Lifting Ban on Oil Exports

Floor Speech

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Mr. CONAWAY. Mr. Speaker, I appreciate the leadership allowing me to visit with you about something that is near and dear to my heart. I hope we spend the better part of the next hour discussing a bill tomorrow that will be before this body, which is H.R. 702, which would lift the 40-year-old, decades-old ban on exporting a domestic product, a domestic commodity, called crude oil.

As you look at the things that America buys and sells around the world, the only commodity that we produce here in the United States that we cannot export is crude oil. It harkens back to 40 years ago, and I will talk about it in a second.

There are no restrictions on imports. You could import all the crude oil that you would like, but we have a restriction on exporting that crude oil.

Now, the administration recently signaled a bit of a change in that in that they licensed a swap of certain number of barrels of heavy crude from Mexico for light sweet crude coming to the United States. So there was at least one opportunity recently where the Department of Commerce authorized that swap and, in effect, began to export some of this crude that we produce every single day.

Forty years ago the Arab oil embargo and all the things that happened with that--most of the folks in this Chamber, except maybe you and I, don't necessarily recall the long lines at the gas station and the rationing and the way that even-numbered license plates were okay one day and odd-numbered license plates were okay the next day to buy gasoline.

I can remember living in Dallas at the time. I would have to get up at 5 o'clock in the morning and go sit in line at a gas station in order to fill up the car so that I could make it downtown and back and forth. It was somewhat disruptive to our quiet lives.

The price of oil went from $3 a barrel to $12 a gallon, a fourfold increase. That shock hammered the economy with a lot of things that were going on.

As a part of that response, in addition to the response, just before the Arab oil embargo in the 1973-1974 timeframe, the United States had, through a secret study, determined that American crude oil production may have peaked in 1970 and that the wells in the United States that were then producing and the new ones that were going to be drilled and brought online--that the daily production in the United States would slowly decline from that point on and that that scarce resource of strategic value needed to stay here in the United States.

So while we were even a net importer at that point in time, the wisdom of this House, the Senate, and the President at the time was: Let's just don't export any U.S. crude. Let's use all of it here. And then we will buy from other folks the crude oil that we need to make up the difference in our refinery loads.

That held true for 35 years. Then something pretty stunning happened, and that was this incredible renaissance in the oil and gas business that has occurred over the last 5 years.

When history writes about this era of the oil and gas business, it will talk about these incredible breakthroughs in technology and the science associated with it and the risk taking of the private sector.

The current President likes to brag about the oil and increased production. Quite frankly, this has all come in the private sector, private lands, and private initiatives, where this has happened. Permitting on public property, public lands, has slowed down, and actual production off our Federal lands has shrunk from where it has been.

So for 35 years it was a policy that was out there. It was never an issue because we didn't produce enough every day to export.

Then about 5 years ago this process of increased production was driven by the shale oil play in the Bakken, the shale oil play in west Texas, and the shale oil play in the Eagle Ford shale in south Texas, big frac jobs, technologies that broke the rock up or allowed the oil to escape out of that rock in quantities heretofore not really contemplated or known.

The oil was in the rock. Everyone knew that. They just didn't know how to get it out of the rock. This wonderful renaissance began to occur, and U.S. production began to increase every day to the point now that the estimates, had the price not dropped, were that, by 2020, we would be the largest exporter and that we would have an excess.

So we already had a bit of an excess of crude oil in the United States because it had to go through U.S. refineries. U.S. refineries are set up to process heavy crude, which is not what is produced out of this oil shale. That is light, sweet crude. So, consequently, we had more light sweet. We are still importing crude every day from Venezuela and other countries that feed heavy crude into our refineries.

So it got on everybody's radar screen that we need to figure out a way to unlock this market and eliminate the inefficiencies associated with not being able to export U.S. crude.

As a result of that, there are two sets of prices in the world markets. There is a Brent price of crude, which is North Sea crude, and there is also a West Texas Intermediate price that is in the markets.

There has been for a long time now a differential between those two prices. The West Texas Intermediate price, which is what our local American producers get, was less than the Brent crude.

That differential was driven by the fact that we had no market for U.S. crude, other than U.S. refineries, given the laws and the restrictions that were in place. So the movement began to explore the opportunity for lifting this decades-long ban on crude oil.

Throughout the years that Harry Reid was in charge of the Senate, it was a nonstarter because it was not likely we could get a bill like we are going to vote on tomorrow in the House through the Senate. With the Republican victory last November and control in the Senate by Republicans, it then became an opportunity for us to examine this policy and see if it makes sense.

