ENERGY POLICY:

Murkowski calls for opening spigot for U.S. crude exports

The top ranks of the Senate Energy and Natural Resources Committee are poised to see a bipartisan consensus in favor of ending the nation's nearly four-decade-old ban on exporting domestic crude oil.

The stunning shift accelerated this morning when the panel's top Republican, Sen. Lisa Murkowski of Alaska, called on the Obama administration to use its existing authorities to begin approving overseas sales of light oil and condensate currently barred from export by a patchwork of 20th-century laws.

Murkowski joins Sen. Mary Landrieu (D-La.), set to lead the committee following the ambassadorial confirmation of Sen. Max Baucus (D-Mont.), in pressing for an end to a ban that crude producers and oil-patch lawmakers say is outmoded in an age of rising U.S. production thanks to hydraulic fracturing.

"There will come a time when we will have an unsustainable glut" of shale oil being pumped from formations in Texas, North Dakota and Montana at a dizzying pace, Murkowski told an audience at the Brookings Institution. "It may be next year. It may be sooner than that -- it may be a couple of months. The free market works wonders, but it can't work magic here."

The Alaskan predicted that looser export restrictions would not cause a "looming run on the crude oil bank" and that "all things equal, this will help the American consumer" by sparking more global production that would press prices downward. But the effect on gasoline prices of even a small opening for U.S. crude exports is far from assured and represents an enormous political obstacle to easing the ban, as Sens. Robert Menendez (D-N.J.) and Ed Markey (D-Mass.) illustrated last month in calling for domestic oil to stay in the country (E&E Daily, Dec. 17, 2013).

Daniel Weiss, director of climate strategy at the liberal-leaning Center for American Progress, slammed Murkowski as willing to compromise national energy security on the unproven assumption that the current production boom can continue over the long term.

"The export of U.S.-produced oil would weaken our energy security by sending this critical commodity overseas," Weiss said in a statement. "American oil should remain on American soil."

Michael Marx, Beyond Oil campaign director at the Sierra Club, defended the export ban in a statement as "an incentive for clean energy sources [that] helps reduce the threat of rail derailments, drilling, spills, and our reliance on even more carbon intensive sources of oil."

Such resistance to lifting the export ban in light of flat to falling domestic crude demand is likely to prevent Congress from acting during a midterm election year, a political truism that Murkowski acknowledged in aligning with analysts who see President Obama as empowered to carve out oil shipment exemptions using his existing powers under the Energy Policy and Conservation Act of 1975 (E&E Daily, Jan. 7).

"I'm trying to be practical about where we are," the senator said, floating the notion of a two-track strategy that would involve a bill aimed at providing "some encouragement" to the administration on easing the export ban.

A Chairwoman Landrieu and ranking member Murkowski on the energy panel could go a long way toward giving such legislation momentum in the Senate. But environmentalists are ready to remind the chamber's Democratic leaders that the production boost of fresh crude exports would have consequences for climate change -- which Brookings acknowledged in its introduction of the Republican senator as cognizant of the "need to adapt to a warmer world."

Stephen Kretzmann, executive director of the green group Oil Change International, cited International Energy Agency warnings of the emissions generated by the presently brisk pace of global fossil-fuel development in an interview on Murkowski's comments.

"The reality is that lifting the oil export ban right now is simply climate denial in a new and more dangerous form," he said, adding that "the whole reason to lift the oil export ban is to raise prices in the U.S., raise the price received by drillers and to increase future production and supply."

The United States is permitted to export crude in small amounts under Commerce Department licensing carve-outs for shipment to Canada as well as sales of heavy oil from California and Alaska. Crude exports averaged 114,000 barrels per day (bpd) in October, according to the Energy Information Administration, or nearly double the 2012 average of 67,000 bpd.

Fuel's got to travel

Regardless of the export ban's fate, swelling production of both oil and natural gas from shale formations continues to stress existing infrastructure and exert pressure for new investment on a GOP typically wary of increased government spending.

Murkowski took on that issue at Brookings today, challenging her Republican colleagues as well as Democrats to view the domestic energy boom through a nonpartisan lens.

"It's not just how we move our fossil fuels but our wind, our solar, our renewables" to market, she said. "This is going to be our big challenge moving forward, and it's going to be expensive."

The American Petroleum Institute today touted private-sector energy infrastructure investment in its annual industry outlook, launching a new campaign aimed at promoting public support for domestic fossil fuels (see related story).

Another piece of the exports puzzle that Murkowski eyed for re-examination on Capitol Hill is the little-understood landscape of federal agency responsibility for fuel transportation projects. The issue is best known as a skirmish in the fight over the Keystone XL pipeline, under review for years by a State Department that Republicans often accuse of unduly delaying a decision.

But Murkowski suggested today that the current system's vesting of cross-border infrastructure approvals at State, natural gas export license applications at the Energy Department and crude export bids at Commerce deserves broad scrutiny.