Congress Facing Huge Pressure to Lift Oil Export Ban
A lobbying blitz is underway to scrap the decades-old ban on crude oil exports from the United States.
Originally implemented during price spikes in the 1970s, oil exports from the U.S. have been legally blocked, save for exemptions given to exports to Canada. That was largely a nonissue for several decades, as the U.S. was a massive importer of oil, and there wasn’t much of an opportunity for domestic drillers to export crude.
That all changed in the last few years with a flood of new production. Calls for lifting the ban on exports began in earnest in 2014. The Obama administration has not decisively taken a stance on the issue but has shown some willingness to allow exports to move forward. In June, the Commerce Department granted waivers to several producers to export ultralight forms of oil known as condensate. Rather than satiate demands for export, the move only sparked more interest.
Many more companies applied for their own waivers, and the body began approving them. In December, the agency also issued a clarification on what constitutes “condensate,” and while it did not issue a blanket lift on the oil export ban, the move essentially green lighted the export of ultralight forms of oil that had undergone only minimal processing.
The Obama administration threw the industry a bone by offering a relief valve for all the oil supplies that have built up within U.S. borders. By allowing some exports, the federal government opens up the market for producers, where they can sell oil at a higher price. After all, WTI is currently selling for just $50 per barrel, while Brent is selling at a $10 premium.
But now the oil industry, sensing its advantage, is stepping up the lobbying effort to once and for all scrap the four-decade export ban.
More than 80 companies that are members of the Independent Petroleum Association of America (IPAA) flooded Capitol Hill this week to lobby for an end to the oil export ban. “Those members, who have flown in this week from several states including Colorado, Illinois, Louisiana, Ohio, and Texas, have 150-plus meetings scheduled with House and Senate offices to urge lifting the U.S. crude oil export ban,” Politico reported.
At a March 3 hearing at the House Subcommittee on Energy and Power, the CEO of Pioneer Natural Resources pressed the issue. “If U.S. producers are forced to downsize further due to a protracted downturn caused by the export ban, it could take the industry many years to restore production growth. Loss of critical mass in the U.S. oil and gas sector equates to loss of energy security for the United States,” Scott Sheffield told House members.
On the same day, the U.S. Chamber of Commerce hosted the CEO of ConocoPhillips in Washington, D.C., across the street from the White House. He called for an end to the export ban, citing production and inventory build-ups that could overwhelm the nation’s refining ability. “We shouldn’t put U.S. producers at a competitive disadvantage by limiting access to global markets,” Ryan Lance said.
Lifting the ban on exports is still controversial, even among some Republicans. The head of the Senate Energy and Natural Resources Committee, Lisa Murkowski (R-Alaska), has called for liberalizing oil exports and plans to hold a hearing on the matter on March 19. However, her counterpart in the House, Fred Upton, has shown some hesitation. Upton says getting rid of the ban “will only happen after an open review of the current policy,” citing the debate on LNG exports that took more than a year.
The industry has already succeeded in kick starting that debate, and with low prices, oil companies are going on the offensive and appear to be gaining momentum within Congress and the administration to rip up the 40-year ban on exports.
Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.