Just to set the record straight, even without the bad deal the President has foisted on us, we treat Iran better than we treat American producers. Because even before the sanctions are lifted in Iran, they can produce and export about a million barrels of crude oil a day. The U.S. is zero.

So as you step back to look at the big picture, we treat Iran--with all the mischief they do and the bad actor they are and the threat to world peace that they are, they get better treatment than domestic producers, and that makes no sense whatsoever when you look at the overall issue.

So we are at a point now where, with this drop in prices to almost half of what it was, we have begun to see that crude oil production will probably tail off here in the United States this quarter.

But the oil is there. We know how to get it. The science is available. It is just simply driven by the price. Recovering the drilling and completion costs is

what is causing the current decline in production, but we know where it is and how to go get it.

When a well comes online, from day one, it will begin to produce less oil today than it did yesterday. That process, that decline, will move forward throughout the life of that well until it reaches its economic limit.

The economic limit of a producing well is driven by the price versus how much it costs you to get it out of the ground, the taxes associated with the barrel, the royalties associated with it. Those have got to be in positive circumstances or it doesn't make any sense to produce that crude oil.

In the drilling and the completion of a well, you have got to be able to recover that investment from the total number of barrels that you expect to produce out of that well. When you know those fixed costs going in, there are very few of those costs that are recoverable once you drill a well.

Your only return is to sell the crude oil. And given how much you think that each well will produce, it has got to be at a price where you can recover that investment as well as cover your incremental costs each day of producing that crude oil.

So there are some sound economic reasons why, at current prices of crude oil, there is less drilling going on and certainly less completions going on in the market.

That oil is not going anywhere. That shale is just the way it was when the prices were a lot higher. So if prices were to recover and it made sense, then our American domestic producers could go back to producing more and would then reset that decline on an upward slope so that we are, in fact, producing more oil each day than we did yesterday because we are bringing on more wells every single day to offset the natural decline that each well will experience. While we have got this window of opportunity, it is time now to lift this crude oil ban.

Mr. Speaker, I am joined by my neighbor, who represents the southern two-thirds of New Mexico. More importantly, he represents my three grandsons who live in Las Cruces, New Mexico. So I watch him like a hawk to make sure he is doing a good job representing my grandsons.

I yield to the gentleman from New Mexico (Mr. Pearce).

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Mr. CONAWAY. Mr. Speaker, I thank the gentleman from New Mexico for his thoughts and comments. He and I are blessed to share a group of people who work across that State line between Texas and New Mexico--our districts are contiguous with each other--who live in one State, work in the other, vice versa, some of the hardest working, most dedicated, patriotic folks on the face of the Earth, like his dad and his mom who have built wealth, raised a family, protected that family, and produced a U.S. Congressman. It makes them easy to talk about and easy to defend.

I want to flush out this idea of the geopolitical aspects of lifting the ban. I was recently in a Baltic country in conversations with one of the top two leaders, and I had the chance to ask a question of the Prime Minister. I said: Mr. Prime Minister, if you could buy crude oil directly from the United States, would it make your issues with Putin and all the mischief and things he is up to less difficult to deal with?

He lit up like a Christmas tree. He said: Oh, absolutely, absolutely. We would love to buy U.S. crude and not spend that money with Putin and Russia and help lift the boot--the Russian boot off their neck--that is driven by crude oil and natural gas.

If they could supply to these countries that can't supply themselves, then there is absolutely no reason whatsoever that they shouldn't be running our light sweet crude through their refineries at this point in time.

Steve talked about his dad. My dad was the same way in the sense that if rigs--he was a roughneck, and roughnecks are that hardy group of individuals who work on a drilling rig. It is dangerous. It is hard. It is 24 hours a day. They work 8-hour shifts.

My dad would pull doubles in order to get the extra time and a half so the cash flow to the family would be enough to feed my brother, sister, me, and my mom. He lost a part of a finger as a part of that experience. If the rigs were running in Borger, Texas--we lived in Borger, Texas, where I was born. If the rigs were running in Odessa, Texas, we moved to Odessa, Texas, because my dad thought it was more important to have a job than necessarily where we lived because that was key.

In the early 1990s, I was part of a group that did a needs assessment in Midland, Texas. And we sometimes lose sight of why jobs are important because we talk a lot about it. But that needs assessment did a scientifically sound, statistically sound survey of Midland, asking folks what are the issues within your home, what are the issues within your neighborhood, what are the issues within your community that have a problem, that create this problem? We then winnowed those down to the top 10.

