Oil Industry Gaining in Push for Repeal of U.S. Ban on Petroleum Exports

Source: By ERIC LIPTON and CLIFFORD KRAUSS, New York Times • Posted: Tuesday, October 6, 2015

Jack Gerard, left, the president and chief executive of the American Petroleum Institute, with Senator John Hoeven, Republican of North Dakota,  after a Crude Oil Export forum in September. Credit Zach Gibson/The New York Times 

After watching the price of oil and the size of their profits plunge, a dozen top executives from some of the nation’s largest oil exploration companies flew to Washington late last winter on an urgent mission: push Congress and the White House to allow unlimited exports of American crude oil.

Now, their long-shot lobbying effort to repeal the 40-year-old export ban has gathered considerable momentum. Approval by the House is expected in the coming weeks, and two Senate committees have already endorsed the idea.

The White House and Senate Democrats may still move to block it, but the fact that the legislation is even moving ahead in an era of extreme gridlock affirms the deep-pocketed oil industry’s durable power in nation’s capital.

“The sooner this happens, the better for us,” said Kenneth P. Cohen, Exxon Mobil’s vice president for public and governmental affairs. “The momentum has picked up. The political calculus right now is very favorable for taking a look and actually doing something about this ban.”

To industry executives, the swift progress validates the inherent strength of their argument that eliminating the export ban will create jobs and drive down gasoline prices by encouraging more domestic crude oil production.

To that end, the oil industry has financed organizations whose scholars have generated reports praising the proposal. It has placed op-eds in Capitol Hill newspapers and paid for television spots in key markets, including one round of new ads introduced last week naming a dozen Democratic House members the industry is trying to pressure to back the measure.

Industry executives have even pressed foreign governments to communicate their support through “diplomatic channels.” And they have enlisted help from lawmakers from major oil-producing states, including Representative Joe L. Barton, Republican of Texas; Senator Heidi Heitkamp, Democrat of North Dakota; and Senator Lisa Murkowski, Republican of Alaska. These lawmakers alone have also benefited from more than $3 million combined in direct industry campaign contributions during their careers.

Louis A. Finkel, the top lobbyist at the American Petroleum Institute in Washington, calls the effort a “campaign-style engagement,” more akin to a presidential campaign.

The institute has an annual budget of about $235 million and it spends about $70 million of that on television commercials, social media posts and other advertising. A sizable chunk of the blitz this year is aimed at pushing Congress to lift the export ban.

That spending has helped build oil industry programs with names like “Energy Nation” and “Energy Citizens” — networks of millions of oil industry employees and supporters who are directed to send out tens of thousands of emails, Twitter messages (#LiftTheBan) and other appeals to create the appearance of a national consensus.

For opponents of the legislation, the wave of advocacy has been difficult to challenge.

“They are saturating Washington on this issue and defining it on their own terms,” said Tyson Slocum, director of the energy program at Public Citizen, a nonprofit group that has tried to raise objections to the repeal of the ban.

The export ban has been a cornerstone of American energy policy since 1975, when Congress directed President Gerald R. Ford to largely prohibit the export of oil as “consistent with the national interest,” although a few broad exemptions, like exports to Canada, were allowed.

But the calculus has changed since domestic oil production nearly doubled after 2008 because of the sharp increase in drilling and hydraulic fracturing in shale fields across the United States, slashing the country’s dependence on imports from OPEC and producing a glut of several types of crude oil.

In the last two years, the Obama administration has made modest adjustments to the ban, including giving oil companies temporary permission to swap varieties of oil with Mexico. But the industry wants a full reversal, hoping it will offer relief from the glut and price collapse, which is causing intense financial strain.

Think tanks have been a critical part of the repeal effort, with prominent centers like the Brookings Institution and the American Enterprise Institute issuing reports or sending scholars to Capitol Hill endorsing the move. These same organizations have taken large donations — in some instances exceeding $1 million a year, as was the case for Brookings — in combined contributions from industry donors.

Thomas J. Duesterberg, co-author of one Aspen Institute report — funded in part by the American Petroleum Institute, ConocoPhillips, Continental Resources, Exxon Mobil and Pioneer Natural Resources — concluded that repealing the ban would create about 630,000 jobs within five years. He said the industry funding had no impact on his findings. But it was obvious to him why the industry helped finance his project.

