"Nobody’s getting everything they want, that’s for darn sure, but I do think this is an impressive journey that we have gone down in the past several months," said US Senator Lisa Murkowski, chairwoman of the Senate Energy and Natural Resources Committee, in July 2015 after a particularly long day at the office.
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The committee Murkowski chairs had just approved a raft of energy-related proposals, clearing them to continue their journey through the twists and turns of the US legislative system. The major bill to make it past the committee’s scrutiny was the Energy Policy Modernisation Act, a patchwork of policy proposals that would ease the permitting process for gas pipelines while strengthening energy efficiency programmes and providing a policy boost for hydropower.
The Energy Policy Modernisation Act demonstrates, both in name and content, that the US is increasingly ready to discuss how best to adapt its energy infrastructure and natural resource policy to the modern age. But perhaps a better indicator of this ongoing discussion is another measure that received approval from the committee that day – the proposal to repeal long-standing restrictions on the export of US crude oil to international markets.
The restrictions – which by now have enough exceptions that they don’t quite amount to an outright ban – are a hangover from the market volatility of the 1970s, when oil exports were restricted to help ensure American energy security following the oil crisis of 1973-1974.Those in favour of the repeal argue that the market today is a far cry from the situation four decades ago, and the US stance on oil exports should change to reflect that. The debate over US oil exports is ongoing as the repeal proposal wends its way through the corridors of power, each side laying out the case for or against opening up US-produced crude oil to the world.
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Industry set to benefit from global exports
For offshore and onshore oil producers in the US, there is, unsurprisingly, a unified pro-repeal stance, and the industry hasn’t been shy about making its views known to the public and policymakers alike.
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By GlobalData"The sooner this happens, the better for us," Exxon Mobil vice-president for public and governmental affairs Kenneth P Cohen told the New York Times in October 2015. "The momentum has picked up. The political calculus now is very favourable for taking a look and actually doing something about this ban."
Depressed oil prices have eaten into oil companies’ profits, prompting the loss of an estimated 200,000 jobs in the industry as well as production shutdowns and the sale of major assets. Full access to global markets would, according to the US Energy Information Administration, generate an estimated $25bn in extra crude sales by 2025, with onshore and offshore companies operating close to export terminals on the Gulf coast likely to receive a particularly strong boost.
For offshore oil and gas companies specifically, the lifting of export restrictions would also inform and, to a certain extent, legitimise the concurrent debate over authorising new exploration licences on the Atlantic coast and in currently restricted waters in the eastern Gulf of Mexico off the coast of Florida. According to the American Petroleum Institute (API), opening up Florida’s coast to drilling could eventually add a further million barrels of oil per day to US output, and having an international market to sell into would likely make this prospect more attractive.
Big Oil’s lobbying machine powers up
But simply extolling the benefits that the repeal would have for the oil industry isn’t enough to draw strong bipartisan support in Congress and sway public opinion. Oil companies know this, and for the last year or more have launched a powerful lobbying and public information campaign under the leadership of the API.
According to the New York Times, the API has spent a "sizeable chunk" of its $70m annual publicity budget this year on the campaign to lift the restrictions, including financing pro-repeal think tanks, placing editorials in prominent Washington newspapers and running television adverts in key markets, as well as an aggressive email and social media campaign spearheaded by industry-sponsored networks of millions of oil industry employees and advocates.
"[Oil companies] are saturating Washington on this issue and defining it on their own terms," said the director of anti-repeal advocacy group Public Citizen’s energy programme Tyson Slocum.
Pro-repeal arguments presented by the industry follow broadly economic and diplomatic lines. Various estimates have claimed that allowing US oil exports will create up to a million new jobs due to the expected production increase, which is pegged at up to 1.2 million extra barrels a day by 2025, according to a January 2015 report by Columbia University’s Center on Global Energy Policy.
Lower international oil prices prompted by the US’s entrance into global markets could reduce the price of petroleum for consumers at the pump, proponents argue, and the US would also be able to exert more influence on oil powers such as Iran and Russia, supporting allies against market volatility and the diplomatic pressure exerted by less scrupulous suppliers.
The industry publicity blitz hasn’t quite managed to create broad bipartisan support for the repeal, but the proposal enjoys strong support from most Republican politicians and Democrats representing oil-centric states, and comments in July by John Boehner, then Speaker of the House of Representatives, indicate the growing momentum referenced by the industry.
"Lifting the ban would create an estimated one million jobs here at home, jobs that frankly would be created in every state," Boehner said. "It would help bring down prices at the pump for consumers, and it would be good for our allies…I would support lifting the ban, and hopefully we can work together in a bipartisan fashion to move our energy policies into this century."
Debating the economic and environmental impact of US oil exports
However, dissenting voices not amplified by the sponsorship of the oil industry have been questioning the economic benefits of lifting export restrictions, as well as raising the issue of the environmental damage that will be caused by new exports and the production increase that is expected to follow.
On jobs, some anti-repeal advocates have argued that the oil industry has managed to increase its production levels massively in recent years while cutting tens of thousands of jobs through production efficiency improvements and automation, calling into question whether more drilling will necessarily provoke a significant spike in employment opportunities.
Some oil refiners have also argued that exposure to international markets would actually increase the price of oil for US oil refineries, which currently enjoy low prices due to the abundance of US domestic supply, and would therefore hit the wallets of American consumers. "The math is simple on this action," said Tom O’Malley, chairman of New Jersey-based petroleum refiner PBF Energy, in late 2014. "Removing the export ban equals higher oil prices equals higher gasoline prices equals angry voters."
The economic impacts of unrestricted US oil exports are up for debate – lower global oil prices prompted by American supply could counteract the price pressure for refineries, for example- but the environmental effects are more clear-cut. Even the Center on Global Energy Policy’s broadly pro-repeal report acknowledges as much: "To the extent allowing exports lowers crude oil and petroleum product prices, global oil demand will increase, along with oil-related CO2 emissions."
Particularly in the wake of the US’s leadership role in the historic global emissions reduction agreement achieved at the UN Paris Climate Change Conference, many environmentalists view the prospect of opening up the export market and encouraging more drilling as a betrayal. An August report by the Center for American Progress used production estimates from pro-repeal studies and found that repealing export restrictions, including the energy used by tankers to carry American oil to markets around the world, would create carbon emissions equal to 135 coal-fired power plants.
So the debate continues. The legislation won an important victory in October when it was passed by the House of Representatives, setting up the bill for an all-important debate in the Senate. However, the proposal still has a long way to go before being passed into law. The successful vote in the House did not achieve the two-thirds majority required to nullify the risk of a presidential veto, and the Obama administration’s official opposition to the repeal makes the threat of a veto a worryingly realistic possibility for the oil industry and its allies in Congress. The oil lobby may be powerful, but the debate over US oil exports still rests on a knife-edge.
