Democrats raise doubts about oil export benefits

“I also want to see that we have that industrial capacity in our country. We need those downstream jobs.” Rep. Gene Green, D-Houston

WASHINGTON — Texas Republican Rep. Joe Barton is advancing his plan to let U.S. oil producers sell their bounty around the world, but a House hearing Thursday illustrated the steep obstacles export advocates face.

Democrats on the Energy and Power Subcommittee were skeptical of Barton’s bill to end the U.S. ban on most crude exports, arguing that the main beneficiary would be China, at the expense of domestic refineries.

“Right now, we’re doing very well sending lowsulfur diesel from Texas over to Europe,” said Rep. Gene Green, D-Texas, noting the sector’s highpaying jobs. He said that if the U.S. starts exporting oil, “we will lose some of that incentive to have these downstream jobs.”

Refiners can freely sell gasoline and diesel overseas and have benefited from abundant production of U.S. oil that sells at a discount to international crudes. Although domestic refiners previously geared up to process heavier imported crudes, many are making changes now to use more of the lighter, lower-sulfur oil flowing out of U.S. wells.

Export advocates argue selling more crude to foreign buyers — beyond the limited amounts allowed now — would help erase the persistent discount for U.S. oil. Supporters also tout the potential geopolitical benefits for the U.S., asserting that increased oil from the country helps allies around the globe.

But on Thursday, Czech Republic Ambassador Petr Gandalovič passed up opportunities to specifically ask for U.S. oil and said even if American crude were widely available worldwide, it might not end up in the hands of Czech refiners that would have to reconfigure facilities to process it.

And a former Navy commander on the USS Cole when it was attacked in Yemen 15 years ago told the House panel that widespread U.S. oil sales will do more harm than good for national security interests. Projections from consulting firm IHS invoked by export opponents suggest that if the ban is spiked, China would be the largest single recipient of U.S. oil from 2017 to 2020.

“Oil will always follow the path of greatest financial gain; right now that is going to be Asia, and that is going to have a ripple effect that goes through every part of our economy,” said Kirk Lippold, a retired Navy commander. If American crude is exported, it will sustain Chinese industries competing with the U.S., he added.

But economist David Montgomery, recently retired from NERA Economic Consulting, stressed it’s difficult to predict where exported oil will land. When it comes to energy security, he said, a bigger factor than “where the barrels go” is simply “how much oil is in the total world market.”

“Why wouldn’t we be talking about taking this excess light sweet crude and retooling our refinery capacity and keeping it right here in the United States?” questioned Rep. Mike Doyle, D-Pa. “As policymakers we are supposed to be thinking 20, 30, 40 years down the road for the next generation ... not how people can make some more money in the oil industry.”

So far, Barton’s bill has 75 co-sponsors, including seven Democrats. On Thursday, Barton, of Ennis, was optimistic the legislation would advance to subcommittee votes soon, a critical step on the way to the House floor. But getting there may depend on winning over lawmakers such as Green whose constituents include upstream oil production and downstream refining interests.

Green’s Ship Channel district includes refineries and oil field service companies hurt by the downturn in crude prices.

“I have a lot of folks who produce oil. I represent a lot of service companies, and I want them to be working in the field,” he said. “But I also want to see that we have that industrial capacity in our country. We need those downstream jobs.”