By Peter Gardett
A high-profile hearing on crude oil exports before the US Senate Energy and Natural Resource Committee ended with no appreciable progress on resolving continued confusion over the federal ban’s prospective end. But in the one state where exports are permitted — Alaska — investment plans are already taking shape.
The Committee’s leading Republican Senator Lisa Murkowski of Alaska reiterated strong support for removing the federal exports ban, but also said that she didn’t expect a decision from the administration or legislation to result from the hearing.
“What I’m hoping is that we can advance this discussion,” she said.
Senate Democrats expressed even less enthusiasm for resolving the issue, with Committee Chairman Ron Wyden, an Oregon Democrat, saying his “litmus test” for removing the ban would be its as yet undefined impact on middle-class families.
U.S. crude exports could mean an additional $70 billion in U.S. upstream investment by 2020, prompting a production boost of a half-million barrels per day. That could, in turn, lower prices and save American consumers $6.6 billion in the same time period, according to an ICF International study commissioned by the American Petroleum Institute.
Murkowksi’s own state is an exception in the U.S., as oil operators there are permitted to export under a Clinton-era concession and the hearing highlighted the state’s front-runner approach to setting in place an integrated energy architecture that attracts some of those billions in investment.
Alaska is the site of an emerging oil and gas investment boom that hinges on construction of a North Slope gas treatment plant, an 800-mile gas pipeline and an export terminal that under a proposal from Gov. Sean Parnell would include state investment alongside the state’s three major oil producers — Exxon Mobil, Conoco and BP.
The agreement to fund preliminary engineering and design work, currently before the Alaska legislature, has received the support of Alaska Revenue Commissioner Angela Rodell and Alaska Natural Resources Department Commissioner Joe Balash. Moving natural gas to market rather than reinjecting it at oil fields has become a central component of the cost-effective large-scale integrated resource development system proposed for the state, which has suffered from declining investment until recently as other oil and gas regions have begun to grab market share. The move would also underpin a shift to cost-effective natural gas use for in-state consumers unable to afford costly delivery infrastructure themselves.
Exxon Mobil is already investing in gas condensates production at Port Thompson in Alaska but is interested, along with other companies, in accessing the roughly 8 trillion cubic feet of natural gas off the North Slope.
The prospect of an integrated, competitive future for Alaskan oil and gas emerged in response to a change in the state’s energy tax laws. The tax changes, part of the “More Alaska Production” legislative program proposed by Alaska Governor Sean Parnell, have a higher floor that rewards production growth but in the short term end an oil price-linkage formula that kept tax revenue high even as Alaska oil production and investment slipped.
Without the resource and the integrated plan to access it at scale, the tax changes wouldn’t prompt investment. The tax changes could still be reversed by a coming referendum in August, but have already moved Alaska from the realm of a production boom fantasy to the real world of hard policy and investment choices.
Peter Gardett is adjunct fellow in energy and environmental security at the Center for a New American Security and entrepreneur in residence at the New York State Energy Research and Development Authority.