Washington (Platts)--30Jan2014/1224 pm EST/1724 GMT

During Congress' first hearing in 25 years on US oil exports -- currently banned in most cases -- a divided Senate Energy and Natural Resources Committee on Thursday debated the impact on consumers of sending some of the country's plentiful light, sweet crude abroad.

The top Republican on the committee, Lisa Murkowski of Alaska, urged her colleagues to consider reversing the ban, saying the US would soon be overflowing with light crude and condensates as a result of the shale boom in North Dakota and Texas.

"This ban threatens record-breaking US oil production and American jobs by creating inefficiencies, gluts and other distortions," said Murkowski, who has been the leading Senate voice calling for expanded crude exports. "The architecture of US energy exports must be renovated if our nation is to lead the world on issues of trade, the environment and energy."

But Oregon Democrat Ron Wyden, who chairs the committee, advocated a more cautious approach, saying the potential price impacts on American consumers must be the top consideration.

"It's not enough to say some algorithm determines exports are good for the gross domestic product, or some other abstract concept," he said. "American families and American businesses deserve to know what exports would mean for their specific needs when they fill up at the pump, or get their delivery of heating oil."

Louisiana Democrat Mary Landrieu -- who is expected soon to take over as chairwoman of the committee after a leadership shuffle that will see Wyden assume leadership of the Senate Finance Committee -- said she wants more information on what types and quantities of crudes US refineries are running.

"We have to be very aware and sensitive to the investments made by our refineries," Landrieu said.

The US largely bans exports of crude under restrictions imposed by Congress in the wake of the 1973 Arab oil embargo. The US Department of Commerce can issue permits for crude exports under certain prescribed conditions, but has generally only allowed small quantities to Canada.

US crude production is booming, but much of the production is light oil and condensates that refiners in the US Gulf Coast are ill-equipped to use. The US Energy Information Administration has forecast that domestic crude production will double from 2008 levels to 9.6 million b/d by 2019.

REFINERS VS. DRILLERS

The debate over crude oil exports has pit some refiners against drillers, and that split was on display at the hearing.

Harold Hamm, CEO of independent producer Continental Resources, said allowing exports would create more incentive for drillers to produce oil, and the increased supply would lower global crude prices, benefiting consumers.

"The authorization of oil exports promotes investment in additional energy resource and infrastructure development at home, enabling our nation to better control its destiny," said Hamm, whose company is the largest leaseholder in the Bakken shale formations of North Dakota and Montana.

He added that the US has no restrictions on the export of gasoline and diesel, to the advantage of US refiners.

"Why shouldn't independent producers be allowed to do the same?" Hamm said.

But Graeme Burnett, a senior vice president of Delta Air Lines, which owns the Trainer refinery in Pennsylvania, said US consumers are benefiting from the current discount of US crudes to Brent. Reversing the ban would cause US oil prices to rise, as markets become more integrated, he said.

"If we lift the export ban, we would in essence be allowing the transport of crude out of a competitive market in this country and into a less competitive global one controlled by a few oil-producing states," Burnett said.

He noted that the US shale boom has revived the fortunes of many US refineries. Delta, for example, acquired the idled Trainer refinery from ConocoPhillips in 2012, and restarted it to provide jet fuel for its planes and other products.

Delta said earlier this month that it expects the Trainer refinery to post a "modest profit" in 2014 by using "cost-advantaged crudes," such as Bakken.

"The ban may be unnecessary at some point in the future," Burnett said. "But we still have a long way to go to protect against oil market volatility and achieve true energy independence."

NO IMPENDING ACTION

Most observers say they do not expect any quick action on the issue from Congress or the White House, as the prospect of crude exports is politically dicey and faces significant opposition.

Senators Edward Markey and Robert Menendez, who do not serve on the committee, sent a letter to President Barack Obama on Thursday outlining what they called the legal case against crude exports.

Markey, Democrat-Massachusetts, and Menendez, Democrat-New Jersey, said the 1975 law that established the ban does not allow the Department of Commerce "broad authority" to allow exports.

"Longstanding US law requires that, with very few exceptions, domestically produced crude oil cannot be exported," the senators wrote. "We urge you to support longstanding law and precedent and oppose efforts to roll back these important protections for consumers and our national security."

Lawmakers at the hearing acknowledged the controversial nature of the debate and said they hoped the hearing draws attention to the issue.

"I don't expect that we are either going to see the administration moving forward with a decision next week, or legislation coming forward from me or other members of the committee here," Murkowski said. "What I am hoping is that we can advance this discussion so that it is clearly understood."

--Herman Wang, herman.wang@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com

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