Refiners plot against oil exports

WASHINGTON — Oil companies’ zeal to sell U.S. crude overseas is alienating refiners, some of which on Wednesday took the first steps toward mounting a public campaign against easing a 39-year-old export ban.

Although oil producers stand to profit from greater crude exports, their gains would come at the expense of domestic refiners that are selling record amounts of gasoline, diesel and other finished petroleum products to foreign consumers.

While refiners currently enjoy a discount on domestic crude — which is priced well below the international benchmark — that scenario could disappear with broad oil exports.

“The unlimited export of crude is not in the national interest,” said Bill Day, spokesman for San Antonio-based Valero Energy Corp. “We’re not so sure who would support such a thing, unless you were a producer and wanted to get a higher price for what you are producing.”

In the nation’s capital, the issue is emerging as the biggest energy policy debate in this election year, with high-profile calls Tuesday from the head of the American Petroleum Institute and Sen. Lisa Murkowski, R-Alaska, to do away with the 1970s-era export ban.

On Wednesday, U.S. Chamber of Commerce CEO Thomas Donohue added his voice, saying the restrictions — imposed after a 1973 embargo by Middle Eastern producers led to U.S. fuel shortages — are outdated and don’t match the reality of today’s surging energy production.

A half-dozen refiners, led by New Jersey-based PBF Energy and Delta Air Lines’ Monroe Energy, huddled on a phone call Wednesday to make plans to push more aggressively against easing the oil export ban, according to two industry sources.

The effort could bring in new lobbying firms to battle on the refiners’ behalf and ultimately could expand to a broader coalition of crude export foes, including consumer advocates and national-security groups worried about squandering America’s current energy advantage.

Widening dispute

Such a public campaign would expose a widening rift between downstream refiners and upstream oil producers. It also could put some refiners out front of their own industry trade group, the American Fuel and Petrochemical Manufacturers, which does not oppose oil exports.

That group’s president, Charles Drevna, said it “has been consistent in its promotion of economic development and free and open markets.”

He acknowledged, however, that “there may be a couple of independent refiners who are a little more reticent about lifting the ban on exports.”

A PBF Energy spokesman did not return a call seeking comment; Delta declined to comment.

Blake Clayton, an energy analyst at the Council on Foreign Relations, has predicted that oil companies would export several billion dollars’ worth of crude annually if the ban were lifted, potentially more than 500,000 barrels a day by 2017.

Given the high stakes, any lobbying and public relations battle between the oil producing and refining industries could be intense and expensive.

“We’d be going against some very deep pockets,” Day said, adding that there’s no way a company like Valero can outspend an oil giant or the American Petroleum Institute.

Political leverage

Any anti-export campaign could stoke fears about the U.S. ability to sustain near-record levels of oil production over decades and the prospect that overseas crude sales could hasten the decline.

Critics also could raise the specter of higher oil prices — a potent message in any election year. Kevin Book, with the Washington analysis firm Clear View Energy Partners, noted that refiners enjoy “tremendous political leverage.”

Election-year politics make substantive congressional action unlikely, though Senate Energy and Natural Resources Committee Chairman Ron Wyden, D-Ore., said he wants to have a hearing on the issue soon.

In the meantime, at least one Obama administration official has signaled that the exports policy should get a closer look. In December, Energy Secretary Ernest Moniz suggested that the crude export ban deserves re-examination in “an energy world that is no longer like the 1970s.”

Some oil exports are already allowed; in fact, Valero has been authorized to export crude to Canada. But exports largely are limited to oil headed to Canada or produced in Alaska’s Cook Inlet, some heavy crude produced in California and oil transported through the Trans-Alaska Pipeline system.

The Obama administration could take some steps immediately, even without congressional action, to build on those exceptions. Options include a declaration by the Commerce Department that ending the ban is in the national interest. The administration also could approve an export application if it finds the oil “cannot reasonably be marketed” in the United States because most Gulf Coast refiners are designed to process heavy crude, not the light sweet supplies flowing out of U.S. fields.

A refinery bottleneck is suppressing domestic prices — in particular the lack of refining capacity for the light sweet crude coming out of the Bakken and Eagle Ford formations.

Limited options exist for getting the light sweet crude to East Coast refineries equipped to process it.