the Department of Energy's new rule to
expedite small-scale LNG exports also emerged first
in Congress.¹⁶Recommendations

Informed by the findings described above, the oversight
study also recommends the following legislative and executive
actions:
Legislative Actions
1. Pass into law the Nuclear Energy Leadership Act (S. 903),
the American Mineral Security Act (S. 1317), and
the American Energy Innovation Act (S. 2657).
2. Codify in statute that the U.S. International Development
Finance Corporation may support civil nuclear
energy projects (and consider codifying a permanent
national security exception to permit support for
civil nuclear and critical mineral projects not
strictly located in low-income countries) and that
the Department of Energy may expedite
authorizations to export small volumes of natural
gas.¹⁷ 3. Reconcile mandatory drawdowns from the Strategic
Petroleum Reserve with global economic slowdown and
persistent threats to energy security, and
prioritize funding for maintenance and
modernization of the reserve's infrastructure.
4. Reconfigure the federal apparatus surrounding export
credits, including by repealing the Department of
Treasury's statutory mandate to negotiate an end to
export credits and by facilitating Export-Import
Bank financing of strategic energy projects.¹⁸ 5. Expand federal efforts to address critical minerals
scarcity and import dependence, including by
amending the law to allow the Department of
Energy's Loan Guarantee Program to support critical
minerals projects in refining and recycling and by
adopting the June 2019 recommendations published in
a Department of Commerce report.¹⁹Executive Actions
6. Pursue multiple civil nuclear energy cooperation (``123'')
agreements concurrently and deemphasize nuclear
cooperation memoranda of understanding (NCMOUs),
which carry essentially zero force of law.²⁰ 7. Deprioritize discussions of trilateral (between the
United States, Australia, and Japan) and
quadrilateral partnerships (with India) until
bilateral agreements bear fruit.
8. Recognize that U.S. and Australian energy producers and
exporters are competing in the same markets and
focus the bilateral partnership on producing and
refining critical minerals for energy purposes.
9. Recognize that U.S. and Japanese engineering, technology,
and construction firms are competing in the same
markets and ensure the bilateral partnership
consists of more than U.S.-origin molecules being
piped through Japanese-constructed infrastructure.
10. Prioritize on-budget and on-schedule modernization of the
Strategic Petroleum Reserve.

Conclusion

Two significant events occurred in the days immediately
following the staff delegation trip to Japan and Australia: the
onset of the oil pricing dispute between Russia and Saudi
Arabia and the pandemic declaration in March 2020. Both events
matter significantly to ``strategic energy'' because the former
increased global energy supply and the latter decreased global
energy demand. The twin-shock of these events was historic and
threatened U.S. energy security. A strong domestic energy
industry is the sine qua non of a nation that is prepared to
lead strategic energy partnerships.
Chairman Murkowski joined with Senate colleagues in
successfully pressing for an end to the Saudi-Russian oil
pricing dispute.²¹ The Committee recently held
hearings on the impact of COVID-19 on the energy industry (June
16, 2020), on mineral supply chains (June 24, 2020), on U.S.
territories (June 30, 2020), and on users of public lands,
forests, and national parks (July 23, 2020).²²The Department of the Treasury and Department of
Energy separately proposed purchasing crude oil to refill the
Strategic Petroleum Reserve as part of the COVID-19 economic
stimulus package. Absent appropriations to purchase significant
quantities of crude oil, DOE's Office of Fossil Energy was
limited to two creative and commendable initiatives: (1)
providing temporary storage to U.S. producers facing
oversaturated storage; and (2) purchasing a small quantity of
crude oil by repurposing existing funds.²³ Congress
may consider clarifying SPR-related authorities to avoid future
confusion over the limits of DOE's crude oil remit.
Another DOE proposal to create a special lending facility
under the CARES Act to support U.S. energy companies ultimately
was not adopted by the Treasury Department. Such companies are
eligible for CARES Act financing under the same criteria as
companies in other sectors of the economy, as Chairman
Murkowski insisted in a letter to Secretary of the Treasury
Steven Mnuchin.²⁴Though both events significantly and deleteriously
impacted global energy markets, they do not alter the findings
and recommendations of this report. Strategic energy
partnerships should still be pursued by the United States even
in a world of decreased energy demand and slower economic
activity.
In testimony before the Committee in March 2020, Dr. Birol
described the United States as ``a cornerstone of global energy
security.'' Despite the onset of the COVID-19 crisis, Dr. Birol
concluded his opening remarks as follows:

