WASHINGTON – The Senate held its first hearing in 25 years on U.S. oil exports, weighing whether crude should flow freely from the nation’s shores for the first time since the 1970s.
Some lawmakers on the Senate Energy and Natural Resources Committee seemed to be open to the idea of lifting the ban on crude oil exports.
Sen. Tim Scott (R-S.C.) said as the U.S. increases its production of crude, and hopefully its exports, it will put countries in the Middle East in “a unique position to take a serious look at their own budgets, and their own revenues.”
With America poised to become the world’s largest producer of crude oil in 2015, many lawmakers say closing off access to global markets makes no sense.
“This ban threatens record-breaking U.S. oil production and American jobs by creating inefficiencies, gluts and other distortions,” said Sen. Lisa Murkowski (R-Alaska), who has been the leading voice in the Senate calling for expanded crude exports. “The architecture of U.S. energy exports must be renovated if our nation is to lead the world on issues of trade, the environment and energy.”
In November, the Energy Department reported that domestic crude oil production surpassed foreign imports for the first time in 20 years. U.S. crude production increased 28 percent, to 2.5 billion barrels annually, from 2007 through 2012, according to the department.
Committee Chairman Sen. Ron Wyden (D-Ore.), however, called for caution, saying the U.S. must weigh the costs to consumers before moving forward.
“It’s not enough to say some algorithm determines exports are good for the gross domestic product, or some other abstract concept,” he said. “American families and American businesses deserve to know what exports would mean for their specific needs when they fill up at the pump, or get their delivery of heating oil.”
Sen. Mary Landrieu (D-La.), who will become the committee’s chairwoman after Wyden assumes leadership of the Senate Finance Committee, said she wants more information about what types and quantities of crude U.S. refineries are processing.
“We have to be very aware and sensitive to the investments made by our refineries,” Landrieu said.
She provided other reasons for lifting the ban: new technologies available for exploration and production, and alternative fuels.
After the Arab oil embargo of 1973, Congress passed the export ban to conserve domestic oil reserves and discourage foreign imports. The 1975 law prohibits all U.S. crude from being shipped abroad, though exports of refined oil products, such as diesel and gasoline, are permitted.
The Department of Commerce can issue permits for crude exports in some rare circumstances, but has generally only allowed small quantities to Canada. Sending unrefined crude oil abroad requires a license from the Bureau of Industry and Security.
Some crude oil can be exported when a presidential finding is made that determines that doing so is in the country’s best interest.
President Ronald Reagan lifted the bans in 1985 and 1988 to permit exports to Canada. In 1992, President George H.W. Bush approved limited exports of heavy crude oil from California after environmental laws in the state significantly reduced domestic demand.
Murkowski said she did not expect President Obama to lift the ban in coming months, and she does not expect the committee to introduce legislation any time soon.
While U.S. oil producers have increasingly called for lifting the ban to create more incentives to produce oil at home and lower prices for consumers, refiners have claimed the opposite.
Harold Hamm, chief executive of Continental Resources and chairman of the Domestic Energy Producers Alliance, pointed out that while exports of crude are prohibited for small producers, the refineries that major oil companies supply are free to sell unlimited amounts of gasoline and diesel to global markets.
“Are we going to be their milk cow forever?” asked Hamm, whose company is the biggest producer in North Dakota’s Bakken region.
Graeme Burnett, senior vice president of Delta Airlines, said that relaxing the ban would prompt members of the Organization of the Petroleum Exporting Countries (OPEC) to reduce oil output to maintain high global prices.
“[U.S.] use of homegrown oil would diminish, and prices here at home would rise to match the higher global price for a barrel of crude,” Burnett said. “We believe strongly that the ban on U.S. crude oil exports is good for consumers.”
Delta, the largest user of jet fuel in the world behind the U.S. military, owns a refinery in Pennsylvania that uses Bakken crude.
Dan Weiss, senior fellow at the Center for American Progress, said lifting the ban would jeopardize the nation’s newly found energy security and increase gas prices for consumers.
“Without the ban, oil companies could sell their oil at the higher world market price, which the Energy Information Administration projects will average $9 per barrel higher this year,” Weiss said.
Most of the crude oil produced in the U.S. is the light, sweet type that domestic refiners are ill-fitted to handle.
Sen. Rob Portman (R-Ohio) said the U.S. should consider as a first step a deal with Mexico to offer U.S. light, sweet crude oil in return for its heavier grade that most American refiners are equipped to handle.