Farmers would benefit from crude oil exports, too, oil industry leaders tell House agriculture panel

A drilling rig is set up near a barn in Springville, Pennsylvania. (AP Photo/Alex Brandon, File)
A drilling rig is set up near a barn in Springville, Pennsylvania. (AP Photo/Alex Brandon, File)

WASHINGTON — The House Agriculture Committee convened a hearing Wednesday to study how crude exports could affect rural America, but instead of gleaning insights from farmers or livestock producers, the panel turned to oil industry leaders.

Over two hours, those witnesses — including Continental Resources CEO Harold Hamm and Texas Railroad Commission Chairman David Porter — argued that oil exports could drive more domestic crude production, with benefits rippling nationwide.

“Crude oil exports would spur new American energy production, foster economic growth and provide direct benefits to rural America and our nation as a whole,” said Porter, who heads the Texas Railroad Commission that oversees energy in the state.

Hamm stressed that recent surges in U.S. oil and gas development have yielded big benefits for landowners and mineral rights holders, including farmers who are using royalties and rental payments from drilling to sustain their operations.

“Royalty payments to more than 10 million landowners across America have contributed greatly to the support of the family farms and ranches and the rural way of life,” Hamm said.

Kari Cutting, vice president of the North Dakota Petroleum Council, pointed to another potential benefit, in the form of more abundant — and less costly — diesel and fertilizer for agricultural producers in her state.

New fertilizer plants are planned, offering the promise of cheaper alternatives to foreign imports, she said. And a new refinery in North Dakota is set to use transform Bakken crude extracted nearby into 7,000 barrels of diesel per day.

“There has not been a recent harvest where we haven’t experienced a shortage of diesel fuel,” Cutting said. “This refinery is just one step forward in helping agriculture get the energy resources they need to harvest their crops.”

There was scant mention of how a surge in crude transported by the nation’s railroads last year delayed shipments of agricultural commodities, such as grain and sugar.

But Cutting noted that railroad investments in North Dakota — driven by oil production in the state — also benefit the movement of agricultural products, in some case ensuring rail service for some rural elevators that have been without it for years.

House Agriculture Committee Chairman Michael Conaway, R-Texas, and the panel’s leading Democrat, Rep. Collin Peterson of Minnesota, both have signed on as cosponsors of legislation that would lift the oil export ban.

Conaway observed that much oil development takes place in rural areas, like his own district spanning Midland and Odessa. “When (oil) development slows or prices swing wildly, the health of those rural communities suffers,” he said.

Rep. Michelle Lujan Grisham, D-N.M., noted that in small rural communities, a sudden surge in oil business can strain local governments without enough teachers and housing to match the influx of rigs and workers. If property taxes go up to supply local services that can pinch longtime residents, Lujan Grisham added.

Lujan Grisham said she was worried about the oil booms that grow “the economy so quick so fast the local folks can’t afford to live there and stay there.”

Farmers and ranchers have benefited from lower prices for the diesel that powers tractors and trucks and the propane used to dry grain.

Several studies have concluded that U.S. oil exports could help lower global crude prices as well as domestic gasoline prices that track them. There has been less attention to the possible price implications for other refined petroleum products, including diesel and jet fuel.

A May report from Barclays said diesel prices would “likely be higher” if refiners were not using discounted U.S. crudes, possibly because lifting export restrictions pushes domestic oil prices higher.

Under current trade policy, refined petroleum products can be freely exported. And while exports of raw crude are generally barred, there are exceptions for some Californian crude, oil extracted in Alaska and shipments to Canada.

Refiners — including some that oppose oil exports — say they are investing heavily to process more of the light, sweet crude flowing out of U.S. wells.

Some refineries that rely heavily on waterborne shipments of crude also argue that oil exports could empower their foreign competitors to buy U.S. crude more cheaply than they can. The higher costs, they say, primarily come from federal Jones Act requirements that they use American-made and -crewed ships anytime they transport cargo among U.S. ports.