ENERGY POLICY:

Democrats face tricky balancing act in urging fuel export restrictions

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It attracts both coastal liberals and centrists in some of Capitol Hill's toughest election-year battles. It was the highest-rated message tested by two top Democratic advisers looking to guide their side of the aisle through a spring of bruising combat over gas prices.

But how much more loudly can -- or should -- Democrats call for slowing down or blocking exports of domestically produced oil and gas, especially when overseas fuel sales are helping President Obama approach his goal of doubling U.S. export growth by 2015?

The Democratic export embrace pulls in an armful of hot energy issues, from the Keystone XL pipeline to the imminent opening of the lower 48 states' first liquefied natural gas (LNG) export facility to the U.S. EPA regulations that have prodded the coal industry to ship its product overseas in volumes last seen two decades ago. While the party is far from united in favor of restraining fuel exports, and Democratic legislation on the issue is highly unlikely to come to a vote, even the emerging message is fraught with hurdles.

"This is the only export we seem to dislike," veteran energy analyst Michael Levi said of lawmakers' enthusiasm for keeping U.S.-produced fossil fuels in the country. "If your problem with oil, coal or gas production is oil, coal or gas production, then you clean that up, but dealing with it by barring exports is not the wisest approach."

The Democratic flirtation with fuel export restrictions peaks in relation to Keystone XL, for which President Obama denied a permit in January but which remains the top energy priority for congressional Republicans convinced of the project's merits as a job creator and replacement for Middle Eastern oil imports.

Critics of the $7 billion Canada-to-U.S. project, led by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), proposed in February a requirement that oil shipped through the pipeline remain in the United States unless the president granted a waiver. That pitch was intended to prod the GOP over its claim that Keystone XL's 830,000 daily barrels of oil would bring down U.S. gasoline prices, a notion disputed by energy experts and the Obama administration, but the proposal gained enough momentum to win a nod from Senate Majority Leader Harry Reid (D-Nev.) and an upper-chamber floor vote in March (E&E Daily, Feb. 1).

Two Democratic Senate candidates, incumbent Jon Tester of Montana and Rep. Shelley Berkley of Nevada, recently joined the call for export restrictions on fuel from Keystone XL.

The anti-export push's next iterations came on the LNG front, with Markey and Sen. Ron Wyden (D-Ore.) urging more scrutiny of the current flurry of natural gas export projects, and a more general call to prevent the overseas shipment of oil produced on public lands. On the latter front, Markey so far has drawn co-sponsorship from one of the House's most liberal members, Rep. Lynn Woolsey (D-Calif.), as well as from Rep. Bill Owens (D-N.Y.), who burnished his centrist credentials in 2010 by suggesting he could support a Republican for speaker.

Asked in an interview last week about whether his boss's push for export limits could extend to U.S.-mined coal, now heading overseas at its highest levels since the early 1990s, Markey spokesman Eben Burnham-Snyder said it should receive different treatment than oil or natural gas, given the fuels' widely varying environmental impacts.

At the same time, Burnham-Snyder defended a push to keep domestic fuels in the United States as economically beneficial in its own right. "Would it constrain certain industries, like oil and gas? Yes," he said.

"Would it help certain domestic industries, like steel, plastic, chemicals, fertilizers, or any manufacturer seeking to switch to natural gas for power? It would help them a lot."

But export restrictions also risk putting a damper on the nascent economic recovery, given that fuel was the nation's top export in 2011. "As we produce more oil here domestically, that's jobs in America, wealth creation in America," Energy Secretary Steven Chu told House members last month.

Energy lawyer Brigham McCown, former acting chief of the George W. Bush administration's pipeline safety agency, put the trade-off in starker terms.

"We have not been able to produce a lot of things made overseas," he said in an interview. "Energy products seem to be a bright spot in that. It means a higher GDP in the U.S., which is good for all of us."

With U.S. gasoline demand static at best, the oil industry is assuredly benefiting from the boom to what the Energy Information Administration estimates was more than 1 billion barrels in petroleum liquid exports last year. Sixteen percent of that annual volume came in the form of gasoline, but gasoline made up nearly one-third of the total increase between 2010 and 2011 -- a fact not lost on environmentalists who slam Keystone XL as an export pipeline that would increase pump prices for U.S. consumers.

American Petroleum Institute President Jack Gerard, a stalwart backer of the XL project who argues that it would lower U.S. gas prices, joined Markey in defending his position when the two jostled over overseas fuel sales during a hearing last month.

"If we, just like in the case of gasoline today, produce more than the market demands, exports are a good thing," Gerard told the Massachusetts author of a greenhouse gas emissions bill that his group helped to kill in 2010. "The president has called on us to double our exports in this country."

Democrats count an ally on the exports issue in the United Steelworkers, which represents workers at refineries that make up nearly two-thirds of domestic capacity.

The steelworkers' union wants "to ensure that the U.S. domestic market is supplied at reasonable prices," spokeswoman Lynne Hancock said via email, while noting that her team has not examined the specific details of individual fuel export bills.

"The inexpensive North American crude should be used for U.S. refineries, especially for those on the East Coast that are having to import expensive Brent crude."

Restricting export of fuel developed on federal lands was the first energy talking point offered by House Minority Leader Nancy Pelosi (D-Calif.) to her members during the two-week recess that concludes today. Whether it remains a central plank in Democrats' push-back against the GOP program of more drilling and Canadian oil trade, however, may depend on how far House Republicans can take their latest campaign to override the White House rejection of Keystone XL.

That effort is set to come to the House floor this week in the form of a short-term extension of current transportation law, with the pipeline attached as a sweetener to draw conservative votes and trigger conference talks with the Senate on its new version of the bill (Greenwire, April 13). House Energy and Commerce Chairman Fred Upton (R-Mich.) delivered his party's weekly radio address Saturday, further highlighting the GOP focus on Keystone XL and its other energy priorities.

As Republicans and Democrats tangle over the economic benefits of U.S. fuel production from rigs and refineries, neither are likely to acknowledge what Levi, a senior fellow at the Council on Foreign Relations, diagnosed as a peculiar alignment between them.

"Both ends of this debate seem to agree that there is something extremely compelling about consuming the oil we produce here," he said.

Schedule: The Rules Committee meeting on a transportation bill that would fast-track Keystone XL is tomorrow, April 17, at 3 p.m. in H-313, Capitol building.