“Part of the way you make an argument these days, is to provide some solid economic grounding for your arguments,” Mr. Duesterberg said.

The oil companies and their trade associations made sure the reports were widely distributed on Capitol Hill and within the Obama administration — as well via social media tools.

One letter that Exxon Mobil sent via email in March to the United States transportation secretary, Anthony Foxx, said lifting the ban was a matter of “simple math,” although it did not mention that the company had helped pay for the report.

Government leaders from the Czech Republic, Japan and South Korea also started to weigh in after they were urged, according to one oil industry lobbyist, to “communicate their support through diplomatic channels that they favor a lifting of the ban.”

Many of the lawmakers involved in the push for the repeal have longstanding ties to the industry, in part because they represent states like Alaska, Texas and North Dakota, where oil exploration and production is a major economic force.

But the ties are personal as well.

Ms. Heitkamp spent a decade as a paid director of a North Dakota-based natural gas company before being elected to the Senate. The oil and gas industry has contributed more money to her election campaigns than any other sector.

She was among the members of Congress who met in March with the delegation of oil industry executives, which included John J. Christmann IV, chief executive of Apache Corporation, and Scott D. Sheffield, chief executive of Pioneer Natural Resources, both of Texas. Ms. Heitkamp also offered the group confidential advice on how to best approach certain Democratic lawmakers to join their cause.

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In an interview, Ms. Heitkamp said she then volunteered to help twist arms, making personal appeals to a long list of lawmakers, including Senator Chuck Schumer, Democrat of New York, as well as President Obama.

“It is a policy that never made sense,” Ms. Heitkamp said, recalling the pitch against the ban that she made in private to Mr. Schumer and others.

Representative Steve Scalise, Republican of Louisiana and the No. 3 ranking member of his party’s leadership, sent House Republicans home for the summer recess in July with a three-ring binder packed with polling data and estimates of the number of jobs that would be created by repealing the ban — data provided in part by the industry.

“There is a lot of work going on behind the scenes,” Mr. Scalise said in an interview.

In the committee vote so far, House lawmakers who have supported the repeal, on average, have received 155 percent more money from employees at, or political action committees run by, companies and trade associations that support crude oil exports than the lawmakers who oppose it, according to an analysis by MapLight, a nonprofit group.

The biggest open question for the industry is just what it would be willing to trade in exchange for winning support from the White House and Senate Democrats. So far, some industry players have hinted that they would be willing to support extensions of wind and solar tax credits as a way to entice environmentalists. But for now, that is not looking as if it will be enough.

Ms. Heitkamp on Thursday was the sole Democrat on the Senate Committee on Banking, Housing and Urban Affairs to vote in favor of a bill, which she had introduced, that would repeal the ban. It passed by a 13-to-9 vote, given the Republican majority, but it is clear that changes will be needed before it will have much luck of winning passage on the Senate floor.

“This is a windfall for the oil companies,” said Kristen Orthman, a spokeswoman for the Senate minority leader, Harry Reid, Democrat of Nevada. One estimatesuggests that domestic crude sales could jump an extra $25 billion by 2025 if the ban were repealed. “There needs to be a little more balance.”

Lined up against the oil companies are the United Steelworkers union, which represents refinery workers, and environmental groups. Also against lifting the ban are a handful of refiners who benefit from the glut in domestic supplies, which lowers the price of their main raw material for producing gasoline, diesel and jet fuel.

The opposition has done its own polling, and the data they have compiled suggests that lawmakers risk the enmity of voters if they support the repeal.

“For those incumbents up for re-election in the near term, the ads write themselves,” said Jay Hauck, executive director of Crude Coalition, a new trade association financed by refineries organized to fight the effort. “Senator X voted to help his friends in the oil industry and export our oil to China and raise prices on the backs of American families.”

The two sides will be fighting it out in the coming weeks — both trying to convince members of Congress that the narrative they are selling is the most compelling one. And for the oil industry, even if the legislation does not pass Congress, it will have increased pressure on the Obama administration to further loosen the ban — as the Commerce Department has the power administratively to make more adjustments.

“Nothing happens by coincidence in Washington,” Mr. Hauck said. “It is all very coordinated and scripted.”