With its boundless human ingenuity, rich resources and track
record of successful innovation and commercialization of
new technologies, the United States is extremely well
placed to continue to lead the world in the development and
deployment of energy technologies that can help ensure a
secure, affordable and sustainable supply of energy for
decades to come.²⁵The oversight study conducted by the Committee staff
delegation to Japan and Australia found bilateral strategic
energy partnerships to hold enormous promise. Unfortunately,
they are presently under-delivering. By considering the
findings of this report and adopting its recommendations, the
legislative and executive branches would help crystallize
strategic energy partnerships into productive agreements that
build tangible projects and secure durable trading
relationships, while complementing efforts to safeguard the
environment and reduce carbon dioxide emissions. The true test
of these partnerships will be whether or not they leave their
mark on global energy markets in the decades ahead.

Acknowledgments

Committee staff would like to thank all Japanese and
Australian representatives for their time and insights.
Particular gratitude is due to the Department of State for its
support of the delegation's travel, especially Justin Tull of
Embassy Tokyo and Patrick Koucheravy and Hugh Green of Embassy
Canberra. In Washington, sustained and direct support provided
by Phillip Brown and Michael Ratner of the Congressional
Research Service was essential and invaluable.
In the United States, subject-matter experts--too many to
name--at the Export-Import Bank, the U.S. International
Development Finance Corporation, the U.S. Trade and Development
Agency, the Department of State, the Department of the
Treasury, the Department of Commerce, and the Department of
Energy (including the U.S. Energy Information Administration)
also contributed time, wisdom, and data, in some cases over the
course of several years, in support of this project and others
upon which it rests. Further thanks are due to Shayerah Ilias
Akhtar, Lynn Cunningham, Rachel Eck, Heather Greenley, Mark
Holt, Marc Humphries, Paul Parformak, Raj Gnanarajah, Andres
Schwarzenberg, Keri Stophel, and Martin Weiss of the
Congressional Research Service.
------------
References:

¹ Most recently, see Senator Lisa Murkowski, ``With Powers
So Disposed'': America and the Global Strategic Energy
Competition (July 11, 2019), available in Appendix I. See also
Senator Lisa Murkowski, Energy 20/20: A Blueprint for America's
Energy Future (February 4, 2013), and the series of white
papers that followed: The Narrowing Window: America's
Opportunity to Join the Global Gas Trade (August 6, 2013),
Powering the Future: Ensuring That Federal Policy Fully
Supports Electric Reliability (February 11, 2014), The Energy-
Water Nexus: Interlinked Resources That Are Vital For Economic
Growth and Sustainability (May 6, 2014), A Signal to the World:
Renovating the Architecture of U.S. Energy Exports (July 7,
2014), and, with Senator Tim Scott, Plenty at Stake: Indicators
of American Energy Insecurity (September 18, 2014).

² For example, the Trans-Alaska Pipeline System--
explicitly authorized by Congress and President Nixon in 1973--
is the quintessential embodiment of ``critical
infrastructure.'' The Kenai LNG export facility, the first of
its kind constructed in the United States, was approved by the
now-defunct Federal Power Commission in 1967 (37 F.P.C. 777).
Innovative drilling techniques have been employed for decades
on the North Slope, ``well'' before their adoption in the
continental ``Lower 48'' states, in places such as the Alpine
and Kuparuk fields. Thanks are due to Phillip Brown and Paul
Parformak of the Congressional Research Service and David
Houseknecht of the U.S. Geological Survey.

³ The text of these agreements is available in Appendix
II.

⁴ Energy Information Administration, Monthly Energy
Review, Table 1.4c Primary Energy Net Imports by Source.

⁵ All Annual Energy Outlooks are available on the EIA
website.

