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Business, oil groups call for end of oil-export ban at Billings forum

Facing low prices and a supply glut, oil industry executives called for an end to a 40-year-old federal ban on crude oil exports during a Billings forum Thursday.

Lifting the ban would open new markets for producers and boost the economy in Eastern Montana, panel members told a luncheon group of about 40 at the Crowne Plaza hotel.

“The bottom line is that we have a glut of crude in this country, and we need to export. We have too much,” said James McCord of Bay Limited, which manufactures oil field equipment in Billings.

The forum was sponsored by the Billings Chamber of Commerce and the Montana Chamber of Commerce.

The oil-export ban dates back to 1975, when the United States was far behind Middle Eastern nations in oil production and facing domestic shortages.

Industry advocates argue that the boom over the last seven years in hydraulic fracturing, or fracking, has increased supply and made the ban obsolete.

“It gives the U.S. an opportunity to be an international leader in energy policy,” said Dave Galt of the Montana Petroleum Association, which represents upstream and downstream oil companies.

Oil companies are also feeling pinched by low prices. Sweet crude is trading around $40 per barrel now and has been stagnant for months.

Related: U.S. approves landmark crude oil export swaps with Mexico

A bill to lift the ban has passed the U.S. House, and a similar bill cleared the U.S. Senate Energy Committee in July. Last week, the Obama administration gave approval for limited exports of U.S. oil to Mexico, permitted on a case-by-case basis under existing law, according to the Houston Chronicle.

However, experts say the bill faces an uphill climb to passage through the full Republican-controlled Senate and get signed into law by President Barack Obama. Opponents of lifting the ban fear it could lead to higher retail gas prices.

During Thursday’s forum, Mike Bale, local recruiter with the Billings-based plumbers and pipefitters union, said he worried about supporting plans to export raw materials that could be refined domestically.

“As we export crude oil, we will be exporting jobs,” he said.

Environmental groups, such as the Sierra Club, have also raised concerns about the safe transport of crude oil and have fought expansion of fossil-fuel use. A train hauling Bakken crude oil derailed near Culbertson and spilled 35,000 gallons in July.

Galt called these concerns “scare tactics” and noted railroads are working to upgrade tank cars to prevent spills.

Other panel members added that the oil industry is a crucial part of Yellowstone County’s economy.

“Attorneys, accountants, you name it — we all have some sort of relationship to this industry,” said Steve Arveschoug, president of the Big Sky Economic Development Authority.

This article was written by ERIK OLSON from Billings Gazette, Mont. and was legally licensed through the NewsCred publisher network.

33 comments

  1. Yes, bring back the gas line of the 70s. I missed them so.

  2. First stop importing -over 50% of the crude in storage is Canadian tar crude–
    “Using the EIA and Genscape reports, it appears that of the 500-700 MB/D of oil stocks accumulated in US storage this year, about half is heavy oil from Canada.”
    http://oilpro.com/post/17604/whiting-problem-may-trigger-canadian-shut-ins

  3. Please explain how exporting into a glutted market with the price of oil below $40/ bbl would increase the price of oil–
    Any oil exported would increase the glut and depress price lower

    • You have be told repeatedly. Lifting the export ban will bring WTI and Brent to near parity. That would be ~$5/b increase for WTI.

    • And still below what the price US could export — and when the crude is added to the glut the price drops more

    • No, Thad, there is no crude “added” to the glut. For each barrel exported, one more will be imported. That’s zero net change to supply.

    • So why should the US export just to increase imports

    • You have been told repeatedly. Most US refineries are designed for heavy crude for optimum operation. Light crude is surplus to needs and can be profitably exported. US trade balance will improve ~ $15/b.

    • Refineries started expanding and upgrding to handle light crude when the supply strted to increases 6-7 yrs ago- The oil companies had no choice- could not sell unless refined

    • Nonsense. Only minor modifications are needed to refine very light shale crude. But last 20 years, $85 billion was spent to modify for heavy crude, including $10 billion at Motiva Port Arthur.

    • LOL you mention MOTIVA PA which happens to be the largest refinery in the US- last month set a US record for the most light crude refined in a single day 640,000 bbls.
      “Only minor modifications are needed to refine very light shale crude.-” exactly and you agree.
      $85 billion in the last 20 years– we are discussing the last 6-7 yrs— and the $10 billion MOTIVA spend was just 3 yrs ago.

    • Paul there a few things that you haven’t thought about beyond the fact that we import much less oil today then ever before so I don’t see it as a net net. The infrastructure isn’t set up to export oil so that cost would be extremely prohibitive cutting into profits. Second lighter sweet crude would not be equally demanded around the globe. For instance Europe definitely would not be interested due to the same crude being produced in the North Sea and Mediterranean areas. The slightly lifting currently being discussed is an actual swap with Mexico bbl for bbl.

    • The infrastructure to export is in place–simply reverse the flow through the infrastructure used to import–

    • I don’t usually agree with Thad, but he is right on this one!

    • Export infrastructure is more than adequate. The US already exports 500,000 bpd of light crude to eastern Canada, which is exempt from the ban.

    • Europe has stringent product quality limits and values light, sweet crude for its refineries. The North Sea has been in decline for years. UK is a net importer of crude. Light shale crude would be a desirable import for Europe and would compete well with crudes from Algeria and Nigeria.

    • Thad, you still don’t get it. Motiva Port Arthur spent $10 billion for a HEAVY crude expansion. The Saudis will be running lots of Saudi heavy and medium crudes. Domestic light crude will not be a priority no matter how easy it is to refine. Medium and heavy crudes are cheaper than light and more profitable to refine. That’s why the investment was made.

    • MOTIVA is in my back yard so to speak, raised in the area friends working there–
      “Along with the additional capacity, the refinery has increased its flexibility to process a wide variety of crude oils, ranging from relatively light to heavy. The major products of the refinery are gasoline, distillates, jet fuel, and base oils. Technical enhancements to the refinery provide the flexibility to vary gasoline and diesel production to accommodate changing market conditions.”
      What is the preferred feed stock for gasoline, distillates, diesel and jet fuel?
      http://www.aramcoservices.com/News-Events/Motiva-expansion-comes-on-line-in-Texas.aspx

    • Flexibility is good. But profitability is the key. The refinery has invested billions to refine heavy and medium crudes with maximum profitability. Light crude refining doesn’t require significant investment. It’s pretty much a default, or base case. That’s why light crudes are more expensive and less profitable than medium and heavy crudes.

  4. The gas lines of the seventies had nothing to do with us rather than OPEC flexing their muscles.

  5. I agree with Thad. Can’t understand how exporting crude while we import a big percentage to satisfy domestic demand. Build pipelines to get the oil to East coast refineries and export refined products and save American jobs in the process instead of giving our oil to be refined abroad and refined products imported back here. Costing American jobs!

  6. This is bologana. OPEC ramps up production; floods the market causing prices to plummet. Adding Iranian oil has everyone worried it will cause them to drop more, but the oil companies here want to Export our Oil onto that world market; thus increasing the oversupply? BANNING ALL imports should be the first step. Why not only produce what we need here in america and save our reserves for the future?

  7. It is the gas companies – they are buying at low prices and refining slow to increase the price of gas! They are faking refinery shut downs and problems to ensure this happens!

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