WASHINGTON — The oil industry is fighting back against allegations that it is looking to recruit another country to challenge the U.S. ban on exporting American crude.
Representatives from the American Petroleum Institute on Friday flatly denied the group had approached another country to formally protest the restrictions through the World Trade Organization.
“Absolutely not,” said Erik Milito, API’s upstream director. “The debate we’re having . . . is around the need to make sure U.S. policymakers here in the United States are working within our framework to provide a solution to this export dilemma that we’re currently in.”
Industry leaders have been campaigning for an end to the 38-year-old limits on most oil exports in light of surging domestic crude production, projected to reach record levels by 2016. But Milito insisted that the focus is on the Obama administration, the Senate and the House of Representatives “so that we are going toward an endgame that will ease these restrictions . . . to increase production, increase jobs and do the right thing for the economy.”
A Bloomberg report recently said API was developing a legal analysis that could be used by a foreign country in mounting a challenge of the trade restriction. Earlier this month, Sen. Ed Markey, D-Mass., blasted the potential strategy, calling it a “troubling tactic” that would undermine U.S. law, circumvent the legislative process and ignore the will of the American people.
Milito called the allegations “misleading.”
“I would not take anything away from that in terms of us talking to foreign governments,” Milito said. “That’s absolutely not happening.”
Congress banned exports of crude in 1975, after an embargo by Arab nations in protest of western policies on Israel underscored the United States’ reliance on foreign energy supplies.
But the governing law is not absolute; the Commerce Department’s Bureau of Industry and Security can issue licenses for oil exports whenever it deems them “consistent with the national interest.” Exceptions include exports to Canada as well as foreign sales of oil produced in Alaska’s Cook Inlet, some heavy crude produced in California and oil transported through the Trans-Alaska Pipeline System.
Broader changes could come from Congress, which could rewrite the export law, or the Obama administration, which could opt to more liberally interpret the “national interest” exception.
Oil industry lobbyists have been pressing for changes, launching a campaign that already has prompted high-profile pro-export editorials in the Wall Street Journal and other newspapers. Sen. Lisa Murkowski, R-Alaska, is set to unveil a major policy paper on the issue on Jan. 7. And last week, Energy Secretary Ernest Moniz noted the exports ban was born from an era of long gas station lines and hefty oil imports — a situation far different than today, with the U.S. on track to produce 9.5 million barrels per day in 2016.
Milito said Moniz’s comments affirm the “growing disconnect between domestic production levels and our outdated export levels.”
“The American energy revolution has rendered our current export policies obsolete,” he said. “Exporting a portion of our abundant crude supply would provide greater stability to the global supply while creating jobs and generating revenues stateside.”
Critics say that more foreign sales of U.S. oil could cause domestic prices to climb, effectively lifting the price for West Texas Intermediate crude, which trades at a discount to the global benchmark, Brent crude. “Why would we want to export oil and raise American oil prices to match the world’s oil price?” asked Sen. Robert Menendez, D-N.J., in a letter to President Barack Obama earlier this week.
API’s Milito counters that some costs could actually be lower without a ban, since most American refineries are designed to process dense, high-sulfur sour crude generally imported from other countries — not the light, sweet stuff flowing from U.S. fields.
“Trapping light, domestic crude within our borders only penalizes U.S. production, which could mean higher costs for refiners and consumers,” he said.