CRUDE OIL EXPORTS 

HEARING 

BEFORE THE 

COMMITTEE ON RESOURCES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTH CONGRESS 

FIRST SESSION 

ON 

H.R. 70 

A BILL TO PERMIT EXPORTS OF CERTAIN DOMESTICALLY PRODUCED CRUDE OIL, AND FOR OTHER 

PURPOSES 

91-746cc .. 

MAY 9, 1995---WASHINGTON, DC 

Serial No. 104-12 

Printed for the use of the Committee on Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1995 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0-16-047413-2 
COMMITTEE ON RESOURCES 

DON YOUNG, Alaska, Chairman 

JAMES V. HANSEN, Utah 

JIM SAXTON, New Jersey 

ELTON GALLEGLY, California 

JOHN J. DUNCAN, JR., Tennessee 

JOEL HEFLEY, Colorado 

JOHN T. DOOLITTLE, California 

WAYNE ALLARD, Colorado 

WAYNE T. GILCHREST, Maryland 

KEN CALVERT, California 

RICHARD W. POMBO, California 

PETER G. TORKILDSEN, Massachusetts 

J.D. HAYWORTH, Arizona 

FRANK A. CREMEANS, Ohio 

BARBARA CUBIN, Wyoming 

WES COOLEY, Oregon 

HELEN CHENOWETH, Idaho 

LINDA SMITH, Washington 

GEORGE P. RADANOVICH, California 

WALTER B. JONES, JR., North Carolina 

WILLIAM M. (MAC) THORNBERRY, Texas 

RICHARD (DOC) HASTINGS, Washington 

JACK METCALF, Washington 

JAMES B. LONGLEY, JR., Maine 

JOHN B. SHADEGG, Arizona 

JOHN E. ENSIGN, Nevada 

GEORGE MILLER, California 

NICK J. RAHALL II, West Virginia 

BRUCE F. VENTO, Minnesota 

DALE E. KILDEE, Michigan 

PAT WILLIAMS, Montana. 

SAM GEJDENSON, Conn(lcticut 

BILL RICHARDSON, New Mexico 

PETER A DEFAZIO, Oregon 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

TIM JOHNSON, South Dakota 

NEIL ABERCROMBIE, Hawaii 

GERRY E. STUDDS, Massachusetts 

W.J. (BILLY) TAUZIN, Louisiana 

SOLOMON P. ORTIZ, Texas 

OWEN B. PICKETT, Virginia 

FRANK PALLONE, JR., New Jersey 

CALVIN M. DOOLEY, Californi~ 

CARLOS A ROMERO-BARCELO, Puerto 

Rico 

MAURICE D. HINCHEY, ~ew York 

ROBERT A. UNDERWOOD, Guam 

SAM FARR, California 

DANIEL VAL KlsH, Chief of Staff 

DAVID DYE, Chief Counsel 

CHRISTINE KENNEDY, Chief Clerk I Administrator 

JOHN LAWRENCE, Democratic Staff Director 

(II) 
CONTENTS 

Hearing held May 9, 1995 ...................................................................................... . Text of H.R. 70 ........................................................................................................ . Statement of Members: 

Page 

1 

58 

Dooley, Hon. Calvin, a U.S. Representative from California ........................ 3 

Thomas, Hon. William M., a U.S. Representative from California .............. 19, 70 

Vento, Hon. Bruce, a U.S. Representative from Minnesota .......................... 2 

Young, Hon. Don, a U.S. Representative from Alaska, and Chairman, 

Committee on Resources ............................................................................ .. Statement of Witnesses: 

Adamany, Linda, Senior Vice President, BP Oil Shipping Company, 

USA ............................................................... ................................................ . Prepared statement .................................................................................. . American Maritime Congress and the Marine Engineers' Beneficial Asso1 35 

87 

ciation (prepared statement) .......................... .......... ... .... ..................... ........ 125 

Council of European & Japanese National Shipowners' Associations (prepared statement) .......................................................................................... . Decker, Tom, Port of Portland .................................... ., ................................. .. Prepared statement .................................................................................. . Hancock, Nolan W., Citizens/Legislative Director, Oil, Chemical, and 

127 

50 

120 

Atomic Workers............................................................................................. 48 

Prepared statement ................................................................................... 108 

Hoffman, Jerry, President and Chief Executive Officer, Berry Petroleum 

Company ............................................................. , ......................................... . Prepared statement .................................................................................. . Independent Petroleum Association of America (prepared statement) ...... .. Jeffreys, Kent, Senior Fellow, National Center for Policy Analysis ........... .. Prepared statement .................................................................................. . Jones, Thomas P., Jr., Chairman, Shipbuilders Council of America ......... .. 

