Prohibition of US crude oil and condensate exports is an outmoded policy that should end soon as a first step in an overall energy export reassessment and reforms, US Sen. Lisa Murkowski (R-Alas.) declared.
“I am not proposing comprehensive energy export legislation,” she said in remarks at the Brookings Foundation on Jan. 7. “I believe the executive branch has the statutory authority to implement most of these ideas on its own, and if the president needs help from the legislative branch, he will always have an open partner on the Energy Committee in me. I am willing to introduce small, targeted bills to move the ball forward as needed.”
Murkowski, who is the Senate Energy and Natural Resources Committee’s ranking minority member, said she was releasing a white paper, “A Signal to the World: Renovating the Architecture of US Energy,” to outline facts and stimulate discussion.
With minimal exceptions, exports of US crude are banned as the nation’s production increases and demand falls, she observed. “There will come a time when we will have an unsustainable glut of this light crude,” she warned. “It may be next year; it may even be a matter of months. The free market works wonders, but it can’t work magic.”
Condensate can be refined and exported as natural gas liquids but otherwise also can’t be exported, Murkowski continued.
“I believe the administration retains enough statutory authority to lift the ban on its own,” she said. “Although the president has the authority to declare it in the national interest to lift the ban, another path is for the Department of Commerce to approve an application for export of crude oil or condensate under a provision in the law permitting the application if it can be demonstrated that those fuels ‘cannot reasonably be marketed’ here in the US.
Refining ‘mismatch’
“A mismatch in our nation’s refining capacity has already emerged, and common sense suggests that the mismatch should meet these qualifications,” Murkowski said. If the Obama administration is not willing to act, or if the statutory authority needs to be modified further, she said she would introduce the necessary legislation.
Opponents’ claims that crude exports would raise domestic gasoline prices are wrong and need to be addressed forcefully, she said. “I have said repeatedly—and I mean it—that the goal must be to make energy more affordable,” the senator said. “If we want to bring down gasoline prices, then we should be opening up federal lands to energy production, not close them off. I can think of a few places in Alaska that could be opened up immediately for new oil production, which would lower gasoline prices.”
Lifting the crude import prohibition would increase production and send US crude into world markets, putting downward pressure on global prices, she suggested.
“I want to be abundantly clear: I think the status quo is not beneficial to the American people,” Murkowski said. “We must act before the crude oil export ban causes problems in US oil production, which will raise prices and hurt American jobs.”
Energy export policies which are working well, meanwhile, should not be changed, she urged. “Thus far, coal exports appear to be keeping pace in world markets. Although efforts to forestall this expansion in trade must be opposed, I also see no problem with the regulatory structures surrounding renewables, [NGLs], and petroleum products. The [US Department of Commerce] already covers those, and I believe it is doing a commendable job.”
Seek efficiencies
The US should also look for efficiencies in areas where existing regulations could be more effectively implemented, according to the senator. She considers it fair to ask whether the US Department of State is the place where cross-border permit authority should be vested, given the time it has spent delaying a final decision on the proposed Keystone XL crude oil pipeline project.
The US Department of Energy’s pace in determining whether an LNG export project to a country which does not have a free trade agreement with the US also needs to be examined, Murkowski said.
“[US Energy Sec. Ernest G. Moniz] appears to have quickened the pace of approvals, but the queue is quite full,” she said. “Licenses still take far too long to review, especially when, as appropriate, the projects still must go through a rigorous safety review at the [US Federal Energy Regulatory Commission].”
Overseas producers already are closely watching developments in the Bakken, Eagle Ford, Marcellus, and Monterey shales, Murkowski said, adding: “It’s hard to put a price on that. Inaction also has a cost. Failing to renovate the crude oil export architecture could very well lead to disruptions in supply and production.”
Cites product exports
Others in Washington also called for an end to the US crude export ban. “It’s a perfect example of what we need to change in our energy policies,” American Petroleum Institute Pres. Jack N. Gerard said in response to a question following his 2014 State of American Energy address at the Newseum.
Oil product exports have reached a record 3 million b/d, and have become the largest single US export component, Gerard said, adding, “Some of these prohibitions and policies are vestiges of the past. The president talks about doubling US exports. Energy can contribute, particularly oil and gas.”
American Fuel & Petrochemical Manufacturers Pres. Charles T. Drevna said addressing crude exports is “a great and timely discussion,” adding, “A real free market would allow exports, which would be great globally. Let’s not live in shadows of the past that have absolutely no bearing on what’s happening today.”
Opponents also weighed in. “The export of US-produced oil would weaken our energy security by sending this critical commodity overseas,” said Daniel J. Weiss, a senior fellow and climate strategy director at the Center for American Progress. “It would also increase our reliance on foreign oil imports. American oil should remain on American soil.”
Weiss said Murkowski and other export advocates assume US crude production will grow endlessly. “In fact, the [US] Energy Information Administration predicts that it will peak in 5 years, and then begin to decline,” Weiss said. “We are a long way from true energy security, and we should retain this domestically produced, strategic commodity until then. Allowing oil exports now would be like celebrating a victory at half time.”
Contact Nick Snow at [email protected].
