The oil export ban has outlived its usefulness -- if it ever had any -- and is ripe for repeal. And that would be a boon to Alaska and the nation.
Enacted during the 1970s in the wake of the Arab oil embargo and directly targeting North Slope oil, the export ban was intended to bolster national security at a time when domestic oil production was relatively low and the nation was highly dependent on insecure sources of imported oil. Last year the U.S. became the biggest oil producer in the world, surpassing Saudi Arabia and Russia.
By the time Alaska's crude oil production peaked in 1988 at about 735 million barrels annually -- about 25 percent of total U.S. oil production -- the ban was reducing the state of Alaska's revenue share by hundreds of millions of dollars.
President Bill Clinton exempted Alaska crude from the export ban eight years later, but it did little to help for a variety of reasons, including the decline in North Slope production. Between 1996 and 2004, only 2.7 percent of Alaska production was exported -- primarily to South Korea, Japan and China -- and none was exported from 2004 until one ConocoPhillips tanker headed to South Korea in the fall of 2014.
Nonetheless, a Congressional Research Service report in October estimated that elimination of the oil export ban would boost Alaska's gross state product by as much as $457 million annually by 2020 and create 1,800 additional jobs. That's almost a half billion dollars in state income each year at a time when we need every dollar we can find.
The array and ideological diversity of oil export ban repeal advocates is striking, and their arguments are varied.
Writing in the Wall Street Journal recently, two highly regarded energy experts, Daniel Yergin and Kurt Barrow, estimated that abolishing the export ban would, over the next 15 years, spur additional U.S. production of 2.3 million barrels a day, boost investment almost $1 trillion, create 860,000 jobs and generate nearly $3 trillion of additional government revenues. Moreover, they concluded the price of gas would drop by as much as 12 cents per gallon, resulting in $420 billion of savings to U.S. motorists over those 15 years.
Former Clinton Treasury Secretary and Harvard economist Larry Summers argued in a recent speech that lifting the oil ban would be geopolitically helpful to the U.S. "Do we want others to depend on us, and have all the consequences that come with that dependence?" he asked. "Or do we wish them to depend on the Middle East?" He also concluded that repeal would lower gasoline prices.
It may sound counterintuitive that allowing oil to leave the confines of the U.S. would reduce gas prices within the U.S., but several recent studies conclude exactly that. That conclusion is based on the straightforward economic principle that when you eliminate an artificial barrier that creates a market inefficiency, lower prices result. In short, free trade is almost always good for consumers.
Many major oil producers support lifting the ban. For example, the CEO of Royal Dutch Shell recently explained in a speech at Columbia University that allowing U.S. oil and gas exports "would reinforce the long-term future of North American energy production," materially improve the U.S. balance of trade and "help to make the global energy system much more stable."
The liberal Brookings Institute recommends the oil export ban be eliminated because it could increase domestic oil production by as much as 4.3 million barrels a day by 2035 while also reducing refined product prices in the U.S.
Recent reports by the highly respected Council on Foreign Relations and Congress' General Accounting Office have reached similar conclusions.
A number of Republican congressmen from oil producing states also support repeal of the oil export ban. Rep. Joe Barton, R-Texas, has introduced repeal legislation in the House and thinks it has an "excellent chance" of passage in both the House and Senate this year.
More importantly, Alaska Sen. Lisa Murkowski is a leading advocate of repeal -- and she is the new chair of the Senate Energy & Natural Resources Committee.
There is of course some opposition to repeal, principally from domestic refiners, which would lose some business if crude oil could be exported without first being refined, as currently required by statute. Some environmentalists also oppose repeal, but it is largely reflexive; their objections to the Keystone pipeline are more substantial.
Like her father, Frank, who fought valiantly but futilely in the 1980s to overturn the oil export ban while he was senator, Lisa Murkowski is undertaking a mission of genuine importance both to Alaska and the nation. But, unlike the 1980s, the politics have changed dramatically. Rather than tilting at windmills, as Frank did, Lisa has the wind at her back.
The Obama administration has tentatively indicated its support for lifting the oil export ban by slightly loosening regulations.
Now, combine that with the odd bedfellows critical of the antiquated oil export ban: major energy producers, a liberal think tank, a mainstream foreign relations think tank, a former Democratic Treasury Secretary and Obama economic adviser, the Wall Street Journal, Republican congressmen from oil producing states, the General Accounting Office and the chair of the Senate Energy Committee.
Talk about the stars being in alignment.
In an era when the two parties would have trouble coming together in favor of motherhood, when is the last time we saw this kind of ideologically broad, bipartisan support for legislation that would actually materially benefit the U.S. economy?
And did I mention that lifting the oil export ban would result in new investment approaching $1 trillion over the next 15 years? That's trillion with a "t." Almost as much as we spend on some of our wars. By comparison, and even under the most optimistic assumptions, the Keystone pipeline project is a mere cup in the oil export barrel.
Sen. Murkowski is perfectly positioned to make a difference. This will be a telling challenge for her, and the new Republican Congress.
All Alaskans should wish her good luck.
Peter Gruenstein is an Anchorage attorney with the law firm of Gruenstein & Hickey and co-author of "Lost Frontier: the Marketing of Alaska."
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com
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