Law~~eb~:,d :u~te~~~t w;;it···P~k~·;:···st~;;··st~p·h~;;~·:··~~ci'''lli~h~~ci''A:: 

34 

83 

144 

36 

94 

50 

111 

Fineber~ (prepared statement and attachments) ....................................... 161 

Loree, Philip J., Chairman, Federation of American Controlled Shipping 

(prepared statement) ........................... ... ......................... .... ........... .............. 153 

Marks, Roger, Petroleum Economist, State of Alaska, Department of Rev- enue ............................................................................................................... . Prepared statement .................................................................................. . Sacco, Michael, President, Seafarers International Union of North America (AFL-CIO) (prepared statement) .......................................................... . Sutton, Peter A., Senior Vice President, TOSCO Refining Company ........ .. Prepared statement .................................................................................. . Turner, Terry, Legislative Director, Seafarers International Union of 

30 

73 

77 

45 

99 

North America ............................................................................................... 33 

U.S. Oil & Refining Co. (prepared statement) ............................................... 149 

Wheeler, Douglas P., Secretary for Resources, The Resources Agency 

of California (prepared statement) ............................................................. . White, William H., Deputy Secretary, Department of Energy ................... .. Prepared statement .................................................................................. . 

159 

4 

61 

Additional material supplied: 

Ultramar: Export of ANS Crude Oil ................................... .... .... .................... 152 

White, William: 

Bilateral international oil supply agreements ...................................... .. Contracts at British Petroleum ............................................................... . Joint venture with Amoco ....................................................................... .. Oil production and its effect on tax and jobs ........................................ .. 

(III) 

14 

16 

10 

28 
IV 

Page 

Additional material supplied-Continued 

White, W~am~onti~';led 

Refinenes 1n Hawau .. ............................................................................... 13 

Communications submitted: 

Bode, Denise A. (Ind. Petroleum Assn. of Am.): Letter of May 9, 1995, 

to Hon. Don Young........................................................................................ 143 
CRUDE OIL EXPORTS 

TUESDAY, MAY 9, 1995 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON RESOURCES, 

Washington, DC. 

The committee met, pursuant to call, at 11:08 a.m. in room 1334, 

Longworth House Office Building, Hon. Don Young (chairman of 

the committee) presiding. 

STATEMENT OF HON. DON YOUNG, A U.S. REPRESENTATIVE 

FROM ALASKA, AND CHAIRMAN, COMMITIEE ON RESOURCES 

The CHAIRMAN. The committee will come to order. 

The committee today will hear testimony on H.R. 70, a bill to lift 

the Alaskan oil export ban. I will briefly go over the history of the 

ban for those who may not be familiar. 

Export restrictions were first enacted during the 1973 Israeli war 

and the first Arab oil boycott. Following the second major oil shock 

in 1979 the restrictions were further tightened, effectively imposing 

a ban on exports. Since then much has changed. Over half of our 

imports now come from the western hemisphere and Europe. Canada and Mexico are among the largest suppliers. 

Fortunately, we are less dependent on the Middle East and Africa than we were in the 1970's. Today U.S. oil supplies are ample 

and are more diversified. In short, our Nation is no longer vulnerable to the supply threats like we were in the 1970's. 

While we have taken steps necessary to reduce our vulnerability 

to others, we have done nothing to encourage domestic energy production. In fact, production on the North Slope has now entered a 

period of sustained decline. In California small, independent producers have been forced to abandon wells or defer further investments. By precluding the market from operating normally, the export ban has discouraged production. H.R. 70 is intended to change 

that situation. H.R. 70 would require the use of U.S. flag vessels. 

Past legislation would have permitted exports on foreign flag vessels. Those bills never went anywhere because they would have led 

to the destruction of the independent U.S. flag tanker fleet that 

was built at considerable expense to move crude oil to market. 

Independent oil producers have now forged a common ground with 

the maritime industry. 

Alaska is the only State that is subject to such a ban. The 1.6 

million barrels of oil transported through the Trans-Alaska Pipeline is forced into the Lower 48 market, creating artificially low 

prices on the West coast. Dumping all this oil on the market has 

depressed the price of crude oil in California by as much as $3 a 

(1) 
2 

barrel, savings which refiners have unfortunately not passed on to 

the consumers. And let me restate that. Dumping all this oil on the 

market has depressed the price of crude oil in California by as 

much as $3 a barrel, a savings which the refineries have unfortunately not passed on to the consumers. The result has discouraged 

exploration development in California and Alaska. 

