BREAKING: House Passes Bill to Lift Crude Oil Export Ban

Posted by Ed Burke on Oct 9, 2015 2:23:45 PM

Picture of the United States House of Representatives

This afternoon the US House of Representatives voted 261-159 to lift the Crude Oil Export Ban that has been in place for over 40 years. 

With the ban in place, prices have been artificially depressed at the refinery level due to limited capacity in the face of massive new production, so the thought is lifting the ban will allow producers to get more return on oil produced domestically. Refiners are obviously less than thrilled for the most part, for the same reason. 

Additionally, the ability to export is seen as being a potential positive for geopolitics and trade relations with other nations. 

On the other side though, environmental groups and the Obama administration argue that lifting the ban encourages further expansion of fossil fuel production, and disincentivizes and slows down the movement to non carbon intensive alternatives. 

(For a quick recap of some of the pros and cons, you can skim this article from 2013, when rumblings about overturning the ban began in Congress: Is It Time to Overturn the Crude Export Ban? )

Anyway, the House is the first hurdle in what could be a winding legislative process. Mitch McConnell has historically been hesitant to introduce bills of this nature to the floor, which could be an issue. Additionally, many Senate Democrats are not inclined to vote for the bill out of fear of backlash if domestic gas prices rise for their constituents (even though a recent EIA report indicated there should be no negative impact on consumers). One ammendment added may help entice Democrats though, and thats a provision that will allow higher payments to shipping unions involved, which is a key constituent for those in relevant states. 

To top it off, the White House has already announced that the President will veto the legislation, should it hit his desk. Even if the bill gets through the Senate, then, its unlikely to garner nearly enough votes to override a veto. 

Long story short, we will probably be in limbo on what actually happens with the legislation for at least another week or two, and its possible it dies in the same fashion as the Keystone Bill earlier this year. Don't expect that the market wont jump around one way or the other on the news though  - even though we really dont know whats happening yet (when has that ever stopped anything?)

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Topics: US Crude Exports, CRUDE, export ban

Midterms 2014: What Will the Energy Agenda Look Like Now?

Posted by Ed Burke on Nov 6, 2014 8:00:00 AM

United States House of Representatives

How will the 2014 Midterm Election results cause a shift in the Energy Agenda?

Keystone XL:

Prior to the midterm elections, Congress sent numerous bills to the Senate to push approval of the Keystone XL pipeline, none of which were brought to the Senate floor. That all likely changes with a Republican Majority Leader. Most likely we will see a vote happen on Keystone, and with Republicans controlling the Senate there are solidly enough votes to pass. Whether the President will sign it or not is up for debate, but in late October during a visit to Canada, Secretary of State John Kerry said he would like to "see a decision, sooner rather than later", maybe signaling that the President won't veto the bill once it hits his desk. 

Crude Exports

Less of a change expected here with the party shift. Exports were expected to be a big consideration in 2015 regardless of party control. Republican Lisa Murkowski and Democrat Mary Landreiu were both expected to move the issue forward. As of this morning Landreiu is locked in a runoff contest, but Murkowski will be stepping up as Chair of Senate Energy and Natural Resources Comittee next year, and has vowed to push the issue on LNG and Crude exports. 

Other Issues

Other issues that may come to the fore include addressing the EPA's proposed regulations on pollution generated from coal fired plants. This is probably too late to be relevant in the New England region, where we are seeing skyrocketing electricity costs and Natural Gas supply issues as a result of retiring older plants. 

It will be interesting to see if other items come to the floor as the legislative session advances. Perhaps RFS issues, blendwall issues, or indications of a reversal of the prohibition of fracking on Federal Land. We shall see.

 

 

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Topics: US Crude Exports, EPA, Keystone XL, carbon emissions, Election Results

Energy Security, Not Independence, Should Be The Goal

Posted by Ed Burke on Mar 27, 2014 12:36:40 PM

Crude oil terminal

We've discussed previously the debate about lifting the Crude export ban in the wake of the shale oil boom in the US. Last year alone the reduction in US imports (down 9%) and the increase in exports (up 11%) accounted for a $63 billion dollar reduction in the overall trade deficit.

Next year the US is expected to become the world's biggest exporter, and oil production is continuing to increase - analysts predict that by 2020 the US will be a net exporter, and the boom could create a net 4.7 million jobs by 2020 as well. 

The continued economic success of the oil boom however will be greatly impacted by whether or not the Crude ban is overturned. Without a growing export market to support the increased production, prices become depressed due to limited refinery capacity until the infrastructure catches up to the supply, which is never the goal, realistically.

The thought is that the US will be capable of being virtually self sufficient in oil production by that 2020 horizon, although that's not necessarily the practical goal. Trade relationships are often a positive for nations, and the thought is we get a better energy security by maintaining relationships than setting the goal as an isolated, completely energy independent nation. For example, we currently get almost half our oil imports from Canada and Mexico, and the Keystone pipeline would enhance our ability to get Canadian oil into the market and strengthen our relationship with Canada. There is a school of thought that an energy alliance between Canada and the US, or Canada, the US and Mexico would be a much better solution for all three countries' energy security and economic opportunities than being a completely independent country would.   

