US Oil Exports Seen as Key to Security: Regulation and Environment

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There’s an economic argument to be made for lifting US crude oil export restrictions, and then there’s the argument that American oil could go a long way toward providing security to the US and its allies. Brian Scheid explains in this week’s Oilgram News column, Regulation and Environment.

Rather than heralding the looming light oil glut domestic refiners will be incapable of processing or the imminent decline American producers face without a clear path on to the world market, crude oil export proponents are now talking national security.

“I think each and every one recognizes the merits of lifting the ban for purposes of enhancing our national security and recognizing that it is an outdated policy,” said Senate Lisa Murkowski, an Alaska Republican, in an interview on the Platts Capitol Crude podcast.

Murkowski, the chairwoman of the Senate Energy and Natural Resources Committee, has become the leading voice on Capitol Hill for giving US oil producers unfettered access to the global market and has recently focused her advocacy on the national security benefits of an export policy change.

US crude exports could benefit Japan, which imports crude from Iran, and could weaken the hold Russia has over Europe’s energy trade, she said.

“Think about the many areas that Poland works side by side with the United States on national security issues, whether it comes to national missile defense, fighting with us in the war against terror, our friends in Poland have been there,” Murkowski said. “Wouldn’t it be nice to be there for them so that the vise that Russia has over Poland with its oil can be loosened?”

The shift in the debate’s focus is similar to the case several lawmakers made for expedited approval of US liquefied natural gas exports following Russia’s military intervention in Ukraine last year.

“If President Obama is serious about helping the people of Ukraine, he will immediately expedite the approval process for liquefied natural gas exports,” said Senator John Barrasso, a Wyoming Republican, in early March 2014, shortly after President Obama said there would be “costs” for Russia’s actions. “American natural gas exports would help Ukraine free itself from Russian energy and Putin’s political manipulation.”

Several bills were introduced in Congress that month to speed US LNG export approvals to allies, such as Ukraine.

With a handful of exceptions, such as certain exports to Canada and exports of certain Alaskan crude, the US has largely prohibited US crude from leaving the US market for roughly 40 years. Debate over these restrictions, originally put into place in response to the 1973 oil crisis, has remained essentially dormant for decades. But recent growth in US crude production has created renewed, and intense, interest in the long-standing policy.

Murkowski, who hopes to force a vote on her bill to lift all crude export restrictions this year, said the national security implications of crude exports are particularly pressing with the potential end to sanctions on Iran’s oil sector later this summer.

“We’re going to let Iran go ahead and sell their oil anywhere. Japan needs it, all these other nations need it, and we’re going to restrict ourselves,” Murkowski said. “At the end of the day, all we’re doing is sanctioning ourselves. That’s not good policy.”

Murkowski has hardly been the only supporter of a new export regime to tout the national security benefits of a policy change.

In testimony before a House of Representatives Foreign Affairs subcommittee last month, Elizabeth Rosenberg, a senior fellow and director with the Center for a New American Security, said the ability of US officials to get other countries to go along with future energy sanctions could be compromised if domestic export limits remain in place.

US allies, “many of whom have reluctantly gone along with energy sanctions in the past, may prove unwilling to participate in further energy sanctions unless the United States makes a serious effort to stimulate alternative oil supplies,” she said.

In a recent Wall Street Journal editorial, Leon Panetta, the former director of the Central Intelligence Agency, and Stephen Hadley, a former national security adviser, pressed the national security case for US crude exports.

“Too often foreign-policy debates in America focus on issues such as how much military power should be deployed to the Middle East, whether the US should provide arms to the Ukrainians, or what tougher economic sanctions should be imposed on Iran,” Panetta and Hadley wrote. “Ignored is a powerful, nonlethal tool: America’s abundance of oil and natural gas.”

Murkowski has pushed this national security argument in meetings with several top administration officials, including the secretaries of defense, commerce, energy and state.

In addition, she’s met with top officials in Japanese Prime Minister Shinzo Abe’s cabinet, who may press the Obama administration for a national interest waiver from the administration for US crude shipments.

The hope, Murkowski said, is to “move the dial…on how we can move more of our resource to our friends and allies in other countries.” — Brian Scheid in Washington


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