Oil exports gain steam, propelled by lobbying blitz

House panel mulls legislation to reverse ban

 By Jennifer A. Dlouhy | Houston | September 7, 2015 

WASHINGTON - Momentum is building on Capitol Hill to lift a 40-year-old ban on exporting U.S. crude, driven by a sophisticated oil industry lobbying campaign that has enlisted executives, targeted political donors and tapped social media.

It's a remarkable reversal for a crusade met with deep skepticism when it was launched less than two years ago.

A House subcommittee is expected to approve legislation lifting the export ban this week, setting the stage for full floor action this fall. Although there isn't a clear path in the Senate, Democratic leader Harry Reid has invited a "compromise" on oil exports - an acknowledgment the issue is ripe for a deal.

"We've come so far, so fast," said George Baker, executive director of Producers for American Crude Oil Exports, a coalition of independent oil companies lobbying to lift the ban. "This is a whole different issue from where it was back in January."

Oil companies have seized on the issue, giving it singular importance, as they chafe against the limits of U.S. demand for crude and look for ways to boost production and prices. Industry leaders believe that if they are able to sell their crude globally they will fetch more per barrel and be able to produce even more.

It's rare for a policy debate to mature this quickly in the nation's capital, where lobbyists and lawmakers can spend years - even decades - working to advance causes. For instance, Congress has been pushed to overhaul the way asbestos lawsuits are handled since the 1980s, but despite bursts of intense work, legislation hasn't hit a president's desk.

In this case, a collision of external factors - including plummeting crude prices, the Russian aggression in Ukraine and a nuclear deal that could allow Iran to widely sell its own crude around the world - helped oil producers argue that exports would bolster the U.S. economy and its geopolitical power.

But perhaps the biggest driver is an unusually intense lobbying crusade that aims to persuade lawmakers and the public using traditional face-to-face advocacy with cutting-edge data mining tactics more commonly employed by political campaigns as well as uncommonly direct appeals from chief executives.

Nearly a dozen chief executives pressed for exports with a White House energy adviser in March, and a number are slated to return to Washington again this week, fanning across Capitol Hill to emphasize the issue before the pivotal House vote.

"It's a good campaign, and it's been very focused," said Michael McKenna, a GOP strategist and president of Virginia-based MWR Strategies. To get to influential voters - who in turn can make appeals to lawmakers - "they're data targeting pretty carefully, (working with) firms who specialize in telling you not who your audience is, but what they watch and what they do online. It's sometimes used in lobbying campaigns; these guys have used it."

The issue has galvanized an army of lobbyists in Washington, D.C. Some four dozen entities reported lobbying on exports between April 1 and June 30 - including the nation's largest oil companies as well as independent producers, refiners, unions and environmental organizations.

Two trade groups are specifically devoted to the issue: Baker's PACE has spent $110,000 on lobbying alone this year, according to disclosures filed with Congress. Another $180,000 was logged by the Consumers and Refiners United for Domestic Energy coalition representing four refiners. The two groups also pay for Internet campaigns, direct messaging and other non-lobbying endeavors but do not have to reveal those costs to Congress.

Lobbying efforts

ConocoPhillips CEO Ryan Lance of Houston, Continental Resources' Harold Hamm, Hess Corp.'s John Hess, and Pioneer Natural Resources' Scott Sheffield have visited Washington regularly to meet with senators and deliver pro-export speeches. Hamm, in particular, has taken a highly visible role - making the rounds almost weekly, testifying at several hearings and sitting in the audience even when not speaking.

"Our executives are ready to roll up their sleeves and engage alongside one another to make sure Congress is well informed about their views," said Louis Finkel, executive vice president for government affairs at the American Petroleum Institute.

Oil companies argue the long-standing export restrictions have fostered a persistent discount for domestic oil, with United States' benchmark crude, West Texas Intermediate, trading about $5 to $6 per barrel less this year than its international counterpart, Brent.

But some refiners, including San Antonio's Valero Energy Corp., are fighting to preserve the status quo that allows exports of gasoline, diesel and other petroleum products while blocking foreign sales of raw, unprocessed crude. They have emphasized the political risks for anyone voting to unlock exports, stressing the lawmakers could be blamed for any later gasoline price spike, even if it isn't related to a policy change.

"The unlimited budget of the pro-export lobby is duping Members of Congress into thinking this is some kind of no-brainer," said Jay Hauck, executive director of the CRUDE refiners coalition. "It is a grievous political error to think this is a consequence-free vote."

Engaging public

Export advocates worked aggressively to line up support among Republicans viewed as more likely to back expanded oil trade, and Democrats believed to be more reluctant.

To build public support, advocates used digital and social media to target messages touting the wisdom of liberalized crude trade directly to influential voters and donors across the country.

For instance, when President Barack Obama's former top economist outlined the case for exports last September, his remarks were pushed out to voters and donors identified by data analysis as likely to be swayed. And when Sen. Lisa Murkowski, R-Alaska, insisted a nuclear deal with Iran would allow the country to sell its crude globally, unfairly leaving the United States as the only producing country not exporting its oil, that message was served up to the potentially receptive voters too.

The American Petroleum Institute engaged its network of about 35 million people and used robocalls to reach voters in select areas around the country, asking them to phone lawmakers and push for exports. Strategists also used private polling to fine-tune messages, examining which arguments worked with what constituencies - and which ones were most salient to Democrats who could be key to passing pro-export legislation.