⁶ The National Nuclear Security Administration's budget
comprises roughly half of total DOE funding. Its Defense
Nuclear Nonproliferation programs, which are focused largely
overseas, received approximately $2.2 billion in enacted FY
2020 appropriations, a sum that dwarfs DOE ``non-defense''
international activities by nearly two orders of magnitude.
DOE's Office of International Affairs received approximately
$27 million in enacted FY 2020 appropriations. Various
government-owned, contractor-operated DOE laboratories,
including the Pacific Northwest National Laboratory, National
Renewable Energy Laboratory, Idaho National Laboratory, and
Argonne National Laboratory, maintain international affairs
offices. As may be expected, the Department of the Interior's
global footprint is relatively small in comparison.
Nonetheless, DOI's Office of Insular Affairs carries out
federal responsibilities in U.S. territories (American Samoa,
the U.S. Virgin Islands, and the Commonwealth of the Northern
Mariana Islands) and freely associated states (Federated States
of Micronesia, the Republic of the Marshall Islands, and the
Republic of Palau). The U.S. Geological Survey routinely
publishes data and analysis on global minerals markets and
resources. The Bureau of Ocean Energy Management and the Bureau
of Safety and Environmental Enforcement periodically engage
with international counterparts. The Fish & Wildlife Service,
which deploys personnel overseas, received approximately $19
million in enacted FY 2020 appropriations for combating
wildlife trafficking and other missions. Even the National Park
Service received approximately $1.9 million in enacted FY 2020
appropriations for international activities, including border
security, historic preservation, and conservation.

⁷ See The Domestic and Global Energy Outlook from the
Perspective of the International Energy Agency: Hearing Before
the S. Comm. on Energy and Nat. Res., 115th Cong. (2018)
(statement of Dr. Fatih Birol, Executive Director,
International Energy Agency); IEA's World Energy Outlook:
Hearing Before the S. Comm. on Energy and Nat. Res., 116th
Cong. (2019) (statement of Dr. Fatih Birol, Executive Director,
International Energy Agency); Energy Outlook of the U.S. from
the Perspective of IEA: Hearing Before the S. Comm. on Energy
and Nat. Res., 116th Cong. (2020) (statement of Dr. Fatih
Birol, Executive Director, International Energy Agency); The
Energy Information Administration's Annual Energy Outlook for
2015: Hearing Before the S. Comm. on Energy and Nat. Res.,
114th Cong. (2015); The Near-Term Outlook for Energy and
Commodity Markets: Hearing Before the S. Comm. on Energy and
Nat. Res., 114th Cong. (2016); Outlook for Energy and Minerals
Markets in the 116th Congress: Hearing Before the S. Comm. on
Energy and Nat. Res., 116th Cong. (2019); S. 33, The LNG
Permitting Certainty and Transparency Act: Hearing on S. 33
Before the S. Comm. on Energy and Nat. Res., 114th Cong.
(2015); The Role of U.S. Liquefied Natural Gas in Meeting
European Energy Demand: Hearing Before the S. Comm. on Energy
and Nat. Res., 115th Cong. (2018); Important Role of U.S. LNG
in Evolving Global Markets: Hearing Before the S. Comm. on
Energy and Nat. Res., 116th Cong. (2019); Terrorism and the
Global Oil Markets: Hearing Before the S. Comm. on Energy and
Nat. Res., 114th Cong. (2015); Factors Impacting Global Oil
Prices: Hearing Before the S. Comm. on Energy and Nat. Res.,
115th Cong. (2018); Crude Oil Exports: Hearing Before the S.
Comm. on Energy and Nat. Res., 113th Cong. (2014); U.S. Crude
Oil Export Policy: Hearing Before the S. Comm. on Energy and
Nat. Res., 114th Cong. (2015); The Status and Outlook for U.S.
and North American Energy and Resource Security: Hearing Before
the S. Comm. on Energy and Nat. Res., 115th Cong. (2017); The
Status of Advanced Nuclear Technologies: Hearing Before the S.
Comm. on Energy and Nat. Res., 114th Cong. (2016); U.S.
Leadership in Nuclear Energy and To Receive Testimony on NELA:
Hearing on S. 903 Before the S. Comm. on Energy and Nat. Res.,
116th Cong. (2019); Critical Minerals Policy Act: Hearing on S.
1600 Before the S. Comm. on Energy and Nat. Res., 113th Cong.
(2014); S. 883, the American Mineral Security Act of 2015:
Hearing on S. 883 Before the S. Comm. on Energy and Nat. Res.,
114th Cong. (2015); The United States' Increasing Dependence on
Foreign Sources of Minerals and Opportunities To Rebuild and
Improve the Supply Chain in the United States: Hearing Before
the S. Comm. on Energy and Nat. Res., 115th Cong. (2017); The
Department of the Interior's Final List of Critical Minerals
for 2018 and Opportunities To Strengthen the United States'
Mineral Security: Hearing Before the S. Comm. on Energy and
Nat. Res., 115th Cong. (2018); Mineral Security and Related
Legislation: Hearing on S. 1052 and S. 1317 Before the S. Comm.
on Energy and Nat. Res., 116th Cong. (2019); Minerals For Clean
Energy Technologies: Hearing Before the S. Comm. on Energy and
Nat. Res., 116th Cong. (2019); The Potential Modernization of
the Strategic Petroleum Reserve and Related Energy Security
Issues: Hearing Before the S. Comm. on Energy and Nat. Res.,
114th Cong. (2015); Strategic Petroleum Reserve: Hearing Before
the S. Comm. on Energy and Nat. Res., 116th Cong. (2019).
Thanks are due to Rachel Eck of the Congressional Research
Service.

