North Dakota leaders pushing for end to oil export ban

DICKINSON, N.D. -- What would it mean for North Dakota and the nation if the long-standing federal ban on exporting crude oil were lifted?

That is the question many are asking now that the United States has enough oil to share in a world that would gladly buy it. There are arguments both for and against such a measure, those opposed to it making the chief claim that letting American oil flow out of the country would create a rise in the price of gasoline.

However, many officials insist that this can’t be further from the truth. The economic benefits, they say, are a door just waiting to be opened.

Their stance goes along with studies, done by institutions such as the Harvard Business School , the Brookings Institute and the American Petroleum Institute , which state lifting the oil export ban would lower fuel prices and create a stronger global energy policy.

The ban was enacted in the 1970s after the Arab oil embargo caused an energy crisis in the United States and elsewhere. Canada is an exception to the ban, and Alaskan crude holds a special status as being exportable.

Nowadays, however, with shale development in the United States still high despite a downturn in prices, many see the ban as antiquated and a barrier to greater economic opportunity.

Good for the state

David Flynn, an economics professor at the University of North Dakota who has studied the oil industry, said the state would likely experience quite a few benefits if the ban were to be lifted.

“I think the state of North Dakota stands to gain a lot from a lifting of the export ban,” Flynn said.

One of the main benefits Flynn believes the state could see would be an influx of money for infrastructure. With more profit derived from more trade, Flynn said the Bakken could see an expansion in the network of oil transportation.

The payoff, he said, would be quick and bountiful.

“We’d see a significant push to improve infrastructure,” Flynn said.

Flynn said he believes that, even with just a hint that the ban could be lifted soon, companies in the oil industries would likely take the possibility into consideration as they draft plans for the future and thus refrain from downsizing in anticipation. This itself could result in a minor lift in the economic slowdown in the region, he said.

“We already allow the export of gasoline,” he said, arguing it makes no sense for the refined product to be traded internationally while the crude is confined domestically.

The main benefactors of the ban, Flynn said, are the refineries that enjoy a “partial market.” He said this means one part of the supply chain is put on a pedestal over the others.

“I think the arguments are stronger now than they ever have been to get rid of this export ban,” Flynn said.

He said the arguments for preserving the ban don’t appear to hold up in the face of plain economics.

“It’s got a lot of half-arguments against it,” Flynn said.

Good for the country

Sen. John Hoeven, R-N.D., is one of the proponents for lifting the ban. He explained that doing so would be a move of practicality.

“We actually have more light sweet crude than we can refine,” Hoeven said last week.

He said the country’s refining capacity is heavily slanted toward heavy crude oils that are imported from nearby countries, such as Canada and Venezuela, and was set up before modern technology unlocked an abundance of light sweet crude at home. Some refineries are starting to make the conversion to meet the growing demand, Hoeven said, but it is a long and expensive process.

Another point, he said, was the fact that there is a price disparity between West Texas Intermediate crude -- the light sweet crude oil that serves as the domestic benchmark for oil pricing -- and Brent crude, which is the global benchmark. This, Hoeven said, is due to the ban blocking WTI from entering the global realm. He said the current premium on WTI compared to Brent is about $4.

Brent crude is also what gasoline prices are based on, both in the United States and abroad, the senator said.

But, he said, removing the ban will add more crude supply to the world market and cause Brent crude to go down.

“The idea is, if we take the export ban off, then you’ll have equalization between the world price … and West Texas,” Hoeven said.

Competing in the global market, Hoeven said that even if the country has to sell its oil at a lower price than its competitors to draw business, it will still be at an economic advantage and pull in more money, which will mean more jobs and infrastructure in North Dakota and elsewhere.

Hoeven said he felt confident that the Senate could pass a bill lifting the ban within a short period of time, though he added it could be a challenge.

Alongside Hoeven on this issue is Sen. Heidi Heitkamp, D-N.D.

Heitkamp is currently working on a couple of bills with Sen. Lisa Murkowski, R-Alaska, that would reform oil policy in the United States and have the ban lifted.

Heitkamp echoed many of the points made by Hoeven, including the imbalance of light sweet crude produced with the number of domestic refineries that can currently refine it.

She said one of the main motivators to change the status quo is that crude oil is confined with the idea of keeping prices low, but that it unjustly bars oil companies from reaching out further into the market.

“All commodities should be able to find their international market,” Heitkamp said. “For me, it’s just an issue of fundamental fairness.

“Having the ability to market the product will continue the investment in the resources in this country, and will continue to build our self-sufficiency,” she said.

Heitkamp speculated that Bakken crude could see a path toward European and Asian markets if the ban were lifted.

Part of the challenge in selling the idea to members of Congress, she said, is that many fear for their political careers in supporting such a bill if gas prices do indeed go up as a result. Heitkamp said it was an active process of educating people about how this likely won’t be the case.

Rep. Kevin Cramer, R-N.D., is also on board for repealing the export ban.

In a previous public address in Washington, D.C., Cramer said allowing American crude to supply foreign markets would help establish energy security for allies, as well as national security. He gave the example of using crude to wean Europe off of oil dependence from Russia.

“Energy security is the ability to use the peaceful tools of energy production in place, frankly, of the weapons of war,” Cramer said.

“The time is now,” he said. “There’s no reason not to do it.”