If you looked at that list of top 10 needs of Midland, Texas, at the time, 9 of those would have been positively impacted by somebody having a job. Whatever that need was, it was less of a problem if a family had a job than if they didn't have a job.

The jobs that this will create, jobs that this will protect and maintain are important. The unemployment rate in Midland, Texas, is still in the 3, 2 range, and Odessa is the lower 4. That hides some other issues associated with this problem; and that is, before the drop in the price of oil, not only were there a lot of jobs, but a lot of those jobs were providing some 10, 15, 20 hours of overtime each week to the people that were working. Overtime is a real boost because it is time and a half.

Now, then, these folks still have a job, and with

the decreased activity, the decreased drilling and all the other activity associated with the crude oil business, that overtime has evaporated. These folks still have a job, but they built commitments and bought trucks and other things based on that overtime, and they are now not getting it. So while they still have a job, the cash flow to their families is impacted.

I had another opportunity to see the impact of that recently when I toured our local food bank and was discussing with them what was going on. They said that the elderly population coming to the food bank had dramatically increased over the last 4 or 5 months as a result of this drop in prices.

I asked, Well, why is that? They said that many of these adults, these elderly adults, their families had been helping them with their monthly bills. Because they had this extra overtime, they had extra money that they were able to help their families with, and now that that has evaporated, that trickle-down effect is impacting these elderly who are on fixed incomes and are having to now go to the food bank. Creating jobs, you just can't overstate how important that is.

I have now been joined by my fellow Texan from the Dallas area, Pete Sessions, current chairman of the Committee on Rules. I yield to my good friend.

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Mr. CONAWAY. Mr. Speaker, I thank the chairman of the Committee on Rules, Pete Sessions, for his kind words and also his support tomorrow.

I think the bill that went through the Committee on Energy and Commerce that started life as a Joe Barton bill will be the one that makes it to the floor tomorrow.

We are expecting to have a really solid, bipartisan vote, by the way. This is not a partisan issue, per se, but the White House might try to make it that. This is a bipartisan issue.

I yield to my colleague from Arkansas, French Hill. French.

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Mr. CONAWAY. I thank the gentleman from Arkansas for his comments and opinions on this issue. I hope his support draws Members of the other side of the aisle to our arguments and to make this happen.

The gentleman mentioned the price he paid in Arkansas recently. I dare say, there is not another commodity in America that we don't check the price on more often than gasoline. You may not buy gas every day, but every time you drive by a gasoline station, you check the price because it is right there for everybody to see. We don't put the price of bread and milk up like that, but we do put the price of gasoline up.

I have got a district that has 29 counties and is 300 miles wide and 200-plus miles north to south. We do a lot of driving. My district director and I are always looking for that better gasoline price deal in the district as we are moving around, because hardwired into most all of us that drive very much is to check those prices.

This increased production in the United States will also help protect consumers from price shocks. I mentioned that in 1974, the price of crude oil went from $3 a barrel to $12 a barrel, a fourfold increase. The more production you have from a stable environment like the United States, the less whipsaw you will get in the market from disruptions in supplies from places and part of the world where it is not quite as stable, such as the Middle East and others.

So, this increased U.S. production will also help protect American consumers from being whipsawed by dramatic increases in the price of crude oil because we have got that supply.

I now yield to the gentleman from North Dakota (Mr. Cramer), who is from another State benefitting from the shale play and someone that is probably more familiar with the Bakken Shale than anybody else.

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Mr. CONAWAY. I thank the gentleman from North Dakota, clearly, a State that is a major player in this oil and gas renaissance that has occurred over the last 5 years.

I would also like to point out that the oil and gas business, per se, is an incredibly fertile ground for small business development. And my dad, I mentioned earlier, was a great example of this.

There are lots of narrow-focused aspects of the service side of the business. We all think of the drilling rigs and the big investments there, but there are various aspects, whether it is hauling things or mud or whatever is the deal, where entrepreneurs, men and women who want to take a little risk, can put a little capital together, put some tools together, and begin servicing an aspect of the business that is there.

So it is incredibly fertile in terms of setting up new businesses. I have got one group in Eastland, Texas, that, just as the renaissance was beginning to start, they thought it was a good idea to get into some aspect of the fracking business and, over a very short period of time, built that business into a multi-billion-dollar deal and sold it.

So incredible wealth was created as a result of small businesses turning into a medium-sized business, turning into a big business, and then, ultimately, sold to another bigger business for an awful lot of money.

And every time that happens there are jobs created associated with that and wealth created with that that benefits not only those individual communities, but all of us that are involved.