The Department of Energy completed a study of the export ban 

of June 1994. DOE concluded that lifting the ban would add $180 

million in tax revenue to the U.S. Treasury, create 25,000 jobs by 

the year 2000, protect maritime jobs, and increase the U.S. oil production by as much as 110,000 barrels a day. The DOE study has 

found that lifting the ban would not significantly impact gas prices 

in California. The ban no longer makes sense. Rather than increasing our dependence on foreign oil, it has decreased domestic production and 

made us more reliant on imported oil. H.R. 70 will allow the market to determine the price and buyer of crude oil. The Trans-Alaska 

Pipeline will supply the West coast with crude because it is the 

closest market. The excess that creates a glut would be sold overseas, and the market will take over. 

[The bill, H.R. 70, may be found at end of hearing.] 

The CHAIRMAN. I want to thank the witnesses for being here 

today and look forward to hearing their testimony. 

Does the ranking member, Mr. Miller, have an opening statement? 

Mr. MILLER. I don't, Mr. Chairman. Thank you. The CHAIRMAN. Does any other member have an opening statement at this time? 

Mr. MILLER. I would like to submit a statement by Congressman 

Vento for the record. 

The CHAIRMAN. Without objection, so ordered. 

[The statement of Mr. Vento follows:] 

STATEMENT OF HON. BRUCE F. VENTO, A U.S. REPRESENTATIVE FHOM MINNESOTA 

AB you know, one of the most important compromises in seeming congressional authorization of the construction of the Alaska Pipeline in 1973 was the promise 

that Alaskan oil would be used only in the United States and never be exported. The basis for that promise was that 1f we are going to sacrifice the Alaskan environment for oil production, all of the oil ought to be used for U.S. domestic consumption. 

Even with that compromise, the Senate was deadlocked at 50-50 and t.'len Vice 

President Spiro Agnew was the decidin~ vote in favor of authorization of the TransAlaska Pipeline. The sacrifice of Alaska s environment in the Arctic and Prince William Sound was not authorized by Congress just to make money for the State of 

Alaska and British Petroleum, but for the national security and energy independ- ence of the {>eople of the United States. At that time, Senator Stevens of Alaska said that "the question should be an- swered by an absolute prohibition of export of North Slope oil to any foreign nation," 

and that, "the bill should categorically prohibit the export of North Slope oil." (CR, 

July 9, 1993) 

That was the view then, and it should be borne in mind today. 

AB the sponsor of the bill to protect the Arctic National Wildlife Refuge as wilder- ness, I see this effort to change the law regarding the export of Alaskan oil to the 

Far East as yet another way to promote the oil and gas development of the Coastal 

Plain of the Arctic Refuge. Lifting the ban, increasing production, depleting known reserves more rapidly, improving marginal economics, responding to an ABian demand and encouraging ABian investment on the North Slope all increase the development pressure on the Arctic National Wildlife Refuge-short tlmn gain for long 

term despoiling of this fragile plan. As long as the Arctic Refuge Coastal Plain is 
3 

not permanently protected as wilderness, lifting the ban on the export of Alaskan 

oil is a high risk option for those of us committed to the long-term protection of this 

special place. 

There are many other environmental reasons to keep the ban in place that stand on their own: Lifting the export ban will allow oil companies to skirt the requirement in the Oil 

Pollution Act of 1990 of replacing older tankers with new double-hulled tankers for 

the Alaskan oil trade. It has been a little over six years since the Exxon Valdez spill, 

but memories are not so short that the American people will be comfortable with 

single-hulled foreign-built tankers sailing through the rich fisheries and rough seas of Alaska on their way to Asia. New double-hulled tankers will not be ordered for 

U.S. trade if there is the possibility of exporting oil on larger foreign-built vessels. 

If the tanker for Asian trade turn out to be "U.S. flagged" (U.S. crews), but not U.S.-

built (Jones Act vessels), then it will be longer before the complete fleet is doublehulled. This will save millions for British Petroleum, but increase the risk of mas- sive oil spills like the Exxon Valdez. 

