WASHINGTON — The U.S. should vigorously fight oil industry attempts to weaken the nation’s three-decade ban on exporting crude, Sen. Ed Markey, D-Mass., said Tuesday.
In a letter to U.S. Trade Representative Michael Froman, Markey delivered a preemptive strike against critics aiming to stoke world trade concerns as part of a broader battle against the oil exports ban.
“Longstanding U.S. law restricting crude oil exports is vital to national security, to protect American consumers and wholly consistent with our obligations under international commitments within the World Trade Organization,” Markey said.
Oil industry fight
The oil industry has been preparing to fight for changes to the 38-year-old law that effectively bars exports of crude as well as other commodities in short supply, following a similar battle over foreign sales of U.S. natural gas.
Although the Commerce Department historically has issued waivers allowing exports to Canada and granting foreign sales of crude harvested from Alaska’s Cook Inlet, industry leaders say the Canadian market isn’t big enough to keep light, sweet oil flowing from the Bakken and Eagle Ford formations. And most U.S. refiners are designed to handle dense, high-sulfur sour crude from Venezuela, Saudi Arabia, Canada and other sources.
Oil export boosters may try to fan concerns the U.S. ban violates World Trade Organization rules as a way to fight the restrictions. The industry’s top trade group, the American Petroleum Institute, is reportedly laying the groundwork for such a battle, by developing a legal analysis that a foreign country could use to challenge the U.S. crude exports ban through the World Trade Organization.
Any World Trade Organization challenge would have to come from another WTO member nation, even if it were encouraged or supported by oil industry leaders in the United States.
‘Profoundly troubling tactic’
Markey blasted the potential strategy as undermining U.S. law, circumventing the legislative process and ignoring the will of the American people.
“If API attempts to pursue an effort to spur another nation to bring a challenge against U.S. law, it would be a profoundly troubling tactic and would be in conflict with the spirit of appropriate collaboration between the members of the WTO,” Markey said.
Markey used his three-page missive to outline why the United States ban on foreign oil sales is consistent with WTO rules against export restrictions. Specifically, the 1940s-era General Agreement on Tariffs and Trade — which was effectively replaced by the WTO — allows exceptions for “exhaustible natural resources” in some cases. Countries also can justify bans on fossil fuel exports under exceptions for essential security interests.
Further, Markey argues that it is laughable to say the U.S. ban violates WTO obligations given the “manipulative, price-rigging production and trade policies” by other WTO nations that are part of OPEC.
So far, the oil industry mostly has been casting broader exports of crude and natural gas as an economic winner for the United States.
“We stand with the president and this administration’s efforts to double American exports and reduce our reliance on imports,” said API spokesman Brian Straessle. “Free trade brings much needed jobs and economic opportunity to American families and workers. We encourage all of our elected officials to focus on what Americans care about most – jobs.”
Oil companies have relatively free rein to export refined petroleum products, and since 2011, the U.S. has been a net exporter of refined fuels, with roughly 2.6 million barrels sold to other countries in 2012.
But the surge in domestic oil production is now spurring a bigger debate over crude exports.
Oil industry leaders argue that broader crude exports make sense because of one big logistical challenge: Most U.S. refineries were built to process dense crudes, but the stuff pouring out of North Dakota, West Texas and other parts of the United States is a light sweet variety.
Some U.S. refiners are planning retrofits to handle light domestic oil and other facilities have adapted by blending in some low-sulfur domestic crude. But there’s a limit to how much they can blend without major retrofits.
Lawmakers already are looking at the issue, but any moves to upend the crude export ban on Capitol Hill face long odds. Even with the surge in domestic oil production — putting the U.S. on track to be the top producer globally — it may be hard for some lawmakers to justify selling that crude overseas after decades touting the importance of American “energy security” and “independence.
ConocoPhillips CEO Ryan Lance acknowledged the tough political challenge during a presentation in Houston last month.
“I accept that it is going to be a pretty hard climb in D.C.,” he said, “but we need to start making the case for the economic benefits.”