The ban on Alaskan North Slope (ANS) oil exports serves no useful purpose, an Alaskan official has argued before a U.S. House of Representatives foreign affairs subcommittee.
James Eason, director of the Alaskan Department of Natural Resources's oil and gas division, said, "Counter to one of its implied intents, the ban has reduced the incentive to produce Alaska and California oil which, in turn, has made our national energy security more vulnerable to the whims of foreign producers.
"The export ban does not benefit consumers, nor has it stopped the rapid decline of the domestic merchant marine fleet. The ban continues to cost taxpayers hundreds of millions of dollars each year in lost royalty and tax revenue.
"Finally, it robs some of our most needy trade partners, such as Mexico and Venezuela, of logical markets for their oil."
Howard Marlowe, director of the Coalition to Keep Alaska Oil, disagreed. He said the law blocking the export of ANS oil enhances U.S. energy security.
GAO'S VIEWS
The General Accounting Office, a congressional watchdog agency, cited some drawbacks to exporting ANS crude but said it would decrease net U.S. oil imports.
GAO's Judy England-Joseph said if the ban were removed, some ANS crude would almost certainly be exported to Pacific Rim countries because transportation costs would be low. What's more, characteristics of ANS crude may make it more suitable for Pacific Rim refiners than it is to U.S. West Coast refiners.
"At a minimum," she said, exports will include the Alaskan crude that is currently shipped at high cost to distant U.S. ports on the East Coast, Caribbean, and Gulf of Mexico."
She said allowing ANS exports would increase the price of the crude at the wellhead and, consequently, the price West Coast refiners pay for crude.
She said exports would promote economic efficiency by reducing oil transportation costs, increasing domestic oil production, and allowing better use of refinery processing resources.
It would hurt the maritime industry because exports are likely to be shipped in on foreign flag tankers rather than U.S. flag tankers. But she said it would decrease net U.S. imports to the extent that oil production and refinery efficiency increase.
ANS shipments were 1.8 million b/d in 1989, with 1.3 million to the West Coast, 300,000 b/d to the Gulf Coast, eastern U.S., and Caribbean ports, and the rest to refineries in Alaska, Hawaii, and the U.S. Virgin Islands.
Since 1987, the amount of ANS oil shipped to eastern U.S. ports has declined due to decreasing ANS production and increasing West Coast consumption.
"This trend is expected to continue, so that some time in the near future ANS crude shipments to eastern ports will cease," she said, adding that could occur as early as 1992.
She said lifting the ban might increase ANS wellhead prices $1-2/bbl, depending on the amount that is exported.
PRO AND CON
Alaska's Eason said revoking the export ban would provide an incentive to increase oil exploration and production on the North Slope and in other areas of Alaska, including the Outer Continental Shelf.
He said, "Lower transportation costs for the crude would make smaller, economically marginal fields such as Conoco's Milne Point and other discoveries such as Niakuk and Point McIntyre more viable, and therefore would encourage more exploration and development.
"Marine transportation costs would be cut at least in half by transporting oil from Alaska to the Far East rather than to the U.S. Gulf Coast, regardless of whether the oil is moved by domestic or foreign tankers."
He said as more heavy oil reserves are developed in the future, the oil will be less adaptable to the California refinery mix and more adaptable to the Far East mix.
Eason said Alaska's state revenues would increase by $150 million for each $1/bbl increase in the ANS wellhead price, and federal revenues would rise similarly.
Marlowe said exporting ANS crude would increase pressure to develop offshore California leases to replace the volumes, increase West Coast product costs, not materially increase oil production in either Alaska or California, and increase the trade deficit because the oil exports would sell for less than imports required to replace them.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.