WASHINGTON — The nation’s largest independent oil companies are banding together to lobby for the right to export crude around the world.
The new venture, dubbed “Producers for American Crude Oil Exports,” is the first formal lobbying effort solely designed to take down the 39-year-old ban on selling most U.S. oil overseas. With more than a dozen independent oil companies on board, the venture is a sign that the industry is revving up for a big, coordinated push to dismantle those trade restrictions next year, when a new Congress is sworn in and the Obama administration may have more political freedom to tackle the issue.
Oil producers who have been clamoring for access to foreign markets say the deluge of light, sweet crude now flowing from U.S. wells threatens to overwhelm domestic refiners geared toward heavier varieties. They also hope unleashing U.S. oil on the world market will lift its price, removing a now-modest $4 discount for domestic WTI compared to the international Brent crude benchmark.
“More than anything else, the formation of PACE reflects growing public awareness of the need to align policies in Washington with the economic opportunities made possible by America’s oil abundance,” said George Baker, executive director of the group. “Thanks to innovative technologies in the energy sector, the independent oil and gas producers in PACE are creating new jobs, helping to grow the economy and strengthening America’s energy security.”
Economic endorsement: Former Obama aide makes case for oil exports
According to a legally required lobbying registration obtained by FuelFix, the effort is being funded by 14 independent oil companies that produce crude but do not refine it: Anadarko Petroleum, Chesapeake Energy, Concho Resources, ConocoPhillips, Continental Resources, Devon Energy, Encana Oil and Gas, EOG Resources, Hess, Laredo Petroleum, Marathon Oil, Noble Energy, Occidental Petroleum and Pioneer Natural Resources.
A spokesman for the group declined to say how much money was being invested into the effort. But the heft and might of the member companies — which have a combined market capitalization of $441 billion and already have their own lobbyists in the capital — demonstrates the importance they are placing on the issue.
To lead the effort, they have hired Williams & Jensen, a D.C. lobbying firm with dozens of clients, including Cheniere Energy, Enbridge Energy, Sunoco and Colonial Pipeline.
Other industry groups, such as the American Petroleum Institute and the Independent Petroleum Association of America have pushed the administration and Congress to undo the 1970s-era trade restrictions on crude. But they represent a wider array of firms, including integrated oil companies taking a more nuanced approach to the issue.
The new campaign is meant to complement — not compete with — the existing trade groups’ work on oil exports.
Export advocates face opposition from some domestic refiners that are producing record volumes of gasoline and capitalizing on the lower cost of light, sweet U.S. crude. Because gasoline can be freely exported and generally sells at a world price pegged to higher-cost Brent crude, refiners can capture the difference.
Related story: Refiners & producers battling over exports
Some of the most exposed independent refiners teamed up earlier this year to counter the oil export push, with a study illustrating the sector’s remaining capacity to process light, sweet domestic crude, a poll highlighting the political risks of voting to undo the ban and other documents planned on the horizon.
So far, opposition to ending the ban has been muted on Capitol Hill, where Sen. Lisa Murkowski, R-Alaska, is leading the push for oil exports. Both action by Congress and administrative changes by the Commerce Department and its Bureau of Industry and Security could undo the existing trade restrictions.
Currently oil producers have been exploiting the ban’s existing exceptions — which allow exports of some Californian crude and Alaskan oil as well as shipments to Canada — to drive foreign sales to near-record levels. Oil exports hit 401,000 barrels per day in July, the highest level in 57 years, according to the most recent government data. During July, the exports included 400,000 barrels of lightly processed condensate, which the government has deemed a refined petroleum product that can be sold overseas.
A series of studies released this year predict that exporting U.S. crude would boost the cost of domestic WTI while lowering gasoline prices from 1.5 to 13 cents per gallon. Predicted lower gasoline prices are tied to the theory that an influx of American oil on the world market would send the cost of Brent crude downward, especially if OPEC sustains its own production to preserve market share.
And the Federal Reserve Bank of Dallas said lifting the crude export ban could benefit consumers in its July “Economic Letter.”
“Numerous independent studies have concluded that allowing domestic producers to sell oil into global energy markets will benefit consumers by putting downward pressure on gasoline prices, reduce our trade deficit and enhance America’s geopolitical standing in the world,” said PACE’s Baker, a lobbyist with William & Jensen. “For these reasons, it is imperative to lift the outdated ban on U.S. crude oil exports.”