Refiners Mull Lobbying Strategy on Crude-Oil Export Ban

RODEO, CA - JANUARY 25: Steam rises from stacks at the Conoco-Phillips refinery on January 25, 2011 in Rodeo, California. Gas prices continue to rise and have gone up 14% or $.39 a gallon over the past year. Crude oil is currently trading at just under $90 a barrell and some analysts speculate that it could skyrocket up above $150 a barrell in the coming year. (Photo by Justin Sullivan/Getty Images)
National Journal
Amy Harder
Add to Briefcase
Amy Harder
Jan. 8, 2014, 3:59 p.m.

Go­ing against the vast ma­jor­ity of the oil in­dustry, a small group of re­finer­ies is plot­ting its way for­ward in the in­tensi­fy­ing de­bate over wheth­er to lift the dec­ades-old ban on crude-oil ex­ports.

In a call on Wed­nes­day, at least six in­de­pend­ent re­finery com­pan­ies and one air­line that owns a Phil­adelphia re­finery, Delta Air­lines, dis­cussed how much in­terest there was in or­gan­iz­ing a lob­by­ing ef­fort, ac­cord­ing to two in­dustry sources.

The par­ti­cipants in­cluded big names like Valero, Mara­thon Pet­ro­leum, and Delta, along with smal­ler com­pan­ies such as New Jer­sey-based PBF En­ergy and Phil­adelphia En­ergy Solu­tions (PES).

The com­pan­ies that are re­portedly plan­ning to take the lead are PBF En­ergy and Delta Air­lines, ac­cord­ing to an in­dustry source who was giv­en a readout of the call. Of­fi­cials of both com­pan­ies did not im­me­di­ately re­spond to re­quests for com­ment.

PES CEO Philip Rinaldi de­clined to com­ment about the call, but he in­dic­ated re­fin­ing crude oil be­fore ex­port­ing it ul­ti­mately helps the coun­try more. He ac­know­ledged it helps his com­pany’s bot­tom line, too.

“For the first time in a half cen­tury, there’s an op­por­tun­ity to re­store the coun­try to a man­u­fac­tur­ing-based eco­nomy, one where you add sig­ni­fic­ant value to cheap-based en­ergy and then ex­port that cheap en­ergy in the form of high-val­ued ad­ded product,” Rinaldi said in an in­ter­view Thursday. “As a large oil re­finer on the East Coast of the United States, that’s a policy that be­ne­fits my busi­ness. I re­cog­nize there is a busi­ness self-in­terest, but we think it’s the right thing to hap­pen for the coun­try too.”

A meet­ing is planned for next week in Wash­ing­ton to dis­cuss the po­ten­tial lob­by­ing ef­fort in more de­tail, ac­cord­ing to the in­dustry source. The source also said Valero and Mara­thon in­dic­ated they would not par­ti­cip­ate in the ef­fort.

Bill Day, a spokes­man for Valero, con­firmed the call oc­curred but did not provide de­tails. Day did say last week that his com­pany does not sup­port lift­ing the ban and in­stead sup­ports the cur­rent policy, which is that com­pan­ies must ap­ply for li­censes through the Com­merce De­part­ment to ex­port crude oil. Few of those li­censes are ap­proved, and most are to ship oil to Canada.

Na­tion­al Journ­al re­por­ted earli­er this week that a rift was brew­ing with­in the in­dustry between do­mest­ic re­finer­ies, such as the ones on Wed­nes­day’s call, and oil pro­du­cers, in­clud­ing U.S. com­pan­ies like Con­tin­ent­al Re­sources and in­ter­na­tion­al cor­por­a­tions like Ex­xon Mo­bil, which both pro­duce and re­fine oil. Be­cause the ex­port ban ap­plies only to crude oil, re­finers are profit­ing by ex­port­ing re­fined oil products like gas­ol­ine, dies­el, and jet fuel at re­cord rates amid the coun­try’s boom in oil pro­duc­tion, which is up 56 per­cent since 2008.

Calls to lift or at least re­vis­it the ban, which dates back to the af­ter­math of the 1973 oil em­bargo by Middle East pro­du­cers, have been grow­ing in the last couple of months. Sen­ate En­ergy and Nat­ur­al Re­sources Com­mit­tee rank­ing mem­ber Lisa Murkowski, R-Alaska, threw her sup­port be­hind the policy change earli­er this week. When asked about the emer­ging rift, she re­spon­ded bluntly.

“They’re go­ing to have to deal with that with­in the in­dustry,” Murkowski said. “From a policy per­spect­ive, it’s good policy, again, to al­low for that level of trade. My in­terest is not to pro­tect the re­finer­ies’ bot­tom line.”

Re­finers that op­pose lift­ing the crude-ex­port ban won’t get much sup­port from their trade as­so­ci­ations. Amer­ic­an Pet­ro­leum In­sti­tute CEO Jack Ger­ard said Tues­day that all of his more than 500 mem­ber com­pan­ies sup­port lift­ing the ban. Charlie Dre­vna, pres­id­ent of the Amer­ic­an Fuel and Pet­ro­chem­ic­al Man­u­fac­tur­ers, a smal­ler trade group rep­res­ent­ing primar­ily re­finer­ies, said last week his group’s of­fi­cial po­s­i­tion is to sup­port lift­ing the ban. Both lead­ers said their reas­ons were based on the no­tion that they sup­port a free mar­ket.