⁸ There is no universally accepted definition of
``strategic energy.'' In contrast, ``strategic minerals''
(commonly referred to as ``critical minerals'') are generally
understood. ``Strategic energy management,'' a business
practice term, refers to certain processes related to energy
performance, usage, and efficiency, and is quite distinct from
the concept of ``strategic energy'' developed in this report.
Strategic energy should be understood as both an organizing
principle and as a motivating principle. It is fundamentally
concerned with the capabilities of the United States to engage
successfully in international economic competition and should
not be reduced to, or confused with, the related but distinct
concepts of critical infrastructure, cybersecurity, and grid
reliability.

⁹ Bilateral memoranda abound across the Federal
Government. The Department of Energy's Office of Fossil Energy,
for example, maintains memoranda of understanding with
Australia, Canada, the European Commission, Japan, India,
Indonesia, Mexico, Norway, Saudi Arabia, South Korea, the
United Arab Emirates, and the United Kingdom. The Office of
Nuclear Energy maintains memoranda of understanding with China,
the Czech Republic, the European Atomic Energy Community
(Euratom), France, Italy, Japan, Jordan, Mongolia, Russia,
South Africa, South Korea, Spain, and the United Kingdom.

¹⁰ More idiosyncratic incarnations also exist, such as the
U.S.-Israel Energy Center (established by Pub. L. No. 113-296,
128 Stat. 4075 (2014)).

¹¹ In the interest of full disclosure, Committee
professional staff member Tristan Abbey helped draft these two
agreements while assigned, in a previous capacity, to the
National Security Council.

¹² In any event, the Australia-U.S. agreement does not
explicitly mention strategic petroleum stocks as an action
item.

¹³ Export-Import Bank of the United States, Report to the
United States Congress on Global Export Credit Competition,
June 2020, p. 38.

¹⁴ See also the following reports prepared by the
Republican staff of the U.S. Senate Energy and Natural
Resources Committee: Cross Currents: Iranian Oil and the U.S.
Export Ban (June 23, 2015); Rendering Vital Assistance:
Allowing Oil Shipments to U.S. Allies (June 9, 2015); A Ban for
One: The Outdated Prohibition on U.S. Oil Exports in Global
Context (June 26, 2014); Crude Pro Quo: The Use of Oil
Exchanges to Increase Efficiency (May 22, 2014); License to
Trade: Commerce Department Authority to Allow Condensate
Exports (April 2, 2014); and Past is Precedent: Executive Power
to Authorize Crude Oil Exports (March 3, 2014).

¹⁵ For the Eurasian energy project exception, see Pub. L.
116-94 (22 U.S.C Sec. 9563).

¹⁶ Department of Energy, 10 CFR Part 590, Small-Scale
Natural Gas Exports, 83 Fed. Reg. 35106 (July 25, 2018).

¹⁷ U.S. International Development Finance Corporation,
Modernizing DFC's Nuclear Energy Policy: Conclusion of 30-day
Public Notice and Comment Period, July 23, 2020. Senator
Murkowski's letter to the DFC about this topic is available in
Appendix III.

¹⁸ Export credit rulemaking is facilitated by the
Organization for Economic Cooperation and Development (OECD).
The authority vested in the President by Section 11 of the
Export-Import Bank Reauthorization Act of 2012 (12 U.S.C.
Sec. 635a-5), as amended, to negotiate an end to export credit
financing is delegated to the Secretary of the Treasury. Thanks
are due to Raj Gnanarajah of the Congressional Research
Service.

¹⁹ As reflected in the active statutes (42 USC Sec. 16511
et. seq.), eligible projects must (1) avoid, reduce or
sequester air pollutants or anthropogenic emissions of
greenhouse gases; and (2) employ new or significantly improved
technologies as compared to commercial technologies in service
in the United States at the time the guarantee is issued. These
two requirements would have to be met before a critical
minerals project could be considered for a loan guarantee.
Statutes also include a list of eligible project categories
(Sec. 16513(b)). Critical minerals are not specifically
included in the project category list. Thanks are due to
Phillip Brown of the Congressional Research Service. The
interagency report, A Federal Strategy to Ensure Secure and
Reliable Supplies of Critical Minerals, is available on the
Department of Commerce website.