We failed to mention that there is no ban on exporting product. Crude oil that is refined, turned into gasoline, turned into diesel, there is no ban on that.

So refiners today can take that heavy crude that they use and the little bit of light, sweet crude that they use, turn that into a product that they then can sell into the world market, and the same folks can sell it back into our communities for us to use in our cars and in our trucks.

That gasoline, in the main, particularly by folks, individuals, is bought with after-tax dollars. That means they have had to earn a buck, pay the taxes on it, and then take what is left out of that dollar to actually buy gasoline.

As we have seen over the last several months, these lower gasoline prices have been a big boon to folks in our country that have to drive a car to get to work or take their kids to school, whatever it might be.

So if you have got a $1 or a $2 drop in the price of gasoline and you are buying 15 gallons a week or 15 gallons every so often, that is $15 to $30 of after-tax dollars that you can then spend somewhere else to benefit you and your family.

Another aspect of what is happening is not related to what will go into the bill tomorrow, but it is something we have talked about on this floor ad nauseam, and that is the XL Pipeline. This pipeline is designed to haul Canadian oil sand oil, bitumen oil, that is, in effect, heavy crude south to the United States.

This is the kind of crude that could run our refineries and our refineries would desperately like to have rather than buying the heavy crude from Venezuela and other places where the recipients of our checks when we buy that crude oil aren't necessarily friends of ours, aren't necessarily on the same geopolitical page that we are on.

So having that pipeline would be another aspect of freeing up this market. The more efficient you can make markets, the less artificial restraints, the less goofy things you have got in there, then the better pricing mechanisms you get, the better and the more efficient those markets are, and then everybody up and down that chain benefits from that.

As I mentioned earlier, we have got this odd circumstance where the producers in the United States sell on the West Texas Intermediate number to a refinery. That refinery then turns it into gasoline, and they sell it based on the Brent crude.

So there is a differential being made by somebody, and shrinking that differential is what will keep the price of gasoline and diesel from increasing.

One of the arguments for folks who don't represent producing provinces is: Why would I be in favor of something that would increase the folks I represent gasoline and diesel prices?

Every study has shown that that will not happen. Now, the price of gasoline and diesel will go up by the world market. But as a result of lifting this export ban, it will, in fact, not increase the price of gasoline as we produce it.

This is a win on every level. It is a win for consumers, as I have mentioned, it is a win for taxpayers, and it is a win for taxing entities.

My colleagues from North Dakota and from Arkansas mentioned that reserves in the ground are valued for property tax purposes, and those property taxes that are generated from that then support our schools and other county, city, and State functions.

As that developed crude oil is explored and those producing wells come online, that creates a property tax base that benefits all of the taxpayers in those particular entities.

So it is a win across the world. It is a win for our allies and the geopolitical issues that we have talked about. So it is good for this country. It is good for jobs. And it is something that I hope my colleagues on both sides of the aisle can thoroughly look at. They have had plenty of time to do it.

As was mentioned, it went through regular order, several hearings on the issue, actual legislation went through the subcommittee and the committee, the normal regular order, as we like to say around here, and everyone has had a chance to weigh in.

Tomorrow there will be some amendments made in order under the rule. Folks will be able to weigh in. Some of

those I will support. Some of those I will be against. But they were all presented as a way to get someone else's idea about this issue to the floor to have us debate it. I think that is a healthy thing, that we will be able to do that tomorrow. Some of those will perhaps pass, and some of them won't.

But whatever happens, I have got great confidence that the bill that we will pass tomorrow with a big bipartisan vote can then go to the Senate and move the ball and move the initiative over there.

Mr. Speaker, I appreciate the gentleman from Texas, whose work on this issue started his career in this business and has just joined us and is the lead sponsor on the bill that we will be voting on tomorrow.

We have got probably 4 or 5 minutes left. I yield to the gentleman from Texas (Mr. Barton), my chairman emeritus of the Energy and Commerce Committee, the Dean of the Texas delegation, for whatever thoughts he might care to share with us.

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Mr. CONAWAY. I thank the gentleman.

I want to brag on the House for having conducted this business with respect to this bill the way it has.

If you go back to your grade school or your junior high civics classes, I'm a bill on Capitol Hill trying to become a law, this is exactly what happened with this deal. It went through the process the way it is supposed to, kind of the old-fashioned deal.

We hope to see tomorrow a big bipartisan vote so the American people can at least in this one glimmer look and say, hey, the House of Representatives functioned the way that the Founding Fathers intended it to and moved an important piece of legislation forward.

Mr. Speaker, I look forward to a big vote tomorrow. I yield back the balance of time.

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