NDPC testifies in Washington to repeal crude export ban

By Emily Aasand | July 08, 2015

Kari Cutting, vice president of the North Dakota Petroleum Council, testified in front of the U.S. House of Representative’s Agriculture Committee today regarding the benefits to be gained by lifting the 1970s ban on U.S. exports of crude oil.

In her testimony, Cutting said that lifting the ban “would create jobs, grow our economy, help decrease gasoline prices and improve our energy security.” She also cited the U.S. Energy Information Administration’s report titled “What Drives U.S. Gasoline Prices,” which found that gasoline prices are tied to the international price of oil. “Allowing U.S. oil exports would add to global supply and put downward pressure on international prices, which are precisely what determines our price at the pump.”  

“In 2006, horizontal drilling technology unlocked the Bakken, resulting in a surge of oil and gas production, making North Dakota equivalent to the nineteenth largest oil producing country,” Cutting added. “With development came a rural economic renaissance for our state. Once shrinking rural communities are now growing, as new people move to the state and others return home to be closer to family.”

In her testimony, Cutting said that oil development has helped supplement incomes for many local farmers and ranchers who once worried about holding on to the family farm. “A new diesel refinery that recently began operating and proposed fertilizer plants and other value-added projects will help further lower input costs for agriculture producers further helping rural growth.”

David Porter, chairman for the Texas Railroad Commission, Harold Hamm, founder, chairman and CEO of Continental Resources, Terrence Duffy, executive chairman and president for CME Group, Jamie Webster, senior director of IHS, and Frank Rusco, director for Natural Resources and Environment of the U.S. Government Accountability Office, were among those testifying.

“The U.S. crude oil export ban is a left-over relic from another period of time,” said Porter. “Forty years ago the United States was in the midst of the Arab oil embargo and faced gasoline shortages across the country. The crude export ban was put in place out of fear of increased dependence on foreign oil and the need to protect our dwindling domestic oil supply. The world today is a much different place and the circumstances we faced in the 1970s are no longer relevant or true today.”

In the 1970s, the U.S. Government banned crude oil export products in reaction to OPEC driven oil prices, mile-long gas lines, rising inflation, a depreciating dollar and growing trade imbalances, and the witnesses assert that the Energy Policy Conservation Act of 1975 is doing more harm than good to the economy.

Hamm said the current export ban serves as a loophole for foreign producers to maintain their grip on America even as abundant new domestic oil supplies have been discovered. “Now the American Energy Renaissance is at risk due to two things—OPEC oil price manipulation and foreign conversion of U.S. refining capacity.”

Hamm added that prior to the export ban, the U.S. did export crude. “The infrastructure is there, all we need to do is utilize it.”

A common concern among legislature committee members was the lack of new oil refineries built in the U.S. in the recent decades. Hamm addressed the issue by pointing out that a reason for that is the tough permitting process to develop such infrastructure. However, the Dickinson, North Dakota-based Dakota Prairie refinery began operations in May, and is the first greenfield fuels refinery built in the U.S. in nearly 40 years.

In his testimony, Webster addressed the recent changes in the global oil market, North America’s critical place in it and what it means for the U.S.’ rural areas.

“The U.S. now has the fastest growing oil production in the world,” said Webster. “American entrepreneurship has increased U.S. crude oil output by roughly 81 percent or 4.4 million barrels per day principally of light tight oil, such as Eagle Ford in south Texas, Bakken in North Dakota.”

In her testimony, Cutting also pointed out that North Dakota is the second largest oil-producing state in the nation, reaching 1.1 million barrels of daily production in May 2014, a significant increase from 100,000 barrels of oil per day in 2007. Since 2005, the oil and gas industry has grown form a $3 billion industry supporting 5,000 jobs to a more than $43 billion industry with 65,000 direct jobs. Today, the industry in North Dakota has more than 12,000 producing oil wells and contributes between $8 million and $9 million per day in oil production taxes to the state and political subdivisions.

“This rural renaissance is being threatened by foreign entities not always friendly to the U.S. and by restrictions imposed on the sale of oil abroad,” said Cutting. “The U.S. government should lift the ban on crude oil exports and allow oil produced in places like North Dakota to reach global markets. Lifting the ban on crude oil exports would immediately restore our competitiveness and revive the renaissance in rural America. Not only would rural America prosper, but all U.S. citizens would benefit from lifting the ban.”

 

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