Administration Backs Export of Alaskan Oil

The Clinton Administration on Wednesday finally endorsed the export of Alaskan oil, marking a policy initiative that is billed as creating up to 25,000 new oil-industry jobs--most of them in California.

The Administration’s move lifts the last big obstacle to ending the two-decade-old export ban, a vestige of the 1970s debate over building the Trans-Alaska Pipeline. A bipartisan energy caucus in Congress has been pushing for the move, and U.S. maritime unions dropped their long opposition last spring when assured that ships using U.S. crews would still carry the oil.

“We want to get this done . . . we figure it’s the time to do it, this year,” said Sen. Frank H. Murkowski (R-Alaska), chairman of the Senate Energy and Natural Resources Committee. Murkowski and Sen. Ted Stevens (R-Alaska) introduced a bill to lift the export ban on the first day of the new GOP-controlled Congress.

Bipartisan supporters “in both the Administration and the leadership of the Congress believe it’s time to move on this,” Energy Secretary Hazel O’Leary said in an interview Wednesday.

Last June, the Department of Energy recommended an end to the ban in a report predicting, among other things, that it would amount to a jobs bonanza for California. But President Clinton had withheld his support until Wednesday, when a top Energy Department official testified before Congress.

The export ban was imposed to win congressional support for construction of the 800-mile pipeline after the discovery of huge oil deposits on Alaska’s North Slope in 1969. Anxiety over oil was being driven by the nation’s rising dependence on foreign oil, dramatized by the 1973 Arab oil embargo, and critics insisted that Alaskan oil be reserved for U.S. use.

Since then, most Alaskan crude has been shipped by tanker to California, even though it would bring higher prices in Far East markets. At the same time, the Alaskan oil has flooded California markets and depressed crude-oil prices. That has discouraged investment in production from California’s oil fields, according to the state’s oil companies.

British Petroleum, one of the two biggest Alaskan oil producers, was seen as the main beneficiary of any oil trade with the Far East. The other major producer, Atlantic Richfield Co. of Los Angeles, is expected to continue shipping its Alaskan oil to California because--unlike BP--Arco produces oil almost exclusively for its own refineries, all located here.

Supporters contend that higher prices in the Far East market would encourage more investment and production in existing Alaskan oil fields--and a jump of $700 million to $1.6 billion in oil taxes and royalties to Alaska by the year 2000.

The Energy Department also estimated that diverting Alaskan crude from the California oil market--where much of it currently ends up, depressing prices--would boost California crude prices by around $1.20 a barrel. That would prompt new investment in the state as well and generate $180 million to $230 million extra in tax and royalty revenue to California.

Despite this, price increases at West Coast gasoline pumps would be “minimal or nonexistent,” Deputy Secretary of Energy William H. White told Murkowski’s committee in a hearing Wednesday.

White said that increases of $1.20 a barrel and $1.60 a barrel for Californian and Alaskan crude, respectively, would normally be expected to mean as much as a 4-cent increase in gasoline per gallon at the pump. But since more than half the Alaskan crude and three-fourths of the California oil is refined by the same companies that produce it--thus eliminating a middleman’s profit--the DOE expects an average cost increase to the refiners of “slightly over 1 cent per gallon.”

Still, opponents, including independent West Coast refiners, argue that even this 1-cent hike would cost West Coast consumers an extra $300 million annually.

“There are still an awful lot of questions to be asked,” said Sen. Patty Murray (D-Wash.).

The Administration wants the Murkowski bill amended to include several requirements, including an environmental review under the National Environmental Policy Act of 1970. Another provision would reinstate the ban if steep gasoline price hikes do occur.

“If the Commerce Department . . . review found it was from anti-competitive behavior, it could snatch the (export) license,” O’Leary said Wednesday.

Murray also said Wednesday that Washington state marine regulators are also concerned about large foreign-flag tankers shifting oil cargoes to smaller vessels in Puget Sound, a scenario she predicted as Tosco and other refiners replaced Alaskan crude with other oil bought on the world market.

For their part, many environmentalists are worried about a change in trade routes.

“Now a lot of the tankers heading out of Prince William Sound (the southern terminus of the Trans-Alaska pipeline) are going to be heading right, past Kodiak Island and past the Aleutian Island chain, heading to Japan, Korea, the markets,” said Rick Steiner, marine adviser for Prince William Sound at the University of Alaska. “It will expose the entire thousand-mile coastline to the eventuality of tanker spills for the first time.”