The U.S. Senate has approved a bill that would permit exports of Alaskan North Slope (ANS) crude oil and grant royalty relief to deepwater Gulf of Mexico production.
The House resources committee was expected to approve ANS export legislation, as was the full House.
The Senate approved the bill 74-25 after sponsors made major concessions to senators from Oregon and Washington. But some senators continued to oppose the bill, saying ANS exports were the first step toward allowing exploration on the Arctic National Wildlife Refuge east of Prudhoe Bay field.
The bill requires exports to be carried on U.S. flagged tankers.
ANS OIL EXPORTS
A U.S. Department of Energy study had said allowing ANS exports to the Pacific Rim would result in transportation savings and higher netbacks for Alaska and California producers. The oil would be replaced in U.S. markets by imports.
DOE said the measure might increase U.S. oil production by as much as 110,000 b/d (OGJ, July 11, 1994, p. 28), providing more revenue for governments. Alaska estimated lifting the ban would increase its income $185 million/year.
California independent producers argued for ANS exports, saying a surplus of ANS crude on the Lower 48 West Coast has depressed prices for their heavy oil.
California and Washington independent refiners wanted the ban continued, but most maritime unions dropped their objections because the exports would be carried in U.S. flagged and crewed ships.
Sens. Patty Murray (D-Wash.) and Mark Hatfield (R-Ore.) opposed the measure, saying it would harm refiners in their states, as well as shipyards that repair ANS tankers, and bring an increased risk of oil spills from lightering by non-U.S. flag tankers.
Murray said, "The tankers that transport Alaska oil are repaired on the West Coast. If export restrictions are lifted, this work will go overseas. We could lose 5,000 jobs within our own region and $160 million in annual employment income."
On the refinery supply issue, Sen. Frank Murkowski (R Alaska), author of the bill, said, "Washington and California will remain the natural markets for ANS crude. Washington and California ports are closest to Alaska, and ANS crude will continue to be supplied to those refiners."
He added that Washington state has some of the highest gasoline prices in the U.S., while refiners there have some of the highest margins.
BP Shipping Co. assured Murray it will continue supplying ANS crude to Tosco's Ferndale, Wash., refinery through 1998.
To appease other refiners, the Senate approved an amendment allowing the president to halt ANS exports for national security reasons.
To appease publicly-owned shipyards, the Senate approved a provision setting aside proceeds from a proposed sale of the Naval Petroleum Reserves for a $10 million refurbishment of the shipyards and $51 million for bond retirement.
And to appease environmentalists, it approved an amendment requiring an industry financed towboat to be stationed in Puget Sound.
Deputy Energy Sec. Bill White said, "If this legislation is enacted, exporting ANS crude oil could generate up to 25,000 jobs by the end of the decade. Alaska could gain $700 million to $1.6 billion in state severance taxes, income taxes, and royalties. California's returns from its share of federal royalties and state and local taxes could increase as much as $180-230 million."
Federal revenues would increase $55 million during 5 years.
Alaska Gov. Tony Knowles said enactment of the bill will improve prospects for drilling in Alaska.
DEEPWATER ROYALTY
Sen. Bennett Johnston (D-La.) said his deepwater royalty measure would clarify the Interior secretary's authority to grant relief on existing leases on the OCS to encourage production.
Currently the secretary may grant relief for leases on production, but it has not been clear whether the authority applies before production begins.
The bill would permit a royalty holiday for otherwise uneconomic leases, as determined by the Minerals Management Service, in more than 200 m of water in the central and western gulf for 5 years.
Fields in 200-400 m of water would be eligible for relief from royalty payments on 17.5 million bbl of production, in 400-800 m on 52.5 million bbl, and in more than 800 m on 87.5 million bbl.
Johnston said, "Royalty relief would not cost the Treasury one penny. In fact, it will help the Treasury because it will bring us new leases that otherwise would not be produced, and in the end those leases would require royalty payments."
He said DOE predicts the legislation would result in development of at least two fields containing a total of 150 million bbl of oil equivalent.
Bob Stewart, National Ocean Industries Association president, said, "It is gratifying to see the Senate recognize that industry can produce needed oil and gas from the deep water Gulf of Mexico, where the economic environment is favorable.
"In order to encourage the kind of capital investment necessary to arrest the decline of domestic oil production and keep investment from going overseas, the economic environment must be attractive."
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