Export Questions Spark Diverse Passions

U.S. energy production, especially oil and natural gas from shale, is booming and expected to continue to grow.

Consequently, this bounty is pushing up energy exports - including coal that is displaced by natural gas in power generation - and refined products that are not regulated.

In addition, the unconventional production boom is spurring calls for reduced regulation of crude oil and accelerated permitting of natural gas exports.

Proponents argue that greater energy exports will stimulate the U.S. economy and aid our allies in Asia and Europe who depend on energy imports.

Another benefit of oil exports may be increased oil efficiency: Exports paired with imports may help balance the mismatch between producing areas, infrastructure and refinery capacity. Refiners currently benefit from the export of refined products, whereas oil producers would benefit from increased crude oil exports.

Opponents, however, argue that energy exports will increase energy costs for consumers and energy-intensive manufacturers. Environmentalists also argue that increasing exports will drive up global air emissions from soot to greenhouse gases.

Analyses of the impacts of natural gas exports conclude that exports could increase prices for U.S. residential and manufacturing consumers, and reduce domestic jobs.

The U.S. Department of Energy analysis, which forms the basis for determining if LNG export terminal applications are in the national interest, estimates that natural gas prices would rise slightly - but the average U.S. household would be better off, because exports would boost the value of the U.S. dollar, reducing the cost of imports.

The government has not completed a similar analysis for oil exports.

Coal Exports

The United States does not restrict coal exports. Exports are up almost three-fold over the past 10 years and are higher than the previous record volume in 1981. EIA projected - before the new EPA rules on existing power plant emissions - coal exports will continue to grow 0.9 percent per year through 2040.

In 2013 the major recipients of U.S. coal exports were, in descending order, China, Europe, United Kingdom, South Korea and Brazil.

Low demand for coal-fired electricity in the United States is driving exports. The low price of natural gas since 2009 has depressed coal consumption for electricity generation.

An additional drag on coal-fired electricity generation is the large number of aging coal-fired plants that are inefficient or do not meet existing mercury and air toxic standards. EIA projects that 16 percent of coal-fired capacity will be retired between 2012 and 2020.

Air quality regulations such as state renewable energy standards and the recently proposed emissions restrictions for existing power plants should further reduce domestic coal consumption and stimulate exports.

Natural Gas Exports

The United States currently exports natural gas via pipeline to Canada and Mexico, but imports from Canada make the United States a net importer of natural gas.

Exports of natural gas to countries with U.S. free trade agreements (FTA) are unrestricted (20 U.S. FTA partners include South Korea, Canada and Mexico). The concept of exports to non-FTA countries was considered commercial only a few years ago, and the first exports may be in 2015.

The U.S. Department of Energy (DOE) grants natural gas export authorizations to non-FTA countries, unless the proposed exports will "not be consistent with the public interest." Potential exporters also have to complete a costly environmental review through the Federal Energy Regulatory Commission before receiving final authorization from DOE.

DOE recently announced that it would change its authorization procedures to stop issuing conditional authorizations and only consider final authorizations after the environmental review is completed. This will prioritize applications from more advanced and potentially commercial projects.

EIA projects that U.S. exports of liquefied natural gas (LNG) will increase to 3.5 Tcf in 2029 and remain at that level through 2040. LNG exports will go to Asia and Europe where the huge demand for natural gas will continue to grow. Japans' Institute of Energy Economics expects Asian LNG demand to roughly double between 2013 and 2040.

As of early June DOE had issued six conditional LNG export authorizations, and had issued one final authorization for export to non-FTA countries at a rate of 2.2 billion cubic feet/d.

Oil and Refined Product Exports

Refiners have responded to increasing, and dominantly light oil domestic production (5.7 million bbl/d in 2011 to 7.4 million bbl/d in 2013 and, potentially, 9.2 million bbl/d in 2015) by changing their import mix to include more heavy oil and exporting more refined products. Lower prices for domestically produced oil also have encouraged refiners to increase their output and product exports.

The United States does not restrict natural gas liquids or refined product exports, so this market has ballooned. In March the United States exported over 3.8 million barrels per day (bbl/d) of natural gas liquids and refined petroleum products, up from about one million bbl/d in 2004.

Crude oil exports are a different story.

The United States currently only exports small volumes of crude oil to Canada because of long-standing restrictions on oil exports. Restrictions on crude oil and natural gas exports started in the mid-1970s when the Arab Oil Embargo accentuated the U.S. dependence on foreign energy. Energy price controls were another incentive to keep U.S. energy out of higher-priced foreign markets.