²⁰ Section 123 of the Atomic Energy Act of 1954, as amended
(P.L. 83-703; 42 U.S.C. Sec. 2153), prohibits significant U.S.
nuclear cooperation with other countries without the
implementation of a peaceful nuclear cooperation agreement (a
``123'' agreement). Nuclear Cooperation Memoranda of
Understanding (NCMOUs) are the products of a State Department
diplomatic initiative designed to ``develop strategic civil
nuclear cooperation relationships'' with other countries and
potentially lay the groundwork for 123 agreements. NCMOUs do
not by themselves allow for the transfer or export of special
nuclear materials or reactors and components. The State
Department notes that ``while 123 agreements are legally
binding and are shaped by legal requirements, NCMOUs are not
legally binding and can be more flexible and strategic in their
content.'' Thanks are due to Mark Holt of the Congressional
Research Service.

²¹ Senator Murkowski's letters to the Saudi Crown Prince
Mohammad bin Salman, Secretary of State Mike Pompeo, and
Secretary of Commerce Wilbur Ross are available in Appendix
III.

²² Official prints of these hearings are not yet available.

²³ The temporary storage program secured 21 million
barrels, or 70 percent, of its 30 million barrel availability.
Of an initial solicitation to purchase 1 million barrels, DOE
purchased 126,000 barrels.

²⁴ Senator Murkowski's letter to Secretary Mnuchin is
available in Appendix III. For the CARES Act provisions, see
Section 4003 of Title IV, Subtitle A of P.L. 116-136,
Coronavirus Economic Stabilization Act of 2020.

²⁵ Energy Outlook of the U.S. from the Perspective of IEA:
Hearing Before the S. Comm. on Energy and Nat. Res., 116th
Cong. (2020) (statement of Dr. Fatih Birol, Executive Director,
International Energy Agency).

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APPENDIX II.

Text of the Japan-United States Strategic Energy Partnership (JUSEP)
Leaders of Japan and the United States launched the Japan-
United States Strategic Energy Partnership (JUSEP) within the
framework of the Japan-United States Economic Dialogue.

1. Core principles:

(1) Open and competitive energy markets are indispensable to
ensuring secure energy supply; and
(2) Universal access to affordable and reliable energy is
needed to help eradicate poverty, fuel economic
growth, and increase global security.

2. Priorities for the 2017-2018 JUSEP work plan:

(1) Promotion of advanced nuclear technologies that are safer
and more proliferation resistant;
(2) Deployment of highly efficient, low emissions (HELE) coal
technologies, including CCUS;
(3) Development of a global market for natural gas; and
(4) Energy infrastructure development in the developing world
that promotes regional integration; adheres to
principles of good governance, respect for the
interests of all stakeholders, and transparency in
bidding and financing; and expands access to the
global energy market.

3. Important geographic regions, including:

(1) Southeast Asia
(2) South Asia
(3) Sub-Saharan Africa

[Announced on November 6, 2017.]

Text of the Australia-U.S. Strategic Partnership on Energy in the Indo-
Pacific
Leaders of Australia and the United States to launch an
Australia-U.S. Strategic Partnership on Energy in the Indo-
Pacific. The partnership aligns the goals of Australia's
Foreign Policy White Paper and the U.S. National Security
Strategy, including to promote regional infrastructure and
energy cooperation, open and competitive energy markets and
improved rules and standards in the Indo-
Pacific.

Core Principles

Open and competitive energy markets are
indispensable to ensuring secure energy supply.
Universal access to affordable and reliable energy
from a variety of sources is needed to help eradicate
poverty, fuel sustainable economic growth, and increase
global security.

Priorities for the 2018-2019 Work Plan for the Partnership

Energy infrastructure development in the Indo-
Pacific, including a focus on the developing world,
that promotes regional integration; adheres to
principles of good governance, respect for the
interests of all stakeholders, and transparency in
bidding and financing; and expands access to the global
energy market.
Deployment of low emissions technologies which
support the secure, reliable, affordable and
sustainable supply of energy in the Indo-Pacific.
Strengthening the development of open and rules-
based global markets for natural gas.

Important Geographic Regions

Southeast Asia
South Asia
Southwest Pacific

[Announced on February 23, 2018.]

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