A pair of federal studies released this week pointed out the benefits of exporting crude oil and natural gas, leading to the impression that it’s only a matter of time before the United States begins sending hydrocarbons abroad.
When, however, depends on several factors.
Congress probably isn’t ready to tackle legislation that would end a 39-year-old ban on oil exports this year or even next, experts said. Exporting crude carries a stigma since the public believes that would raise gasoline prices, even though recent studies, including one released Thursday by the U.S. Energy Information Administration, contend pump prices are linked to global crude prices.
Lawmakers on both sides of the aisle have been skittish about challenging that public fear. That has many experts saying the entire next congressional session may pass before serious legislation to loosen or end the restrictions is introduced.
“We’re going to have hearings, we’re going to have conversations, we’re going to have seminars, we’re going to have more studies,” Michael McKenna, a GOP strategist and energy lobbyist, told the Washington Examiner. “But the truth of the matter is Congress isn’t ready to do something about the law yet.”
A lobbying battle is being waged over the effort. Independent refiners have benefited from surging shale energy production, because exports of refined petroleum products such as gasoline are permitted, and are booming. They have banded together to keep the export restrictions in place. Meanwhile, drillers that don’t have refining operations recently formed a group advocating for an end to the ban.
Educating lawmakers on the subject will be a top priority for advocates of ending the ban, said Matt Letourneau, a spokesman with the U.S. Chamber of Commerce’s Institute for 21st Century Energy. Studies like the one EIA released this week help, but there is still the decades-old stigma of being dependent on other nations for oil to surmount.
“We’ve got to have that dialogue and discuss it, and one of the ways you do that is by having Congress do a deeper dive,” Letourneau said.
The Obama administration also has been guarded on the topic. Energy Secretary Ernest Moniz tamped down expectations that a weakening of the oil export ban was coming, saying at a Thursday event, “The arguments are a little over-ventilated there.”
But the pump is at least primed, due to the debate over natural gas export policy that has dominated Capitol Hill energy discussions for much of the past two years, said an energy industry source who works on both crude oil and natural gas exports issues.
“The [liquefied natural gas] debate sort of took a while before serious legislation started moving, but this one could get accelerated because people got educated on energy exports through the LNG debate,” the source said. “People are now more attuned to the idea.”
Lawmakers have pushed legislation on natural gas exports for some time. One measure passed the House, and a near-identical one sits in the Senate. What’s more, several studies — including one EIA released Wednesday, the second economic analysis from the agency on the topic — have said expanding exports would benefit the economy even though it would raise domestic prices.
Lawmakers are expected to push legislation to speed natural gas export approvals to nations that lack a free-trade agreement with the U.S., which face tougher scrutiny because they must be deemed in the public interest.
But some experts don’t think new legislation is necessary to ensure would-be exporters secure a foothold in the global market.
“That will not be a matter for the lame duck, and by the time Congress gets cranked up next year we’ll know how many more have been approved and what the status is,” Bennett Johnston, a former Democratic senator from Louisiana who now lobbies on energy issues, told the Washington Examiner.
That’s because the Energy Department, while acting more sluggishly than lawmakers had hoped, has probably approved enough export capacity to satisfy potential buyers’ demand for U.S. natural gas. The agency also ended its practice of “conditionally” approving exports, which it said would help more shovel-ready projects attract buyers and investors.
The department has approved 10.6 billion cubic feet per day of exports to non-free trade agreement nations. That doesn’t mean all those projects will get built, though, so lawmakers pushing bills to impose a timeline on the agency to approve projects say the process can and should be reformed.
“The window [to grab some of the export market] doesn’t cycle on Congresses. The window has to do with competition,” Robert Dillon, a spokesman for Sen. Lisa Murkowski, R-Alaska, the top Republican on the Energy and Natural Resources Committee. “I think there still will be interest in streamlining the process.”
How large that window is for the U.S. remains a matter of debate, though some analysts say demand in 2020 for U.S. exports could max out at 7 bcfd. Competition from Australia, Canada and Qatar will be fierce, and concerns are mounting that demand might be weaker than investors perceived even a year ago.
“I don’t think there’s a legislative need, but I still think there’s a lot of people who want to send a message about it,” said McKenna, the Republican strategist. “But the market for LNG exports is going to be the market for LNG exports, and we’re near what the market can tolerate.”
