Murkowski's March: How to Lift a Crude Export Ban

Murkowski's March: How to Lift a Crude Export Ban

For more than three decades from its passage in 1975, the U.S. ban on exporting crude oil made a lot of political sense, given voter anxiety about crude shortages caused by the 1973 Arab oil embargo and later the dislocation of the Iranian Revolution. Images of mile-long gasoline lines had been burned into the psyche of a generation of politicians. U.S. crude oil production fell inexorably from nearly 10 million barrels a day in 1970 to less than 5 million b/d at the end of 2005, supporting the consensus assessment that the U.S. was entering into a permanent era of resource scarcity that no mere law in Congress could change.

Then the fracking revolution arrived, dramatically changing the domestic supply picture, and pushing U.S. oil production up past 9 million b/d. But even a decade later in 2014, there was still some disbelief among elected officials that resource scarcity was over, especially given that unrest in the Middle East had kept oil prices hovering around $100 a barrel for three years.

The Coldest Day

That was the environment when, on the coldest day in Washington D.C. in 20 years, Alaska’s Republican Sen. Lisa Murkowski told an audience at the Brookings Institution on Jan. 7, 2014 that she would advocate for the removal of the export ban.

“The rules of engagement of energy trade were written long ago for a now by-gone era in which scarcity, not abundance, were the prevailing mindset,” she said during her speech. “The current system is inefficient, with antiquated architecture. Lifting the ban would send a strong signal to the energy markets that as a nation, we are serious about our emerging role as a hydrocarbon producer.”

For many in the energy industry who at that time anticipated a large surplus of U.S. crude coming on-line by 2016, her support was music to their ears. For many outside observers, however, such positioning sounded out of tune for the normally unassuming Murkowski. With oil prices in January 2014 averaging $107 a barrel, why would a member of the minority party in the Senate – Democrats still held the Senate in 2014 – spend so much attention on an issue, even as the presidency was held by a Democrat who was focused on burnishing his environmental credentials in his second term?

But Murkowski had a strategy concerning the oil-export ban well before anyone else, and that strategy focused on bipartisanship to a degree largely absent from Congress in the last two decades. As one of a dwindling tribe of political moderates in either party on Capitol Hill, Murkowski understood that unless she maintained a bipartisan spirit, partisans in Congress or the White House would find reasons not to listen.

“I think she deserve a lot of the credit” in the Senate, said Charles Ebinger, a senior fellow in charge of Brookings energy security program who attended the Murkowski event. “She spearheaded the effort, and more than any other politician helped push it through.”

So when analysts in the aftermath of the massive $1.1 trillion omnibus spending bill talk about backroom dog-fights involving environmental riders and Planned Parenthood, Syrian refugees and the Puerto Rican economy, Nancy Pelosi and Paul Ryan vs. the Freedom Caucus, it’s worth remembering who chose to sit out or refused the fight: many Senate Democrats.

White Paper Dozen

By the time of Murkowski’s Brookings speech, her staff had already invested considerable effort studying the complex inter-workings of the export ban. Over the next 18 months, her staff put together nearly a dozen white papers with titles such as “Executive Power to Authorize Crude Oil Exports” and “Cross Currents: Iranian Oil and the U.S. Export Ban” that worked to expand the context through which oil exports could be understood. Rather than debating the issue solely on its economic merits, the papers expanded the arguments to include energy security and diplomatic ties with allies.

“She’s spent much of the past two years educating her Senate colleagues and stakeholders on what the export ban was and what the benefits of lifting it would be,” said Michael Tadeo, deputy communications director with the Senate Energy & Natural Resources Committee. “She called 2014 the year of the report.”

Murkowski’s closeness with veteran Energy Committee member Mary Landrieu, a Democrat from Louisiana, surely helped her strategy. Only weeks after the Brookings speech, the Senate Energy panel on Jan. 30 held its first hearing in 25 years examining the impact of ending the 40-year-old ban. Landrieu’s support for the lifting was contrasted during the hearing by criticism from the then committee chairman Ron Wyden of Oregon, who highlighted the historical fear of oil price spikes.

"I just want to hammer home the point this morning that for me, the litmus test is how middle class families will be affected by changing our country's policy on oil exports," said Wyden, who soon left the Energy Committee leadership and was replaced by Landrieu in February.

Aggressive lobbying by independent oil drillers like Pioneer Natural Resources, Continental Resources and oil major ConocoPhillips started in the months after Murkowski’s announcement and went into overdrive when Republicans won control of the Senate in November 2014. In an era of hyper-partisanship, the oil industry realized the ban’s lifting was one of the very few energy policies that could garner support from some hydrocarbon-state Democrats while having across-the-board Republican support.

Also by this time, more than half a dozen studies published by reputable research firms like IHS Global , Resources for the Future, the Energy Information Administration and Columbia University’s Center on Global Energy Policy all found that contrary to conventional wisdom, ending the export ban would slightly decrease the cost of U.S. gasoline. This was because of changes in the international oil market during the past 40 years.

The 2014 election catapulted Murkowski into the chairmanship of the Senate Energy and Natural Resources Committee, but she chose to manage expectations by not offering a bill until May 2015, after having a series of hearings in the spring that kept the non-economic aspects of the ban front and center. She also found a capable Democratic replacement for the loss of Landrieu in the 2014 election, North Dakota Democrat Sen. Heidi Heitkamp, who co-sponsored a bill to lift the embargo that passed two Senate committees.

Murkowski, Heitkamp and others then spent hours on the Senate floor during the summer talking about the value of oil exports as an economic tool of diplomacy. Several made rhetorical hay with the argument that the Obama administration was willing to lift sanctions on crude imports from Iran but didn’t support ending the export ban on U.S. crude, which operated like a “sanctions regime against U.S. producers.”

The Opening

The Obama administration came out against the lifting the ban over the summer, but President Obama never attack the idea himself, suggesting that a deal could be made. As a result, the small policy snowball that Murkowski had started to push in early 2014 started to build its own momentum as 2015 progressed as both sides of the political aisle looked for a way out of political gridlock.

On the House side, Texas Congressman Joe Barton in October was able to push similar legislation that lifted the ban past the entire House 261-159. Both Senate Majority Leader Mitch McConnell and Minority Leader Harry Reid started to see the ban as a major piece of budget legislation that they both wanted passed before everyone started running for reelection in 2016. Reid in particular was the opportunity to extend solar and wind power tax breaks to 2020, well beyond the Obama administration's time in office.

The final piece of the puzzle came from the House with the surprise ouster of Speaker John Boehner in October. Boehner's leadership tactic of blocking earmarks had acted as a disincentive for horse-trading among members in both chambers. Wisconsin Rep. Paul Ryan’s ascension to the speakership meant that a comprehensive budget and tax bill could be negotiated with less acrimony within the Republican conference.

In his defense the omnibus bill last week, Ryan himself seemed to have internalized the arguments that had originated with Murkowski in 2014.

“Ending the 40-year ban on oil exports? Do you know what that does for our foreign policy?” Ryan told reporters. “What that does for job creators? What that does for infrastructure? It’s huge.”

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