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E&E News:Landmark exports deal was months in the making

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Washington, December 17, 2015 | Geof Koss | comments
After years of legislative gridlock on energy policy, Congress is on the verge of approving a historic compromise giving both parties key wins in what has become a ceaseless war of attrition between fossil fuels and renewable interests.

The blockbuster omnibus and tax package that could be signed into law as early as this weekend would repeal the 40-year-old ban on crude oil exports, while also extending for five years the renewable production and investment tax credits for wind and solar -- sectors that are booming in response to climate change and falling costs but have been slowed by uncertainty over their on-again, off-again tax credits (E&E Daily, Dec. 15).

Other issues, including policy riders and extending the popular Land and Water Conservation Fund, were also part of the horse-trading that led to this week's deal, but a swap that would repeal the exports ban in exchange for green tax credits has been the foundation of the quid pro quo for months.

Getting to an agreement was anything but easy and was driven by a small group of lawmakers who methodically pressed the exports issue for more than a year, laboring patiently to sell the idea to skeptical colleagues.

Leading the charge was Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska), who raised the issue in a speech at a high-profile industry conference in March of 2014.

"That was before it was safe for anyone to be talking about lifting the ban and rather than try to muscle through a bill, we tried to build the case," she told E&E Daily yesterday. "We encouraged the different think tanks to come up with the reports so that people could have a comfort level" with the idea of repeal, which made many lawmakers squeamish over fears of facing political attacks for supporting exports if gasoline prices later increased.

For much of the next year, Murkowski pressed the issue, urging the Obama administration to use its existing authority to ease the export restrictions passed in the wake of the oil embargoes of the 1970s.

In August of last year, Sen. Heidi Heitkamp (D-N.D.) publicly called for lifting the ban during an Energy Department meeting in her home state, which had seen its economy boom from the fracking bonanza.

During the fall of 2014, Heitkamp quietly began meeting with European officials and her Senate Democratic colleagues to press the issue, she recounted in an interview with E&E Daily in her office yesterday.

"We started with the facts," said Heitkamp. "We started with why this policy is a bad policy for domestic development, why it's a bad policy for employment in the country, and why it's a bad policy for international stability and energy security of our allies."

At that point, export proponents did not see a legislative repeal in the cards, but that began to change as a series of rosy predictions from think tanks, consultants, as well as independent federal agencies, including the Energy Information Administration and the Government Accountability Office, showed that allowing exports had positive economic impacts. Significantly, the various analyses predicted that U.S. exports could actually lower domestic gasoline prices.

Heitkamp said the growing body of evidence in support of exports "opened the door" to talks on a legislative repeal by deflating lawmakers' fears over political retribution of exports.

That effort was helped by the fact that gasoline prices continued to fall.

"As prices went down it got easier to make that argument," Heitkamp said.

While cheap gas is good for consumers, it began to hurt the domestic drilling industry, which suddenly faced a growing glut of crude oil. Layoffs began to follow, adding urgency to efforts to repeal the ban.

"The political conditions depend to some extent on the market conditions," said Rep. Joe Barton (R-Texas), the former Energy and Commerce chairman who became the House's point on exports, in an interview yesterday.

"You had a historic drop in the price that has cost hundreds of thousands of jobs. It's not just oil jobs, it's transportation jobs, it's manufacturing jobs, it's computer programming jobs. It's not just in Texas, Louisiana and Oklahoma, it's all over the country. So when you have that kind of what I call catastrophic change, the people who are affected start to petition for redress from the Congress."

Buoyed by positive economic forecasts, Murkowski and Heitkamp earlier this year decided the time was right to draft legislation to end the ban. Because of overlapping jurisdiction between the Energy and Banking panel -- on which Heitkamp sits - the pair used hearings to draw attention to the issue before eventually moving both bills through committee before the August recess.

At that point, they had already begun private conversations with individual senators on exports. Additionally, the pair began to file their exports bills as amendments to other matters before the Senate, to raise the profile of the issue and get their colleagues thinking about it.

In the House, Barton had secured the help of fellow Texas Democrat Henry Cuellar and was working to build bipartisan support for exports in that chamber.

Barton yesterday credited Cuellar and Heitkamp for sticking their necks out an issue that raised the risk of a backlash from environmentalists.

"I didn't take any political risk by coming out for this, they did," he said.

Heitkamp explained how the efforts began to bear fruit with her Democratic colleagues.

"We started making the arguments and I think we got to the point where so many of our colleagues said 'I get it, I just want to know what I get for it,'" she said. "That's politics. So then we move into the political realm and start having discussions with people who showed a willingness to actually negotiate."

Barton said a further boost was provided when then-Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) publicly came out in favor of repeal.

"We didn't have to convince them," he said. "We just had to show them that we had the support."

A political opportunity

Murkowski said she knew they had turned a corner on exports when she began to field questions on the issue from unlikely Democratic senators.

"I knew we were really starting to gain traction when people who clearly are not from producing states would come up to me and say, 'so this whole issue of oil exports, talk to me a little bit about it. And have you guys considered this aspect of it,'" she recounted yesterday. "That's when I knew that the shift had happened."

By then, quiet discussions over a potential deal had begun in earnest, boosted by the support of a central figure -- Senate Minority Leader Harry Reid (D-Nev.).

In an interview in Las Vegas in August, Reid told E&E Daily that he thought there was an opportunity for a deal on exports provided Democrats received extensions of renewable credits (Greenwire, Aug. 25).

Heitkamp said that Reid saw an opportunity to renew green tax credits and finally provide some certainty to an industry that was rapidly growing in his home state.

She was already speaking regularly with top White House officials about exports -- including an August conversation with President Obama -- and said it was clear that a repeal of the ban would have to be accompanied by something else to get exports signed into law.

"I knew that the White House would never sign a standalone piece," Heitkamp said. "The linchpin of getting this done was renewable tax credits."

Working with renewable industry groups, Sen. Martin Heinrich (D-N.M.), and others, Heitkamp said the contours of a possible agreement began to emerge. In the meantime, other export backers continued to press for a legislative opening.

Sen. John Hoeven (R-N.D.) made a serious push to see a repeal included in the multi-year highway bill that was signed into law last month, and while it fell short, he said yesterday it helped create momentum for the eventual omnibus deal.

"It put pressure on people on both sides of the aisle to get it done this year," he said.

Murkowski said the highway push made other senators realize the train was leaving the station.

"That was the real clear signal that something is going to happen this year," she said.

When omnibus talks began in earnest later in the fall, the negotiations were kicked up to the most senior levels of Congress and the White House. At that point, Murkowski, Heitkamp, Barton and other export proponents weren't at the table but were privately and publicly optimistic that a deal was within reach.

For all the partisanship on energy policy, Barton said the exports push shows the potential of Congress when it's able to break through ideological divisions.

"Democracy works when you work at making it work and this is an example," he said.

Heitkamp offered a similar assessment.

"Leading with the public policy argument first and then doing the politics at the end when you have to cut the deal, it makes tremendous sense," she said. "When policy meets with a political opportunity, we ought to be able to do it and get it done here."
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