ENERGY POLICY:

White House leaves door open to revising crude export limits

The White House yesterday left the door open to revisiting the nearly four-decade-old limits on crude exports, saying after a landmark Senate Energy and Natural Resources Committee hearing on the ban that it is "closely monitoring the implications" of surging U.S. oil production.

Even the handful of advocates for tweaking the export ban, led by ENR Committee ranking Republican Lisa Murkowski of Alaska, do not expect Congress to wade into the politically volatile topic, and urge President Obama to use existing executive branch authority to ease the nation's growing glut of light shale oil.

Asked to comment on the hearing, Obama spokesman Matt Lehrich did not rule out such a move.

"The increase in domestic oil production is a good thing and an important part of the president's 'all of the above' energy strategy," Lehrich said via email. "We are closely monitoring the implications of growing domestic energy supplies, including the economic, environmental and security opportunities and challenges that it presents. We will evaluate policy options as needed."

During what ENR Chairman Ron Wyden (D-Ore.) confirmed was the first congressional hearing in 25 years on U.S. crude export limits, enshrined into law during 1970s oil price shocks exacerbated by Middle East unrest, committee members in both parties appeared prepared to do what politicians are rarely known to -- keep an open mind on an intellectually complex issue.

Murkowski said she was "really gratified by the thoughtful responses" to her call earlier this month to revisit the export ban, which contains several exemptions for shipments of Alaskan or Californian varieties of crude, as well as shipments to Canada (Greenwire, Jan. 7). "It hasn't been a knee-jerk, 'Oh my gosh, we can't do it, the sky is falling' [dialogue]."

Yet senatorial skepticism abounded that eliminating the export limits could resolve current regional differences in crude costs, the leading determinant of prices at the pump, to the benefit of consumers. Sen. Maria Cantwell (D-Wash.) singled out "safety and price" as her top concerns, noting the already-sharp focus among policymakers on recent crude-by-rail accidents in the United States and Canada.

Sen. Tim Scott (R-S.C.) spoke for many Republicans in touting the job-creation and balance-of-trade benefits of producing more light shale oil in the United States, where production is poised to top 8 million barrels per day by the end of this year (EnergyWire, Sept. 13, 2013).

That flourishing yield "puts our Middle East competitors in a very unique position to take a serious look at their own budgets," Scott said.

But Amy Myers Jaffe, director of energy and sustainability at the University of California, Davis, told senators that the strongest case for U.S. economic benefits lay less in allowing unfettered exports and more in finely tuning energy policy "to avoid creating market distortions."

Given that the nation already counts processed hydrocarbons as its No. 1 export, Jaffe added, policymakers must decide "the best way to organize free markets."

Pros, cons to exemptions to ban

At the moment, those free markets are dominated by diesel exports that routinely topped 1.2 million barrels per day last year, compared with less than 600,000 barrels per day in finished gasoline exports, according to the Energy Information Administration.

In a fact belied by the shorthand description of crude export limits as a "ban," EIA reported that exceptions to the ban permitted more than 200,000 barrels per day of overseas crude sales in November, or more than double the September levels. That marks the highest volume of U.S. crude exports since 1999.

"Major oil companies are exporting refined petroleum products like gasoline and diesel with no limitations," Continental Resources Inc. CEO Harold Hamm, the largest shale oil producer in the Bakken region, told senators. "Why shouldn't independent producers be allowed to do the same? Are we going to be their subjugate milk cows forever?"

Yet Hamm's call was countered by Graeme Burnett, the Delta Air Lines senior vice president who chairs the board of the refining company that the airline purchased in 2012 to help lower its fuel costs. A move to end "export limits now would come at the expense of the American consumer," Burnett told senators. "We would pay more for gasoline, more for heating oil and more for the price of an airline ticket."

Joining Burnett and the Center for American Progress in calling for the preservation of the ban yesterday were Democratic Sens. Ed Markey of Massachusetts and Robert Menendez of New Jersey, who wrote to Obama urging him to keep domestic crude in-country to avoid swelling gasoline prices.

Markey and Menendez took aim at claims that the Commerce Department can effectively lift the limits by invoking exemptions for specific crudes, writing that "nowhere in regulation is the Commerce Department bestowed with the authority to approve large-scale exports on its own and any attempt to do so would exceed the department's existing authorities."

Exemptions do exist, however, for swaps of crude with other nations that might correct refining imbalances. Sen. Rob Portman (R-Ohio) brought up that prospect yesterday by mulling a trade "where we would be exporting light sweet crude in exchange for heavy crude" from Mexico.

"So it may not be wholesale lifting of the export ban at this point, but it might be some opportunities for us to actually enhance our competitiveness in this country," he added.

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