Continental Resources CEO Harold Hamm responded to a question during a U.S. House Committee on Agriculture hearing Wednesday morning about how quickly the oil industry would pick up if the long-standing federal oil export ban were to be lifted tomorrow.
“We exported until 1975. The infrastructure’s there,” Hamm said. “… It can happen really quickly.”
Hamm was one of a series of witnesses, including North Dakota Petroleum Council Vice President Kari Cutting, to speak at the Capitol Hill hearing held to examine what effects lifting the nation’s oil export ban would have on the rural economy. Committee members asked witnesses both questions relating to the ban and also questions about the oil industry in general.
The witness panel also included David J. Porter, chairman of the Texas Railroad Commission, which is the state’s chief energy regulator.
“The export ban is more than just an outdated policy,” Porter said in his opening statement to the committee. “Keeping it in place is actually harming our economy.”
Porter blamed the ban for economic effects like the wide disparity between the West Texas Intermediate crude American benchmark price and the Brent crude price, the international pricing benchmark off of which gasoline prices are based. He said lifting the ban would benefit both the nation and rural America.
Hamm said he had the unique opportunity of watching the “American energy renaissance” take place with the unlocking of shale oil in the past decade.
“The American energy renaissance is the single-most defining aspect on this planet today that will shape the next 50 years for America,” said Hamm, whose company is the largest producer in North Dakota’s Bakken oilfields.
However, he said that renaissance now hinges on the removal of the export ban.
About two-thirds of American refining capability today, Hamm said, is geared for heavy sour crude oil, which is not compatible with the current mass production of light sweet crude in the country.
This is partially due to the fact that foreign powers have a large stake in American refineries, he said, for which they import heavy sour crude and thereby have no incentive to retrofit them to refine light sweet.
This leaves only a third of the country’s refining capability to tackle most of the oil now produced in America, Hamm said. He reasoned that opening up to the international market is the best option for this dilemma.
Hamm added that one study predicted that lifting the ban could eventually result in a 1 percent GDP growth.
Cutting spoke about North Dakota’s agricultural impacts since the Bakken oil boom began.
She said it practically saved many rural North Dakota communities, which were shrinking beforehand as people left the state for better opportunities. Some were wondering, she said, if they would be able to keep their farms in the family.
Now, with a fresh influx of money from the oil industry, Cutting said many farmers are reaping the benefits. New agricultural technology projects are popping up in the state, she said, and many of those in agriculture are investing in high-tech machinery.
“This rural renaissance is being threatened by foreign entities not always friendly to the United States and by restrictions imposed on the sale of oil abroad,” she said. “The U.S. government should lift the ban on crude oil exports and allow oil produced in places like North Dakota to reach global markets. Lifting the ban on crude oil exports would immediately restore our competitiveness and revive the renaissance in rural America. Not only would rural America prosper, but all U.S. citizens would benefit from lifting the ban.”
Cutting mentioned the Dakota Prairie Refining plant west of Dickinson and told the committee how it was the first greenfield refinery built in four decades. The diesel it produces, she added, now supplies North Dakota farmers, making diesel shortage worries a thing of the past.
“This investment would never have occurred without oil and gas development,” Cutting said.
But, she said, this prosperity was in danger of becoming unsustainable if the export ban was left in place.
U.S. Rep. Pete Aguilar, D-Calif., asked witness Frank Rusco, director of the U.S. Government Accountability Office, about the environmental and safety implications that could result if lifting the export ban caused a greater flow of oil to travel through the nation’s transportation infrastructure. Rusco responded that any increase in industrial activity meant a multiplied risk of safety incidents.
“Those sort of things are inevitable with industrial processes,” Rusco said.
But, he added, income generated from more trade could offset this risk.
“In relation to lifting the export ban, it removes a piece of uncertainty that … could allow the building of additional infrastructure that might mitigate this further,” Rusco said, pointing to pipeline development.
Rusco said the Department of Transportation is evaluating how oil should be handled on the rails.
Stacey Plaskett, a congressional delegate representing the Virgin Islands, explained how her territory once had its own non-light sweet crude refinery, Hovensa, which was partly owned by the Venezuelan government and was considered one of the largest in the Western Hemisphere.
Now closed, with a significant part of the territory’s workforce and income wiped out, Plaskett asked witness Jamie Webster, senior director of consulting firm IHS, what the costs would be for retrofitting Hovensa and similar refineries in rural communities.
Webster said it would take several hundred millions of dollars, depending on the size of the refinery.
“That’s the issue that we have,” Plaskett said, explaining that, through corporate unwillingness, the communities surrounding Hovensa and refineries like it had little chance of getting their old plants retrofitted and restarting the local economy.
“My warning to everyone is, beware having an economy that’s based on one industry,” Plaskett said.
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