Washington — In the debate over the current ban on exporting crude oil from the United States, both sides agree that the energy universe has changed dramatically since the restriction was imposed in the 1970s to husband the nation’s energy resources in a time of Middle East embargoes and supply shortages.
Advocates for repealing the ban, who include the big oil companies and nearly the entire Louisiana congressional delegation, argue that the dramatic increase in U.S. oil production, tied to the development of horizontal drilling and the expanded use of hydraulic fracturing, has transformed the country from a supplicant in the world oil market to a potentially dominant player. Opening the gate to oil exports would stimulate the economy and create jobs, with little or no effect on the price of gasoline, they say.
“This is an opportunity for America to lead,” said U.S. Rep. Charles Boustany, R-Lafayette, whose district includes the heart of the Louisiana oil patch. “And it’s an opportunity for us to help our Louisiana producers.”
Supporters of the ban, who include environmentalists and some independent refiners of domestic crude, say the smart choice on a planet increasingly threatened by climate change favors emerging clean and renewable energy technologies like wind and solar, and certainly not the stepped-up exploitation of dirty and dangerous fossil fuels. The price of crude in the U.S. inevitably will go up if domestic producers are allowed to send their oil overseas, they say.
“The move to try to lift the crude-oil export limitation is really a way to invest in the past instead of the future,” said Franz Matznow, director of the Beyond Oil project at the private, nonprofit Natural Resources Defense Council. “We should be investing in real energy security and real environmental security, which means resources like wind and solar that don’t run out, don’t blow up, don’t pollute our air and more importantly don’t lock consumers into this endless roller-coaster ride driven by foreign oil markets that we can’t possibly control.”
The battle has already been joined in Congress. The U.S. House Energy & Commerce Committee voted 31-19 on Sept. 17 for a bill by Rep. Joe Barton, R-Texas, to repeal the ban, with three Democrats siding with the majority Republicans. House leadership has said the legislation may come up for a full House vote by the end of the month.
After the committee vote, House Majority Whip Steve Scalise, a Republican from Jefferson who sits on the committee, released a statement that the legislation represents “a common-sense change that will create good jobs here at home while strengthening America’s energy security by increasing domestic oil production.”
With Republicans, who include all but one member of the Louisiana delegation, holding a sizable majority in the House, approval of the Barton bill there is near certain. Democrat Cedric Richmond, of New Orleans, said he is undecided on the measure. But echoing opponents of the ban, he wondered about the logic of allowing Iran to sell oil abroad as part of the nuclear deal with that country while blocking U.S. exports: “Does a 40-year-old ban still make sense?”
In the Senate, a repeal measure also has won approval from a committee, with the Energy & Natural Resources Committee voting 12-10 along party lines for the legislation in July. Sen. Bill Cassidy, of Baton Rouge, joined his fellow committee Republicans in support of the proposal. His party holds a 54-46 edge in the full Senate, including David Vitter, of Metairie.
“Lifting the export ban means the energy industry can provide more good jobs with good benefits for our workers,” Cassidy said in a statement.
But under Senate rules, it takes 60 votes to approve legislation, and near-unanimous opposition by Democrats could block the bill. Although sensitive to environmental and consumer concerns, Democrats have signaled that they might be willing to make a deal, trading their support for some measures they endorse, such as extensions of tax breaks for renewable energy sources.
The White House poses another potential hurdle, with Democratic President Barack Obama’s press secretary, Josh Earnest, saying Obama would not support the House bill. Earnest also accused the Republicans of dancing to big oil’s tune. But the administration, too, is interested in extending tax incentives for renewables.
The newly applied drilling methods have fueled a boom in U.S. oil production, which has reached its highest level in decades: In 2014, the U.S. passed Saudi Arabia as the world’s No. 1 oil producer. Imports have fallen to the point where production outstrips imports, although they still run to millions of barrels a day.
But the economic benefits to U.S. producers have been sharply reduced by a dramatic decline in crude oil prices, which have plunged to half the level of mid-2014. Rigs have been shut down, exploration has been cut back and more than 100,000 U.S. oil workers have lost their jobs. Even as motorists have delighted in lower gasoline prices.
“How much we drill is going to be a total reflection of the price of crude oil,” said Don Briggs, president of the Louisiana Oil & Gas Association, which represents independent energy companies, large and small.
Producers hope a repeal of the ban on exports will lift the price of U.S. crude to the higher levels on the world oil market, which is what supporters of the ban fear (although even they acknowledge the effect would be small because global oil prices are depressed, too). That would mean a windfall for producers, but higher costs for one segment of the oil industry: independent U.S. refiners who process domestic crude oil.
Those independent refiners are fighting against the big oil companies who favor exports, said Jay Hauck of Consumers and Refiners United for Domestic Energy, a coalition of refiners.
“It’s a David vs. Goliath situation,” he said.
But Hauck is optimistic about the chances of his side, in part because some members of Congress have expressed concern about the impact a repeal of the ban would have on gasoline prices.
Advocates of repeal point to a recent study by the Energy Information Administration of the U.S. Dept. of Energy predicting that gasoline prices would stay the same if the ban is lifted or even decline a bit as the price spread narrows between domestic and foreign crude.
But the study also says a repeal won’t do much to increase crude-oil prices or spur production.
The American Petroleum Institute, which represents major oil companies, predicts a repeal would increase production by 500,000 barrels a day, compared to total domestic production now of more than 8 million barrels a day. That increase is roughly equal to the current exports permitted under exceptions to the ban, which include oil from Alaska’s Cook Inlet, oil sent to Canada and certain quantities swapped with Mexico.
API says repeal could create up to 300,000 jobs by 2020. Louisiana would account for just over 7,000 of those jobs. Oil production from the state itself has declined by a third since 2000 and now ranks 10th. But oil from federal offshore territory in the Gulf of Mexico accounts for a significant share of U.S. production and provides service jobs and other employment for Louisiana residents.
Wherever the member companies of LOGA fit in the overall energy economy, they support repeal of the export ban, Briggs said.
“It’s important that we’re able to participate in a free market,” he said. “The free market always creates more jobs.”
The Louisiana Mid-Continent Oil & Gas Association, which represents the big oil companies operating in the state and offshore, also views the export ban as contrary to American free-market principles.
“We’re a country of capitalists,” the organization’s president, Chris John, said.
John, who preceded Boustany in the House as a Democrat, wants Congress to change the law.
“It’s time to update an antiquated policy, given the fact that America is now the largest producer of oil in the world,” he said. “We should position ourselves to take advantage of that.”
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