The question of whether additional crude exports would affect domestic and international markets in the future is of interest to policymakers, industry and the public.

Restrictions on U.S. crude oil exports are primarily based on the 1975 Energy Policy Conservation Act. Of interest in today's domestic energy economy, the 1975 bill includes exceptions to the export ban, allowing:

  • Exports of oil transported through the Trans-Alaska pipeline.
  • Small volumes of California heavy oil.
  • Exports for use in Canada.

The bill also allows crude oil exports if the president determines that oil exports are in the national interest; this provision has never been tested.

U.S. Senator Lisa Murkowski (R-Alaska) has written that energy exports benefit the U.S. economy, but that the inconsistent export rules benefit only certain segments of the energy industry. She opines that the president may be able to expand crude oil exports without congressional action.

In mid-May, Energy Secretary Ernest Moniz said, "The issue of crude oil exports is under consideration … A driver for this consideration is that the nature of the oil we're producing may not be well matched to our current refinery capacity."

This suggests that the administration is considering executive branch action.

Comments (0)


Policy Watch

Policy Watch - Edie Allison
Edie Allison began as the Director of the AAPG Geoscience and Energy Office in Washington D.C. in 2012.

Policy Watch

Policy Watch is a monthly column of the EXPLORER written by the director of AAPG's  Geoscience and Energy Office in Washington, D.C. *The first article appeared in February 2006 under the name "Washington Watch" and the column name was changed to "Policy Watch" in January 2013 to broaden the subject matter to a more global view.

View column archives

See Also: Bulletin Article

Emission of carbon dioxide (CO2) from fossil-fueled power generation stations contributes to global climate change. Capture of CO2 from such stationary sources and storage within the pores of geologic strata (geologic carbon storage) is one approach to mitigating anthropogenic climate change. The large storage volume needed for this approach to be effective requires injection into pore space saturated with saline water in reservoir strata overlain by cap rocks. One of the main concerns regarding storage in such rocks is leakage via faults. Such leakage requires, first, that the CO2 plume encounter a fault and, second, that the properties of the fault allow CO2 to flow upward. Considering only the first step of encounter, fault population statistics suggest an approach to calculate the probability of a plume encountering a fault, particularly in the early site-selection stage when site-specific characterization data may be lacking. The resulting fault encounter probability approach is applied to a case study in the southern part of the San Joaquin Basin, California. The CO2 plume from a previously planned injection was calculated to have a 4.1% chance of encountering a fully seal offsetting fault and a 9% chance of encountering a fault with a throw half the seal thickness. Subsequently available information indicated the presence of a half-seal offsetting fault at a location 2.8 km (1.7 mi) northeast of the injection site. The encounter probability for a plume large enough to encounter a fault with this throw at this distance from the injection site is 25%, providing a single before and after test of the encounter probability estimation method.
Desktop /Portals/0/PackFlashItemImages/WebReady/measuring-and-modeling-fault-density.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 3714 Bulletin Article

See Also: DL Abstract

Hydrocarbon exploration beneath the shallow allochthonous salt canopy of the ultra-deepwater central Gulf of Mexico has encountered three thick, sand-rich, submarine fan successions that punctuate an otherwise relatively condensed and fine-grained basin center stratigraphy. These sand-rich fans are Late Paleocene, Early Miocene, and Middle Miocene in age and each coincide with periods of very high sediment flux and basin margin instability. They are the primary exploration targets in most ultra-deepwater fields, recent discoveries, and failed exploration tests.

Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 3079 DL Abstract

See Also: Energy Policy Blog

New methane-emission regulations for the oil and natural gas industry could follow this fall.

Desktop /Portals/0/PackFlashItemImages/WebReady/epa-plans-oil-gas-industry-methane-emission-fact-finding-2014-04apr-02.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 12892 Energy Policy Blog

See Also: Learn! Blog

This year's AAPG Woodford Shale Forum on 12 May 2015 in Oklahoma City, promises to be very insightful to geologists and engineers. Included is a special Entrepreneurship session focusing on being successful in the oil industry. Learn about special pricing for students and scholarships for individuals who have been laid off. 

Desktop /Portals/0/PackFlashItemImages/WebReady/forum-woodford-shale-hero.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 17522 Learn! Blog

See Also: Online e Symposium

This e-symposium covers how to conduct an interdisciplinary evaluation of mature fields to determine the best approach to recover remaining reserves.

Desktop /Portals/0/PackFlashItemImages/WebReady/oc-es-evaluating-mature-fields.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 1464 Online e-Symposium