Bloomberg: It's About the Economy, Foes of U.S. Oil Export Ban Preached
Industry lobby pushed campaign avoiding environmental issues
• Combination of events sped action, surprising even supporters
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Working the halls of Congress, lawmaker by lawmaker, to end the ban on U.S. crude oil exports, oil-state senators and energy company executives were united by a single strategy and bolstered by seismic shifts in the industry.
“We can’t let this issue get Keystoned,” said Senator Heidi Heitkamp, a North Dakota Democrat, referring to the years-long, ultimately futile battle to have an oil pipeline from Canada to the Gulf of Mexico approved over the objections of environmentalists.
To avoid meeting a similar fate in their efforts to overturn the 40-year-old U.S. policy, the cadre fanned out across the Capitol, arguing in meetings that lifting the ban was about jobs and the economy -- not the environment, or the future of fossil fuels. Exports would boost the nation’s economy and help put Americans to work, they said.
The backbone of their argument, unthinkable a decade ago, was that the U.S. had become an energy powerhouse less reliant on imported oil. The U.S. in 2014 overtook Russia as the largest oil and natural gas producer as fossil fuel riches gushed out of newly-developed shale fields in North Dakota’s Bakken formation and elsewhere. During almost two years of efforts to end the ban, crude oil prices fell by more than half, and pump prices plunged, neutralizing fears that American car-owners would foot the bill.
In the end, the Congress voted on Dec. 18 to let energy companies export U.S. crude oil for the first time since the OPEC oil embargo forced Americans to ration gasoline 40 years ago.
Lobbying and Luck
Any legislative victory so decisive takes a lot of lobbying and lot of luck. This one was no different. A confluence of events, including plummeting oil prices and the recent deal to remove sanctions on Iranian oil, opened the door. Mix that with one of the biggest-spending lobbies in Washington, add the strategy of tying the export issue to an extension of popular tax credits for wind and solar power, and lifting the ban easily passed both chambers of Congress as part of a government spending package signed by President Barack Obama.
Sensing they had momentum, oil industry lobbyists recently stepped up a social media campaign targeting possible supporters by placing ads on Facebook and elsewhere. One company printed anti-ban messages on its royalty checks. And in the end, supporters of retaining the ban were outmatched on the Hill, where at least 34 groups and companies were lobbying to allow exports compared to seven lobbying against.
“It moved quickly,” said ConocoPhillips CEO Ryan Lance in a telephone interview. “A lot quicker than industry thought it would.”
The trade restrictions on most unprocessed U.S. crude oil were imposed by Congress in 1975 after supply shortages that had Americans lining up for hours to fill their gas tanks. The measure was kept in place through Democratic and Republican administrations to ensure Americans had a steady supply of fuel. Until the Bakken shale fields were tapped, reversing the policy hadn’t been seriously contemplated.
Even during the votes last week, some Democrats, such as Senator Ed Markey of Massachusetts, opposed lifting the ban, saying it would “hamstring our clean energy future” and amount to “Big Oil corporate welfare.”
“The oil industry wants to send our oil overseas to the highest bidder, even as we still import millions of barrels of oil every day from nations around the world in unstable regions,” Markey said in a statement before the Senate passed the spending bill.
In an effort to defuse such an argument, oil groups and Senator Lisa Murkowski, a Republican from Alaska and Congress’ biggest champion of a policy shift, ordered studies from think tanks, academics and government agencies to create a body of evidence showing that exports would be, on net, positive for the economy, and could lower gasoline prices for Americans.
“Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports,” the U.S. Energy Information Administration, an arm of the Department of Energy, said in a 58-page study released in September.
Market forces no doubt smoothed the way. World crude oil prices were above $100 per barrel when Murkowski first laid out the rationale for changing the policy. Before Friday’s vote, crude had fallen below $35.
The issue was a top priority for drillers. ConocoPhillips and 15 other independent oil producers worth $273.86 billion united to campaign for exports, putting money and muscle into an effort greeted with skepticism two years ago. In the last month, as a compromise to link the issue with tax breaks for solar and wind energy won converts, the C-Suite executives telephoned lawmakers to press for approval.
“Normally issues these days take a much longer time frame to develop,” said George Baker, head of the Producers for American Crude Oil Exports coalition. “But the persistence of the champions of this on the Hill,” along with the corporate involvement, helped rapidly propel the cause.
The PACE group formed after lobbyists and executives with Pioneer Natural Resources Co., Hess Corp., ConocoPhillips, Marathon Oil Corp. and Devon Energy Corp. decided they needed to press for exports with a singular focus -- separating the effort from the American Petroleum Institute and other trade groups with broader agendas.
The new group also came to the debate with a fresh slate, without having been bruised by earlier political battles over Keystone and oil industry taxes.