Exporting will have an enormously positive impact on the trade deficit, and US supply would keep downward pressure on global pricing. In terms of energy security, the availability of alternative crude sources for other nations is a positive as well - being that its a global market, political and other issues in oil-producing nations will always affect one another, but with varied supply an issue in one nation isn't neccessarily a catastrophe for others. For example, as we are seeing in the Russia/Ukraine situation, Europe is in a tight spot given that a huge percentage of their energy supply comes from Russia. That sort of limits their ability to enforce tough sanctions because they risk an economic mess if Russia decides to push their prices higher in retaliation. As we all know - energy prices have huge impacts on almost all sectors of a nations economy.  

Political ramifications and implications of Energy policy and security aren't the only issues at play in the debate, obviously. Environmental groups strongly oppose exporting crude because it will likely make renewable energy even less cost effective in the wake of plentiful oil supply, and reduce the pressure to find alternative, non-fossil fuel energy sources. 

I wrote an article on this topic for the March issue of Oil & Energy Magazine - you can read that article in their online magazine here: http://oilandenergyonline.com/how-energy-independent-is-america/ 

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Topics: Energy Independence, US Crude Exports, US Energy Boom, Keystone XL, russia, ukraine,

Energy Issues Top the Political Agenda for 2014

Posted by Ed Burke on Feb 25, 2014 12:52:00 PM

Main energy topics in the headlines for 2014 include the Crude Export Ban, the Keystone Pipeline, the Climate Change Action Task Force, RFS Volumes, and an expected final ruling on the Tier III mandate from the EPA. 

State of the Union 2014
(Photo Credit: Amanda Lucidon, WhiteHouse.gov Official Photo)

There is a lot of work to be done on energy infrastructure in the US - something that became especially clear with record breaking spikes in Natural Gas pricing to the New England and New York markets on the heels of the Polar Vortex. This topic is supposed to be the highlight of the Administrations Quadrennial Energy Review. However, the most obvious energy infrastructure and transport improvement - the Keystone XL pipeline is still bogged down in its 5+ years of paperwork, with no decision in sight, even following the most recent Environmental Study which found there would be no major negative impact environmentally from the project. The State Department review was expected after the President's State of the Union Speech, with a Presidential decision to follow but so far as of late February we haven't seen any movement on the issue. 

Renewables are also on the table - The EPA's expected final RFS volume reductions should be out this month (the first time the EPA will have used waiver power to decrease, not increase, volumes). The tax credits for Biodiesel and Cellulosic Biofuels also expired at the end of 2013, but if you recall, last time these were reinstated retroactively. The EPA is also expected to release its final ruling on Tier 3 Gasoline Standards, which would affect the sulfur content of gasoline vehicle emissions.

I wrote a more comprehensive article for the February issue of Oil & Energy Magazine on the topics on the Energy Agenda for 2014, you can read that article by clicking here 

What do you think the priority items on the Energy Agenda should be?    

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Topics: Energy Independence, Biodiesel Tax Credit, President Obama Address, RFS 2, EPA Mandate, US Crude Exports, Cellulosic Ethanol, Keystone XL

Is it Time to Overturn the US Crude Export Ban?

Posted by Ed Burke on Nov 8, 2013 3:33:00 PM

Congress is reportedly considering overturning laws banning US Oil Producers from exporting Crude. The law originally went into place in the 1970’s largely in reaction to embargoes that raised “scarcity” concerns – essentially, blocking export is supposed to safeguard from scarcity in domestic supply.  This is timely on their part – as we have seen for the first time since 1995, US Crude production has exceeded imports. What do they have to do with each other? In the absence of an export potential, or at least one not slowed and more expensive due to refining, US crude production will hit a plateau or worse. But why?

Refined oil  (gasoline and diesel) can be exported under current US law, and exports have grown substantially in recent years. The issue is, however, that the shale oil boom is producing huge volumes of light crude. In order to export, these huge amounts of crude need to be refined, which is difficult, costly and will ultimately slow production over time. The Council on Foreign Relations sums the issue up nicely in the following quote:

“Restrictions on crude oil exports are already beginning to undermine the efficiency of US oil economy. Much of the country’s rapidly growing production of light crude oil… comes from either areas where refiners are not interested in or able to process it, given that many US refineries are configured to run on lower-quality crude oil, or in parts of the country with inadequate transportation infrastructure. With few viable domestic buyers, producers are forced to choose between leaving oil in the ground and pumping it at depressed prices. The artificially low prices slow additional US Crude production. New refineries currently under construction will help remedy some of these market distortions over time, but a simpler, more cost effective solution would include allowing US Crude to be exported

(CFR Policy Innovation Memorandum No. 34 – you can read the whole thing by clicking here )

The CFR also estimates that Crude Oil exports could generate upward of $15 billion in annual revenue by 2017. Revenue to be made from export should also serve to stimulate continued investment in infrastructure, move technology forward, increase profitability for domestically based producers, not to mention create thousands of permanent, high paying jobs for Americans. 

Before we assume it’s a cut and dry decision however, there are several compelling arguments against dropping restrictions on Crude export, from economic concerns to environmental ones. Since this is a big and somewhat complex topic however, I will address them in subsequent posts.

What are your intial thoughts on US crude export policy? Do you favor a change?

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Topics: Energy Independence, US Crude Exports, US Energy Boom, CRUDE

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