Energy companies also went beyond employees in the oil patch, courting royalty owners and other stakeholders around the country. They have focused those efforts on states where they saw potential to pick up Democratic support.

At least three companies targeted their royalty owners with pro-export messages and appeals to call lawmakers to press for the change, putting the pitch on special websites, check stubs and other correspondence. Lobbyists also cross-referenced databases tracking political contributions with lists of royalty owners, trying to find people who could help carry pro-export message directly to key lawmakers. A major goal was reaching Democratic donors who might help sway lawmakers of the same party.

The identified donors were sent customized information, in the hopes they would engage with the politicians who have benefited from their financial support.

Oil producers say the effort is working, illustrated by declarations from several Senate Democrats recently suggesting they are open to the issue. Reid, the Senate Democratic leader, told Politico that export foes and fans should sit down "and come up with a deal."

Conversation shifts

Sen. Robert Menendez, D-N.J., a longtime oil export critic, highlighted the possibility of strategically using foreign crude sales to bolster a new round of nuclear negotiations with Iran. And Sen. Michael Bennet, D-Colo., said he could support exports as part of a comprehensive climate change package.

"People sense this has turned a corner where (exports) could be possible, where we could allow Americans to compete as every other producing nation can compete," said PACE's Baker.

The conversation has shifted. McKenna noted that people are no longer talking about whether the policy change will happen - just how it will.

The Republican-controlled House is on track to take up stand-alone export legislation this month but could revisit the issue again later this year as a provision in a separate highway or spending bill. The exports-only bill, sponsored by Rep. Joe Barton, R-Ennis, has 113 cosponsors, 13 of whom are Democrats. But oil industry leaders predict they will end up with more yes votes from lawmakers unwilling to sign on to the legislation now.

"We've got a number of Democrats who have cosponsored the bills and we have talked to a lot more who we think are going to be there when the time comes," Baker said.

The issue is thornier in the narrowly divided Senate. But several Senate Democrats, such as Bennet, have suggested they could vote yes in exchange for other policy changes. One possibility is a permanent extension of a renewable energy tax credit used to support wind farms, but that is likely to turn off as many senators as it attracts. Other Democrats may seek a renewal of the Export-Import Bank in exchange for exports.

In any case, API's Finkel agrees momentum is building: "The more time that goes by, the more arguments there are for this."


Shell president: 'Oil will be required for a long time'

By DAN JOLING, AP.Com, Sep. 2, 2015 4:24 AM


ANCHORAGE, Alaska (AP) — The president of Shell Oil Co. said exploratory drilling off Alaska's northwest coast is going well despite stormy weather last week that caused the company to halt operations for a few days.

And in an interview Tuesday with The Associated Press Marvin Odum said he expects further protests against the company's plans for Arctic drilling like the ones in Seattle and Portland where activists in kayaks tried to block Shell vessels.

Arctic offshore drilling is bitterly opposed by environmental groups that say a spill cannot be cleaned in ice-choked waters and that industrial activity will harm polar bears, walrus and ice seals already harmed by diminished sea ice.

In Seattle, Shell faced protests on the water by "kayaktivists" upset over the company staging equipment in the city. In Portland, Oregon, Greenpeace USA protesters hung from the St. Johns Bridge to delay a Shell support vessel, from heading to the Arctic.

"I think the right assumptions for me to make are, it's not going to go away," Odum said. "We saw quite a bit of very public opposition when we were in the Pacific Northwest."

Odum said he's "110 percent ready" to work with people who want to find ways to improve drilling.

"I do have an issue with those that oppose who use illegal means or put the safety of themselves or the safety of anybody associated with this operation at risk," he said.

Odum said good progress is being made on the first well off Alaska's northwest coast.

"We had a few days in the last week where we couldn't operate because of the weather," he said. "Now we're coming out of that and it looks like we're moving into a time period of good weather."

President Barack Obama this week is in Alaska rallying support for measures to combat climate change, such as limits on carbon emissions.

Odum is staying in the same hotel as the president - the Hotel Captain Cook.

While environmentalists praise the president for curbing greenhouse gases, they pillory him for granting Shell permission to drill in the Chukchi Sea for the first time in 24 years.

The U.S. Geological Survey estimates the Chukchi and Beaufort seas hold 26 billion barrels of recoverable oil.

Oil will continue to be needed as the United States transitions to more renewable energy, Odum said.

"Oil will be required for a long time," Odum said. "Let's take a really close look at developing our own resources, control how it's done and get all the benefits that go along with it."

Shell in two years of exploratory drilling and with up to six wells hopes to confirm a vast reservoir of oil. If it's found, Shell could apply for production permits and move oil by undersea pipe to the Alaska shore and then overland across northern Alaska to the trans-Alaska pipeline. That could take more than a decade.

Odum is confident exploration can be done safely, and the overriding factor dictating whether Shell completes an exploratory well this year will be safety.

Shell is operating under strict Arctic rules put in place after the Deepwater Horizon disaster in the Gulf of Mexico. Arctic offshore drilling has been scrutinized in the courts in lawsuits brought by drilling opponents, Odum said.

"It's probably fair to say, this is the most scrutinized, analyzed project — oil and gas project — probably anywhere in the world. I'm actually sure of that," he said.

All the scrutiny, along with Shell's own internal review, have gone into safety considerations. It's in the company's best interest, he said.

"We can't afford to have a problem here," Odum said.