Senators debate lifting crude export ban

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Senators on Thursday will begin to debate whether it’s time to let crude oil flow from America’s shores for the first time since the 1970s.

With domestic production surging, lawmakers are increasingly talking about the ban on crude exports as a relic that has outlived its usefulness.

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“We had to reserve the oil that we had, when no one else was shipping to us,” said Sen. Mary Landrieu (D-La.), who is poised to become chairwoman of the Senate Energy and Natural Resources Committee.

Passed by Congress after the Arab oil embargo of 1973, the export ban was intended to conserve domestic oil reserves and discourage foreign imports.

But now that America is slated to top Saudi Arabia as the world’s largest producer of oil in 2015, many lawmakers say walling off foreign markets doesn’t make sense.

“Now that we have more open trade opportunities, and we are producing more here, it just makes absolute perfect sense to reconsider this policy and update it according to the times,” Landrieu said.

The Senate Energy panel will broach the idea of lifting the ban at a hearing on Thursday.

While no legislation has been introduced, Landrieu and a majority of Republicans appear ready to take that step and are pointing to federal data to make their case.

In November, the Energy Department’s statistics shop reported that domestic crude oil production surpassed foreign imports for the first time in roughly 20 years.

“Monthly estimated domestic crude oil output averaged 7.7 million barrels per day in October, which was the highest production for any October in 25 years,” the Energy Information Administration said.

Landrieu rattled off other reasons for lifting the ban: OPEC is weaker, technology has improved, and there are other types of fuels available.

But while oil producers like Exxon Mobil have increasingly called for an end to the ban to help grow “value-added manufacturing” and stabilize the global market of crude oil, refiners claim it would drive prices up for consumers.

San Antonio-based refiner Valero says they are not against exporting crude oil, noting the firm has a license to export the product at a refinery in Canada.

But they are against lifting the U.S. ban on crude exports, according to Bill Day, a spokesman for Valero.

“The current situation is working fine and doesn’t need to change,” Day said. “We buy oil and take it to our refineries, turn it into gasoline, diesel and other refined fuels since those are higher-valued products that help decrease the trade deficit.”

Refiners say oil producers primarily want to lift the ban in order to drive up prices.

“It would do more harm than good and lead to higher prices in the U.S. for consumers,” Day said. “I don’t fault oil producers for seeking to lift the ban because crude oil is selling for less in the U.S. than overseas.”

Landrieu, whose state is heavy on refineries, said Valero’s views aren’t representative of the industry.

“Not all refiners are saying that,” Landrieu said. “The fact is, there are different kinds and grades of oil, and many of our refiners have been structured or built to refine a certain type, and it’s very expensive to retrofit now. So the facts are that some of the oil that we are producing would be better for exports because our refiners aren’t capable.”

Sen. Lisa Murkowski (R-Alaska), the ranking member on the Energy panel, is another vocal proponent of lifting the crude oil ban.

She says the policy could be lifted with a stroke of President Obama’s pen.

“I am hopeful that I won’t have to introduce legislation,” Murkowski said earlier this month. “I think the executive has the authority, whether it’s the president in making a determination in the national interest or the Commerce Department through authorities that they have currently.”

Obama didn’t mention the possibility of exporting crude oil in his State of the Union speech Tuesday, but Energy Secretary Ernest Moniz hinted at a review of the policy in late December.

Moniz called the ban dated, suggesting it might deserve new examination, given the current state of energy in the U.S.
Still, Thursday’s hearing, led by Senate Energy Committee Chairman Ron Wyden (D-Ore.), will give both sides a chance to air their concerns.

The witnesses will paint very different pictures of what the nation’s energy landscape would look like in an oil-exporting America.
Continental Resources, a major oil producer in North Dakota’s Bakken region, says the ban should have been done away with long ago.

“It is strictly symbolic,” Harold Hamm, CEO of the company told The Hill, adding that exporting raw crude would help make refiners more efficient in nature.

But Dan Weiss, senior fellow at the liberal think tank Center for American Progress, disagreed.

Weiss, who will also testify Thursday, released an analysis days before the hearing that said lifting the ban would raise gasoline prices for consumers and jeopardize U.S. energy security.

Given that “price of oil is the primary component of the price of gasoline” actions — like lifting the ban — that raise the price of domestic oil should raise the price of gas at the pump, he said.

Wyden has yet to take a position on the export policy but said his primary concern is what it means for the consumer and individual businesses in a challenging economy.

Wyden also noted the Energy panel does not have jurisdiction over the Commerce Department, which regulates export licenses.

But with Wyden headed to the top slot on the Senate Finance Committee, and Landrieu set to take the Energy gavel, proponents of lifting the ban are hopeful the issue will receive heightened attention.

Landrieu is facing a difficult reelection race in 2014 and is likely to be eager to flex her powers as Energy chairwoman.

“Let’s see what the hearing brings forth, and then we can do a good strong sensible policy based on the facts,” Landrieu said.