Senators, oil execs unite to end ban

Pump jacks work in unison to pull oil from a field in Williston, N.D., in this fi le photo. Congress voted Friday to let energy companies export U.S. crude for the first time since an oil embargo forced Americans to ration gasoline 40 years ago.
Pump jacks work in unison to pull oil from a field in Williston, N.D., in this fi le photo. Congress voted Friday to let energy companies export U.S. crude for the first time since an oil embargo forced Americans to ration gasoline 40 years ago.

Working the halls of Congress, lawmaker by lawmaker, to end the ban on U.S. crude oil exports, oil-state senators and energy company executives were united by a single strategy and bolstered by seismic shifts in the industry.

"We can't let this issue get Keystoned," said Sen. Heidi Heitkamp, a North Dakota Democrat, referring to the years-long, ultimately futile battle to have an oil pipeline from Canada to the Gulf of Mexico approved over the objections of environmentalists.

To avoid meeting a similar fate in their efforts to overturn the 40-year-old U.S. policy, the cadre fanned out across the Capitol, arguing in meetings that lifting the ban was about jobs and the economy -- not the environment or the future of fossil fuels. Exports would help the nation's economy and help put Americans to work, they said.

The backbone of their argument, unthinkable a decade ago, was that the U.S. had become an energy powerhouse less reliant on imported oil. With oil and gas gushing out of newly-developed shale fields in North Dakota's Bakken formation, Texas' Permian Basin and elsewhere, the U.S. in 2014 overtook Russia as the largest producer of those fossil fuels. During almost two years of efforts to end the ban, crude oil prices fell by more than half, and pump prices plunged, neutralizing fears that American car-owners would foot the bill.

In the end, the Congress voted Friday to let energy companies export U.S. crude for the first time since the Organization of Petroleum Exporting Countries oil embargo forced Americans to ration gasoline 40 years ago.

Any legislative victory so decisive takes a lot of lobbying and lot of luck. This one was no different. A confluence of events, including plummeting crude prices and the recent deal to remove sanctions on Iranian oil, opened the door. Mix that with one of the biggest-spending lobbies in Washington, add the strategy of tying the export issue to an extension of popular tax credits for wind and solar power, and lifting the ban easily passed in both chambers of Congress as part of a government spending package signed by President Barack Obama.

Sensing they had momentum, oil industry lobbyists stepped up a social media campaign targeting possible supporters by placing ads on Facebook and elsewhere. Companies printed anti-ban messages on royalty checks. And in the end, supporters of retaining the ban were outmatched on the Hill, where at least 34 groups and companies were lobbying to allow exports compared with seven lobbying against.

"It moved quickly," said ConocoPhillips Chief Executive Officer Ryan Lance in a telephone interview. "A lot quicker than industry thought it would."

The trade restrictions on most unprocessed U.S. crude oil were imposed by Congress in 1975 after supply shortages that had Americans lining up for hours to fill their gas tanks. Democratic and Republican administrations added some exceptions but kept the measure in place to ensure Americans had a steady supply of fuel. Until the Bakken shale fields were tapped, reversing the policy hadn't been seriously contemplated.

Even during the votes last week, some Democrats, such as Sen. Ed Markey of Massachusetts, opposed lifting the ban, saying it would "hamstring our clean energy future" and amount to "Big Oil corporate welfare."

"The oil industry wants to send our oil overseas to the highest bidder, even as we still import millions of barrels of oil every day from nations around the world in unstable regions," Markey said in a statement before the Senate passed the spending bill.

In an effort to defuse such an argument, oil groups and Sen. Lisa Murkowski, a Republican from Alaska and Congress' biggest champion of a policy shift, ordered studies from think tanks, academics and government agencies to create a body of evidence showing that exports would be, on net, positive for the economy, and could lower gasoline prices for Americans.

"Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports," the U.S. Energy Information Administration, an arm of the Department of Energy, said in a 58-page study released in September.

At least nine U.S. think tanks released reports endorsing crude exports and sent advocates before Congress to push repeal, according to the nonprofit Public Accountability Initiative. While reports generally were cast as independent, all the think tanks receive funding from major oil and gas companies, the public interest research group found. Industry lobbyists and executives also hold governing positions.

"There was a full-on push by these think tanks to put out research supporting the repeal of the export ban," said Kevin Connor, the group's director. "It turns out that these think tanks also have deep ties to the industry, through funding, through leadership and experts that are the industry's payroll."

Market forces no doubt smoothed the way. World crude prices were above $100 per barrel when Murkowski first laid out the rationale for changing the policy. Before Friday's vote, crude had fallen below $35.

The issue was a priority for drillers. ConocoPhillips and 15 other independent oil producers worth $273.86 billion united to campaign for exports, putting money and muscle into an effort greeted with skepticism two years ago. In the past month, as a compromise to link the issue with tax breaks for solar and wind energy won converts, the C-Suite executives telephoned lawmakers to press for approval.

"Normally, issues these days take a much longer time frame to develop," said George Baker, head of the Producers for American Crude Oil Exports coalition. "But the persistence of the champions of this on the Hill," along with the corporate involvement, helped rapidly propel the cause.

Information for this article was contributed by Catherine Traywick of Bloomberg News.

Business on 12/22/2015

Upcoming Events