Oil Producers Face Skeptical Congress in Drive to End Export Ban

Coming into this year, it seemed that the time was right to overturn a ban on exporting U.S. crude oil: Republicans controlled Congress, production was nearing an all-time high and gasoline was falling toward $2 a gallon.

Despite a lobbying push by drillers, and steep job losses in the oil fields, there’s been no significant effort in Congress to lift the 40-year-old ban. Even the Senate’s top advocate for the idea hasn’t proposed legislation.

“I have taken a pretty methodical approach,” said Senator Lisa Murkowski, a Republican from oil-rich Alaska and newly seated chairman of the Senate Energy and Natural Resources Committee. “We’re all very busy here.”

“We’re all very busy here.”

Senator Lisa Murkowski

Murkowski will convene a hearing on the topic Thursday though she said a bill to repeal the ban, in place since the Arab oil embargo four decades ago, remains a work in progress. Her House counterpart, Representative Fred Upton of Michigan, said he also plans to take a deliberative approach.

The reason for the go-slow approach is wariness among lawmakers that they’d be blamed if gasoline prices climb after the ban is lifted. And the oil industry itself is split, with some refiners, who benefit from low prices, opposed to lifting the ban. Oil produced domestically is selling for about $9 less than the global benchmark.
North Dakota

Senator John Hoeven, a North Dakota Republican and member of the Senate energy panel, said lawmakers still need to convince voters that allowing exports won’t cause them more pain at the pump.

“We need the public with us,” Hoeven, whose state is the second-largest U.S. oil producer behind Texas, said in a brief interview in the Capitol. “We’re making progress.”

A price plunge has sparked consolidations, layoffs and spending cuts. The U.S. oil-rig count, a measure of drilling activity, is about 54 percent below its peak of 1,609 in October, and the fewest since March 2011., according to Baker Hughes Inc.

ConocoPhillips said Wednesday it would cut 200 jobs in Canada, about 7 percent of its local workforce. Continental Resources Inc. in December said it would slash 2015 spending by 41 percent. Chevron Corp. plans to curb new investment for the next two years and increase asset sales by 50 percent, Chief Executive Officer John Watson said March 10.

Globally, oil-related job losses have reached more than 100,000, according to staffing firm Swift Worldwide Resources.
White House

Chief executives from 11 companies, including Marathon Oil Corp., Chesapeake Energy Corp. and Occidental Petroleum Corp. that are part of Producers for American Crude Oil Exports flew to Washington last week to lobby the White House and lawmakers, meeting with the staffs of both Republicans and Democrats.

Collectively, the 16 members of PACE spent more than $27 million to lobby Congress and the administration in 2014. PACE, which was formed late last year, spent $20,000 in the fourth quarter last year on lobbying, according to public records.

“I think people are getting more comfortable with the idea, but we are still a ways away from being ready to vote,” said Michael McKenna, an energy lobbyist who is close to Republican leaders in Congress.

McKenna said it would probably be at least two years, or after the presidential race in 2016, before a vote to end the ban.
Refined Products

While raw crude is restricted from overseas sales, refined products like gasoline, diesel and jet fuel aren’t. In fact, exports of finished petroleum products in December reached 96.4 million barrels, just shy of the monthly record set in December 2013, according to the U.S. Energy Information Administration.

“Clearly the other side is ramping up their game this year,” said Jay Hauck, the executive director for Consumers and Refiners United for Domestic Energy, or Crude, a group of four refiners that oppose lifting the export ban.

Low oil prices may hurt oil companies but they’re “beneficial to a broad spectrum of consumers and businesses,” Hauck said.

The fact that some members — including Representative Joe Barton of Texas and Senator Tom Cotton of Arkansas, both Republicans — are openly supportive of lifting the export restrictions is a shift in Washington, where energy policy has long been driven by a stated desire to reduce U.S. dependence on foreign oil.
Oil Fracking

Growing domestic production driven by technological advances like hydraulic fracturing is changing the equation. Lobbyists for oil producers say the ban is a relic of the past that threatens an U.S. economic success story by discouraging production.

“Policies that were enacted during a period of perceived energy scarcity need to be modernized to reflect advancements in technology that have led to an era marked by domestic crude oil abundance,” George Baker, PACE’s executive director, said in a statement.

Oil companies point to a number of studies that have found allowing oil exports won’t raise prices at the pump. A Columbia University study released in January, for example, said gas prices could fall as much as 12 cents a gallon with exports because oil companies would have more incentive to drill.

The Senate Energy and Natural Resources Committee’s hearing on Thursday will be at least the second the panel has held on the topic in a year, since the oil industry began lobbying for a repeal in earnest.
Manchin Undecided

Two members of the panel, Senator Joe Manchin, a West Virginia Democrat who often sides with Republicans on energy issues, and Senator Cory Gardner, a Colorado Republican, said they were still undecided on the issue.

Gardner said it may make sense to sense to send some of the light sweet crude produced from shale rock formations overseas, because U.S. refiners along the Gulf Coast can better handle heavier crudes.

Refining capacity “is not a bottleneck to producing and using more very light U.S. crude oil over the next few years,” according to a study released Wednesday by the American Fuel and Petrochemical Manufacturers, a Washington-based lobbying group that represents oil refiners.

While lawmakers say they are taking a deliberative approach to the issue, the fall in oil prices is adding urgency to the industry’s lobbying push.

Robert Dillon, a spokesman for Murkowski, said the senator believes President Barack Obama can lift the ban without new legislation. That would be “the swiftest and easiest way to achieve the economic benefits of increased energy trade,” Dillon said in a statement.
Eased Restrictions

The Obama administration has eased some of the export restrictions, allowing a slightly processed form of condensate, a type of ultra light oil that’s a gas underground, to be exported.

Producers say the step doesn’t solve the problem of a growing glut of U.S. oil.

Senior administration officials have said more sweeping policy changes aren’t being considered, which leaves Congress to act.

Environmental groups, a significant Democratic constituency, oppose ending the ban because it would encourage more use of fossil fuels, which release greenhouse gases when burned.

“Relaxing oil restrictions or oil regulation in the context of our climate crisis, which is growing day by day, is moving in the wrong direction,” David Turnbull, campaigns director for Oil Change International, a Washington-based clean-energy advocate, said in a phone interview.

Easing the export restrictions “should be off the table,” he said.
Source: Bloomberg

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