Senate panel hears arguments for, against US crude oil exports

Witnesses on both sides of the debate over whether to expand US crude oil exports used improved energy security and creation of more domestic jobs to support their viewpoints during a US Senate Energy and Natural Resources Committee hearing on the subject.

“It’s hard to believe that only a few years after campaigns for America’s energy independence were dominated by slogans such as ‘drill, baby, drill,’” Chairman Ronald L. Wyden (D-Ore.) said in his opening statement.

“Now, this country is in the enviable position of having choices about its energy future,” Wyden said, adding, “In other words, the question becomes how this energy boom can create the greatest benefit for America.”

Lisa Murkowski (R-Alas.), the committee’s ranking minority member, reiterated her Jan. 7 call for the US to lift its ban on crude exports (OGJ Online, Jan. 8, 2014). ““We should send a powerful signal to the world that the US is ready to reassert its role as a leader on energy,” she maintained.

Most federal laws enacted in the 1970s following the Arab oil embargo to stabilize domestic energy prices and supplies have been repealed, testified Harold Hamm, chief executive officer of Continental Resources Inc., Oklahoma City. Two which have not—the 1975 Energy Policy and Conservation Act and the 1979 Export Administration Act—essentially ban US crude exports, he told the committee.

Occurring already

“The popular belief is that we’re not exporting petroleum,” Hamm said, adding, “Nothing could be further from the truth. Major oil companies are exporting refined petroleum products like gasoline and diesel with no limitations. Why shouldn’t independent producers be allowed to do the same?”

But a second witness—Graeme Burnett, senior vice-president for fuel optimization at Atlanta-based Delta Airlines, which owns a Pennsylvania refinery that Phillips 66 Co. operates—warned that allowing unlimited US crude sales to foreign customers could harm oil product exports, which have grown dramatically the past few years.

“If we lift the export ban we would in essence be allowing the transport of crude out of a competitive market in this country and into a less-competitive global one controlled by a few oil-producing states,” he said. “Refined products, by contrast, are sold to foreign customers on markets controlled by supply and demand, not the Organization of Petroleum Exporting Countries.”

Asked by some committee members why product prices remain high in some parts of the country despite increased domestic production, Amy Myers Jaffe, executive director of energy and sustainability at the University of California at Davis’s Institute of Transportation Studies, said transportation bottlenecks and what she termed “the tyranny of geography” were responsible.

Make markets secure

“Supply bottlenecks, no matter how they’re created, will create problems,” Jaffe said, adding, “But a secure market will bring American consumers a lower price. The US should be a responsible participant in creating that globally.”

Daniel J. Weiss, a senior fellow and climate strategy director at the Center for American Progress in Washington, DC, conceded reduced crude imports and increased US production have made the US less vulnerable to a foreign supply disruption since 2008.

But the US Energy Information Administration predicts crude production growth will peak in 2019 and slowly decline thereafter, he continued. “Lifting the ban on crude oil exports could squander this new energy security and price stability,” Weiss cautioned, adding that a better long-term strategy would be to develop transportation fuel alternatives to petroleum.

“This is the first hearing on this subject,” Wyden said as it concluded. “It will not be the last.”

Contact Nick Snow at nicks@pennwell.com.

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