Independent refiners form ‘CRUDE’ group to fight export efforts

WASHINGTON _ Four refiners have teamed up to battle oil companies’ bid to export American crude, launching the first major lobbying campaign on the issue.

The move highlights the deep divisions in the oil industry over the 39-year-old ban on selling U.S. crude overseas, as a surge in domestic production feeds calls to relax the trade restrictions.

The current system favors refiners, who can freely export gasoline, diesel and other petroleum products, even though unprocessed crude is generally barred from foreign sale.

The new effort, called CRUDE, or Consumers and Refiners United for Domestic Energy, aims to preserve that dynamic.

“We’re on the cusp of a historic opportunity _ finally _ to gain energy independence and security, and break through the grip of foreign oil cartels on the U.S. economy,” said Jeff Peck, the lobbyist hired to lead the group’s government outreach. “To smash that opportunity away by all of a sudden exporting crude oil is definitely not in the interest of the United States.”

The group’s founding members are all independent refiners: Dallas-based Alon USA Energy Inc.; Parsipanny, N.J.,-based PBF Energy, Delta Airlines subsidiary Monroe Energy, based in Trainer, Pa.; and Philadelphia Energy Services.

They joined forces in late January, after Sen. Lisa Murkowski, R-Alaska, and the American Petroleum Institute separately began making the case for exporting U.S. crude. The export advocates dominated the early debate, with little public resistance at the time from refiners, whose main trade group has reaffirmed its support for free-market policies.

The coalition was born out of members’ concerns that “the debate was pretty one-sided” and that there needed to be a consistent voice providing the counter-argument, Peck said.

He declined to discuss specific strategy, but the coalition is expected to focus much of its efforts on U.S. policymakers involved in trade and energy issues, including lawmakers on Capitol Hill, regulators at the Commerce Department and other Obama administration officials.

The group hired Washington, D.C. lobbying firm Peck, Madigan & Jones to represent it in the nation’s capital.

The refiners’ alliance could partner with other export opponents to amplify its voice on the issue, potentially joining such strange bedfellows as environmentalists worried about driving fossil fuel development, consumer groups concerned about gasoline prices and labor unions fearing layoffs.

Missing from the new coalition is San Antonio-based Valero Energy Corp., the nation’s biggest independent refiner. Spokesman Bill Day confirmed that while Valero has not joined the coalition, it believes “the current system is working well and should stay in place.”

By visibly working to maintain the existing ban on crude oil exports, the group is publicly at odds with the American Fuel and Petrochemical Manufacturers’ free trade stance and the nations second largest independent refiner, San Antonio-based Tesoro Corp.

Both Tesoro and AFPM have said any debate on export restrictions should include a close look at other policies, such as Jones Act prohibitions on using foreign tankers to transport oil and petroleum products around the country.

“Tesoro supports the principles of free trade and free markets,” said Stephen Brown, vice president of federal government affairs for the company. “It would be a travesty, however, for our lawmakers, as they consider allowing markets to function without the heavy hand of government, not to have outdated statutes like the Jones Act of 1920 also on their radar screens for review.”

AFPM President Charles Drevna also emphasized “the need to look at energy policy holistically.”

The American Petroleum Institute declined to comment on the new coalition, but a spokesman referred to API’s previous arguments that selling oil overseas would support domestic jobs, lower the U.S. trade deficit and boost security.

Export advocates say loosening the ban would help solve a growing logistical challenge, as oil companies extract more light, sweet crude from dense U.S. rock formations than can easily be processed by domestic refineries adapted for heavier varieties. And while some refineries are gearing up to process more light domestic crude, other foreign-owned facilities have few incentives to switch. For instance, Citgo, a U.S. subsidiary of Venezuela’s state-owned oil company, is expected to continue processing heavy crudes from that nation, even if it is surrounded by lighter U.S. options.

The current restraints are helping keep domestic oil prices lower than the international benchmark, Brent crude, giving an advantage to refiners who are selling record amounts of gasoline, diesel and other petroleum products overseas. Oil producers are worried about a glut of light sweet crude developing on the Gulf Coast, sending prices even lower.

“Why would they support lifting the ban if they didn’t think it was going to lift prices?” CRUDE’s Peck said. “That’s obviously good for them, but it’s not going to be good for the American consumer, who is going to pay more at the pump.”