However, Dre­vna and Rinaldi of PES, soun­ded sim­il­ar tunes in cer­tain ways. They both called for a broad­er look at the de­bate rather than nar­row­ing lift­ing or chan­ging the crude-oil ex­port ban. They both said an­oth­er law gov­ern­ing the ship­ment of goods in U.S. wa­ters should be re­vis­ited as well. The Jones Act, dat­ing back more than 90 years, re­quires all goods — in­clud­ing en­ergy products — that are shipped in U.S. wa­ters from one part of the coun­try to an­oth­er to be trans­por­ted on a ves­sel built in the U.S.

“You have Jones Act re­stric­tions,” Rinaldi said. “How do you lift the ban and make this en­ergy cheap to every­body else in the world and then say ex­cept for oil re­finer­ies on the East Coast where we’re go­ing to pen­al­ize you an­oth­er five bucks a bar­rel by for­cing you on a Jones Act ves­sel?”

The re­finers’ po­ten­tial lob­by­ing ef­fort is still very much in its in­fancy stage, and how much if any trac­tion it gains is un­clear. For pre­ced­ent, the in­dustry doesn’t have to look far. Last year, a group of nat­ur­al-gas users, led by Dow Chem­ic­al, launched a co­ali­tion that op­poses a large in­crease in the amount of nat­ur­al-gas ex­ports, an­oth­er trend stem­ming from the coun­try’s skyrock­et­ing oil and nat­ur­al-gas pro­duc­tion of the last sev­er­al years. Ex­ports of nat­ur­al gas don’t face a ban like crude oil, but they do face sig­ni­fic­ant re­stric­tions on ship­ments to coun­tries that are not free-trade part­ners with the U.S. Those with free-trade agree­ments, in­clud­ing Europe, Ja­pan, and In­dia, all want U.S. nat­ur­al gas. Dow and oth­er users of nat­ur­al gas are con­cerned ex­port­ing that fuel could in­crease do­mest­ic prices, which are not set on a glob­al mar­ket like oil.

Aside from this nas­cent lob­by­ing force, the grow­ing chor­us of voices call­ing to lift the crude-oil ex­port ban faces tough odds at chan­ging the status quo. The grid­locked Con­gress rarely changes long-stand­ing law, and end­ing the ban could be seen as threat­en­ing to in­crease gas­ol­ine prices, a po­tent polit­ic­al at­tack dur­ing an elec­tion year. Murkowski hopes the Obama ad­min­is­tra­tion will be leg­ally able—and polit­ic­ally will­ing—to lift the ban it­self. But it’s un­clear wheth­er the ad­min­is­tra­tion could or would do that. 

What We're Following See More »
ANOTHER NUCLEAR OPTION?
Byrd Rule Could Trip Up Health Legislation
1 days ago
THE DETAILS

"Even if House Republicans manage to get enough members of their party on board with the latest version of their health care bill, they will face another battle in the Senate: whether the bill complies with the chamber’s arcane ... Byrd rule, which stipulates all provisions in a reconciliation bill must affect federal spending and revenues in a way that is not merely incidental." Democrats should have the advantage in that fight, "unless the Senate pulls another 'nuclear option.'”

Source:
ONE WEEK
Senate Votes To Fund Government
2 days ago
BREAKING
ON TO SENATE
House Passes Spending Bill
2 days ago
BREAKING

The House has passed a one-week spending bill that will avert a government shutdown which was set to begin at midnight. Lawmakers now have an extra week to come to a longer agreement which is expected to fund the government through the end of the fiscal year in September. The legislation now goes to the Senate, where it is expected to pass before President Trump signs it.

PRESIDENT CALLS MEDICAID FUNDS A “BAILOUT”
Puerto Rico Another Sticking Point in Budget Talks
2 days ago
THE DETAILS

President Trump’s portrayal of an effort to funnel more Medicaid dollars to Puerto Rico as a "bailout" is complicating negotiations over a continuing resolution on the budget. "House Democrats are now requiring such assistance as a condition for supporting the continuing resolution," a position that the GOP leadership is amenable to. "But Mr. Trump’s apparent skepticism aligns him with conservative House Republicans inclined to view its request as a bailout, leaving the deal a narrow path to passage in Congress."

Source:
POTENTIAL GOVERNMENT SHUTDOWN?
Democrats Threaten Spending Bill Over Obamacare
3 days ago
BREAKING

Democrats in the House are threatening to shut down the government if Republicans expedite a vote on a bill to repeal and replace Obamacare, said Democratic House Whip Steny Hoyer Thursday. Lawmakers have introduced a one-week spending bill to give themselves an extra week to reach a long-term funding deal, which seemed poised to pass easily. However, the White House is pressuring House Republicans to take a vote on their Obamacare replacement Friday to give Trump a legislative victory, though it is still not clear that they have the necessary votes to pass the health care bill. This could go down to the wire.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login