Oil Producers Face Skeptical Congress in Drive to End Export Ban

(Bloomberg) — Coming into this year, it seemed that the
time was right to overturn a ban on exporting U.S. crude oil:
Republicans controlled Congress, production was nearing an all-time high and gasoline was falling toward $2 a gallon.

Despite a lobbying push by drillers, and steep job losses
in the oil fields, there’s been no significant effort in
Congress to lift the 40-year-old ban. Even the Senate’s top
advocate for the idea hasn’t proposed legislation.

“I have taken a pretty methodical approach,” said Senator
Lisa Murkowski, a Republican from oil-rich Alaska and newly
seated chairman of the Senate Energy and Natural Resources
Committee. “We’re all very busy here.”

Murkowski will convene a hearing on the topic Thursday
though she said a bill to repeal the ban, in place since the
Arab oil embargo four decades ago, remains a work in progress.
Her House counterpart, Representative Fred Upton of Michigan,
said he also plans to take a deliberative approach.

The reason for the go-slow approach is wariness among
lawmakers that they’d be blamed if gasoline prices climb after
the ban is lifted. And the oil industry itself is split, with
some refiners, who benefit from low prices, opposed to lifting
the ban. Oil produced domestically is selling for about $9 less
than the global benchmark.

North Dakota

Senator John Hoeven, a North Dakota Republican and member
of the Senate energy panel, said lawmakers still need to
convince voters that allowing exports won’t cause them more pain
at the pump.

“We need the public with us,” Hoeven, whose state is the
second-largest U.S. oil producer behind Texas, said in a brief
interview in the Capitol. “We’re making progress.”

A price plunge has sparked consolidations, layoffs and
spending cuts. The U.S. oil-rig count, a measure of drilling
activity, is about 54 percent below its peak of 1,609 in
October, and the fewest since March 2011., according to Baker
Hughes Inc.

ConocoPhillips said Wednesday it would cut 200 jobs in
Canada, about 7 percent of its local workforce. Continental
Resources Inc.
in December said it would slash 2015 spending by
41 percent. Chevron Corp. plans to curb new investment for the
next two years and increase asset sales by 50 percent, Chief
Executive Officer John Watson said March 10.

Globally, oil-related job losses have reached more than
100,000, according to staffing firm Swift Worldwide Resources.

White House

Chief executives from 11 companies, including Marathon Oil
Corp.
, Chesapeake Energy Corp. and Occidental Petroleum Corp.
that are part of Producers for American Crude Oil Exports flew
to Washington last week to lobby the White House and lawmakers,
meeting with the staffs of both Republicans and Democrats.

Collectively, the 16 members of PACE spent more than $27
million to lobby Congress and the administration in 2014. PACE,
which was formed late last year, spent $20,000 in the fourth
quarter last year on lobbying, according to public records.

“I think people are getting more comfortable with the
idea, but we are still a ways away from being ready to vote,”
said Michael McKenna, an energy lobbyist who is close to
Republican leaders in Congress.

McKenna said it would probably be at least two years, or
after the presidential race in 2016, before a vote to end the
ban.

Refined Products

While raw crude is restricted from overseas sales, refined
products like gasoline, diesel and jet fuel aren’t. In fact,
exports of finished petroleum products in December reached 96.4
million barrels, just shy of the monthly record set in December
2013, according to the U.S. Energy Information Administration.

“Clearly the other side is ramping up their game this
year,” said Jay Hauck, the executive director for Consumers and
Refiners United for Domestic Energy, or Crude, a group of four
refiners that oppose lifting the export ban.

Low oil prices may hurt oil companies but they’re
“beneficial to a broad spectrum of consumers and businesses,”
Hauck said.

The fact that some members — including Representative Joe
Barton of Texas and Senator Tom Cotton of Arkansas, both
Republicans — are openly supportive of lifting the export
restrictions is a shift in Washington, where energy policy has
long been driven by a stated desire to reduce U.S. dependence on
foreign oil.

Oil Fracking

Growing domestic production driven by technological
advances like hydraulic fracturing is changing the equation.
Lobbyists for oil producers say the ban is a relic of the past
that threatens an U.S. economic success story by discouraging
production.

“Policies that were enacted during a period of perceived
energy scarcity need to be modernized to reflect advancements in
technology that have led to an era marked by domestic crude oil
abundance,” George Baker, PACE’s executive director, said in a
statement.

Oil companies point to a number of studies that have found
allowing oil exports won’t raise prices at the pump. A Columbia
University study released in January, for example, said gas
prices could fall as much as 12 cents a gallon with exports
because oil companies would have more incentive to drill.

The Senate Energy and Natural Resources Committee’s hearing
on Thursday will be at least the second the panel has held on
the topic in a year, since the oil industry began lobbying for a
repeal in earnest.

Manchin Undecided

Two members of the panel, Senator Joe Manchin, a West
Virginia Democrat who often sides with Republicans on energy
issues, and Senator Cory Gardner, a Colorado Republican, said
they were still undecided on the issue.

Gardner said it may make sense to sense to send some of the
light sweet crude produced from shale rock formations overseas,
because U.S. refiners along the Gulf Coast can better handle
heavier crudes.

Refining capacity “is not a bottleneck to producing and
using more very light U.S. crude oil over the next few years,”
according to a study released Wednesday by the American Fuel and
Petrochemical Manufacturers, a Washington-based lobbying group
that represents oil refiners.

While lawmakers say they are taking a deliberative approach
to the issue, the fall in oil prices is adding urgency to the
industry’s lobbying push.

Robert Dillon, a spokesman for Murkowski, said the senator
believes President Barack Obama can lift the ban without new
legislation. That would be “the swiftest and easiest way to
achieve the economic benefits of increased energy trade,”
Dillon said in a statement.

Eased Restrictions

The Obama administration has eased some of the export
restrictions, allowing a slightly processed form of condensate,
a type of ultra light oil that’s a gas underground, to be
exported.

Producers say the step doesn’t solve the problem of a
growing glut of U.S. oil.

Senior administration officials have said more sweeping
policy changes aren’t being considered, which leaves Congress to
act.

Environmental groups, a significant Democratic
constituency, oppose ending the ban because it would encourage
more use of fossil fuels, which release greenhouse gases when
burned.

“Relaxing oil restrictions or oil regulation in the
context of our climate crisis, which is growing day by day, is
moving in the wrong direction,” David Turnbull, campaigns
director for Oil Change International, a Washington-based clean-energy advocate, said in a phone interview.

Easing the export restrictions “should be off the table,”
he said.

To contact the reporters on this story:
Jim Snyder in Washington at
jsnyder24@bloomberg.net;
Brian Wingfield in Washington at
bwingfield3@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at
jmorgan97@bloomberg.net
Steve Geimann

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