Murkowksi got the debate rolling in January 2014 with a speech at the Brookings Institution and a 22-page white paper. She was later joined by Heitkamp, a pro-oil Democrat whose state is home to the Bakken shale formation, to gin up support in the Senate. The Alaskan became chairman of the Senate Energy Committee after Republicans won control of the chamber in November 2014 mid-term elections, ensuring the topic of exports got a regular airing at hearings.
Representative Joe Barton, a Texas Republican, took the lead in the House. He recruited a fellow Texan from across the aisle, Democratic Representative Henry Cuellar, to help round up votes and diffuse a potential intra-state split between lawmakers representing oil producers and those more closely aligned with refiners.
Early on, they approached chief executives. “That kind of celebrity or CEO commitment and input -- it does make a difference,” Barton said in a telephone interview.
Harold Hamm, the billionaire CEO of Continental Resources Inc., largest leaseholder in the Bakken oil field, visited Capitol Hill almost weekly and testified at some of the at least nine congressional hearings on exports. Others making the rounds included Lance, Hess Corp. CEO John Hess, Chevron Corp. chairman and CEO John Watson, and Pioneer Natural Resources Co. CEO Scott Sheffield.
ConocoPhillips’ Lance said executives approached the issue with lawmakers “so they understood what is going on in the industry today” and emphasized the national security and economic arguments to lifting the ban.
The Energy Equipment and Infrastructure Alliance was recruited to amplify the message that exports would mean business not just for big oil companies in Texas and North Dakota, but for manufacturers and service firms throughout the country. Export backers also stressed that the export ban created costly supply dislocations within the U.S., because the refining infrastructure had been built over decades to handle a specific grade of imported crude different from that produced domestically.
‘David Versus Goliath’
Oil companies, the API and other pro-export groups enlisted an army of lobbyists and consultants, including Bluewater Strategies, Forbes Tate, Heather Podesta + Partners and Williams and Jensen. FTI Consulting helped the PACE coalition of independent oil producers shape their message.
“It was David versus Goliath from the very beginning,” said Jay Hauck, executive director of the Consumers and Refiners United for Domestic Energy coalition, which opposed lifting the ban.
Domestic refiners wary that unrestricted exports would raise prices for their feedstock also fought back, including Delta Airlines subsidiary Monroe Energy, Alon USA and PBF Energy, which formed their own coalition to lobby against liberalizing oil trade.
They were outmatched, though, by the dozens of groups and companies pushing to lift the export ban. The oil and gas industry was the third-biggest spender on lobbying in 2015, dedicating some $97 million to the efforts, according to the non-partisan Center for Responsive Politics.
Export backers borrowed a page from modern presidential campaigns, using digital and social media to deliver pro-export messages directly to voters and donors across the country. They married poll results with consumer product data to directly target potential supporters.
At least three oil companies delivered pro-export messages to their royalty owners, by making the pitch on websites, check stubs and other correspondence. Lobbyists also cross-referenced political donation databases with lists of royalty owners, finding people who could take pro-export messages directly to key figures in Congress. A major goal was reaching Democratic donors who might help sway lawmakers of their party.
The API, the largest trade association for the U.S. oil and natural gas industry, mined its grassroots network of about 35 million people and robocalled voters in select areas around the country, asking them to phone Washington. API Vice President of Government Affairs Louis Finkel counted more than 126,000 direct contacts between the group’s grassroots supporters and members of Congress.
“We engaged in a comprehensive, two-year campaign that began by educating policy makers,” said Finkel, describing “a constant drumbeat over weeks and months to Congress that now is the time to lift the ban.”
That allowed the industry to pounce on the Iran nuclear deal reached in July, which lifted economic sanctions in exchange for restrictions on Tehran’s nuclear program, and the threat that the country could double its own oil exports after sanctions eased.
“With Iran’s re-entry into the global marketplace, folks had the opportunity to think about what that means for America and American energy,” Finkel said.
Murkowski, whose oil-rich state had been exempted from the crude oil export ban since 1995, said the information campaign helped those from states outside the oil patch understand that lifting the ban was “a fairness issue.”
Another turning point came when Senate Majority Leader Mitch McConnell endorsed lifting the ban, which he called “a relic of the ’70s.”
By June, Heitkamp sensed there was an opening to advance exports by tying it to an extension of tax credits for wind and solar power favored by many Democrats. That would respond to some environmentalists’ concerns that exporting more U.S. crude would, by implication, increase total oil production, thereby boosting greenhouse gas emissions. Heitkamp met with Senate Democrats to discuss the possible contours of a deal.
In August, Senate Democratic Leader Harry Reid floated the idea of a compromise, reinvigorating talk of a deal that would lift trade restrictions on crude in exchange for extending renewable energy tax breaks. Reid’s state of Nevada is home to some major solar energy facilities.
While the campaign to lift the export ban sought to avoid partisan politics, supporters also knew when to pull the levers. As Heitkamp puts it, “You have to know who the leader is and what he cares about.”