An Update on Energy Exports Legislation

Published
American Association of Petroleum Geologists (AAPG)

As key Senators continue their push for energy exports, Senator Barrasso (R-WY) recently held Foreign Affairs Subcommittee hearing to discuss the economic and geopolitical benefits of exporting domestic crude oil and liquefied natural gas (LNG). In his opening remarks Senator Barrasso said that U.S. energy exports can provide important national security benefits and serve as a tool to strengthen U.S. foreign policy leadership. A primary example of this would be to provide Eastern European countries alternatives to natural gas imports from Russia. Barrasso also described legislation in this area that he has sponsored, which includes the LNG Permitting Certainty and Transparency Act (S. 33) and the Energy Supply and Distribution Act (S. 1312), which would lift the ban on crude oil exports.

The hearing featured policy experts from the Rapidan Group, IHS, and Center for a New American Security, who highlighted the geopolitical advantages of energy exports.

Robert McNally, Rapidan Group, said that the key goals that the U.S. should look to achieve with energy exports include: strengthening U.S. influence in the world by importing less energy and taking an increased leadership role with U.S. allies; adding more energy resources to the global energy supply pool; offering allies alternative energy supplies; and supporting U.S. foreign policy goals such as economic sanctions against Iran without concerns over price volatility. He also discussed the benefits of swapping the light sweet crude that the U.S. produces with heavier crudes from countries such as Mexico since U.S. refineries are designed to handle the heavier crudes.

Jamie Webster, a senior analyst for IHS, highlighted a recent IHS report, Unleashing the Supply Chain, which found that the benefits of lifting the crude oil ban over the next fifteen years would include: $86 billion increase in gross domestic product; 400,000 new jobs annually; a 25% increase in salaries for workers in the energy industry; and $1.3 trillion increase in tax revenues.

David Gordon with the Center for a New American Security, noted that lifting the oil export ban has bipartisan support. Supporters include former State Department Energy Envoy, Carlos Pascual, CIA Director and Secretary of Defense Leon Panetta, and Steven Hadley, National Security Advisor in the George W. Bush Administration.

Commander Kirk Lippold (U.S. Navy, Retired) presented a different perspective and said that although there are significant benefits to decreasing reliance on imported oil that lifting the ban on exports could have a long-term unintended consequence on national security. Kirk said that although it is true that domestic production has increased significantly, the U.S. continues to import a large amount of oil. According to the U.S. Energy Information Administration, the U.S. imported more than 2.6 billion barrels or 30% of its crude oil supply in 2014. He also noted that although policymakers discuss sending energy exports to Europe to dilute Russian influence, that market forces would more likely send them to Asia. He also said that lifting the ban could hurt U.S. allies with economies that depend on crude oil production such as Nigeria and Azerbaijan.

Senator Markey (D-MA), one of the Committee’s most vocal opponents of energy exports, said that he believes that lifting the crude oil export ban would be a large mistake because it would ensure that U.S. consumers would have to pay higher energy costs. Markey also said that he believes that U.S. refineries are making the necessary upgrades to process light sweet crudes. Senator Markey and twelve of his Senate colleagues recently sent a letter http://ow.ly/PfsEg to President Obama outlining these concerns.

Proposals to expedite the permitting process for LNG exports and to lift the ban on crude oil exports may be included in the comprehensive energy legislative draft that Senator Murkowski is putting together. The draft is expected to be released sometime in July.

As the House Energy and Commerce Committee also looks to craft their comprehensive energy legislative bill, a hearing is planned this week on legislation that would repeal the ban on crude oil exports (HR 702), which was introduced by Congressman Barton (R-TX) and has 70 cosponsors to date. The House Agriculture Committee will also hold a hearing on how lifting the ban could impact the rural economy.

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