Because of changed tanker routes, lifting the oil ban also increases the risk of 

chronic or catastrophic oil spills in the rich fisheries of the Aleutian chain, Kodiak 

Island, the Alaska Maritime National Wildlife Refuge and the Bering Sea. The Arctic Circle is under enormous development stress. We are just now learning of the 

Russian spill in the Komi region where 35 million gallons of oil spilled from a pipe- line near Usink-three times the amount of the Exxon Valdez spill. In addition, environmental and safety problems plaguing the Trans-Alaska Pipeline are legion. More than ten-thousand safety and electrical violations on the Alaska Pipeline have been identified, many of them serious. The ballast treatment facility at Valdez is currently inadequate to handle the tankers that call on it now, and 

larger tankers for foreign trade would be likely if the ban is lifted. Alyeska, the con- sortium of oil companies running the Pipeline, is also currently petitioning for a twelve-year extensiOn in meeting air-pollution standards at the Valdez terminal, 

which accounts annually for 45,000 tons of cancer-causing benzine. We shouldn't even consider an increased flow throughout the Pipeline or rewarding British Petroleum with increased marketability and profits until these questions and serious 

problems are addressed. 

The Department of Energy made only a cursory review of some of these problems. 

Its two-page summary of environmental considerations involved with lifting the ban 

is inadequate, and unsupported by factual substantiation or analysis. 

The Department of Energy's economic arguments in favor of lifting the ban are similarly unsubstantiated and rest on questionable assumptions. Lifting the oil ex- port ban would mean additional oil imports into the U.S.-not increased California 

production, as the Department of Ene~ would have us believe. Because West 

Coast refineries aren't set up to refine California's heavier oil, the Alaska oil shortfall would be made up by imports from Indonesia or Saudi Arabia, meaning more and larger foreign-flagged tankers calling on West Coast ports. This Committee and Conrp-ess in the past decades did very careful work in evaluating such ])roposals. In se1te of Chairman Young's support, I would hope that the 

standard of excellence, dehberation and consideration remains the hallmark of such 

issues, not the rush to judgment dictated by budget considerations. A fiscal debt is 

bad enough. An environmental deficit is yet worse. Only two things are absolutely certain if the ban is lifted: British Petroleum and 

the State of Alaska will gain new revenue and profit. But at whose expense? What 

will be the natural resource cost? This is a classic case of trying to fix something 

that simply isn't broken. The system has worked well the last twenty-two years. There is no reason good enough to break faith with the American people and to promote prosperity for a few at the expense of the many. 

Many speculate a few more dollars if the oil is exported, but what of the 1970 

promises and who ~.11 answer when a new energy crisis arises and our domestic 

energy security is pled~ed abroad. Will we be stumbling over one another to give short shrift to the sanctity of trade contracts? 

Mr. DOOLEY. Mr. Chairman, I ask unanimous consent to submit 

a statement for the record also. 

The CHAIRMAN. Yes, without objection, so ordered. 

[The statement of Mr. Dooley follows:] 

STATEMENT OF HON. CAL DOOLEY, A U.S. REPRESENTATIVE FROM CALIFORNIA 

Mr. Chairman, I was pleased to join you, Mr. Thomas, other Members of the California Delegation, and the Chairman of the Ways and Means Committee on the 
4 

opening day of the 104th Congress as an original cosponsor ofH.R. 70. As you know, 

I have been a strong advocate for lifting the export restrictions on Alaskan North 

Slope oil since I was elected to Congress. Although the current law may have made a great deal of sense in 1973, like many other laws, it is now having the 

unintentioned consequences of reduced domestic oil production resulting in the loss 

of jobs. We therefore should repeal the ban and authorize exports of Alaskan North 

Slope oil carried in U.S.-flag vessels. As Mr. Jerry Hoffman will testify on behalf of the independent producers who 

make up a vital element of the industry in California and also provide many well 

paying jobs in my Congressional District, the current export law forces oil from the 

number-one producing state into the number-three producing state in the country. 

By creating this artificial glut, the law continues to depress California heavy crude 

production. Though no one in 1973 would have predicted that the original export 

restrictions would force job losses throughout my state, today independent producers are forced to bear the pain of that unintended consequence. Our independent oil producers state a compelling case. Like them, I was pleased 

that the Department of Energy similarly concluded last year that the export ban was depressing production and, if lifted, would benefit California and the nation as a whole. The Department of Energy's comprehensive June 1994 study provides a strong factual basis for the Committee to conclude that exporting Alaskan oil would 

be in the national interest. I look forward in particular to the testimony of Deputy 

Secretary White, who I believe will amplify some of his Department's findings. 

Among others, the following are particularly striking: 

1. Production will increase by at least 100,000 barrels per day; 

2.Up to 25,000 jobs will be created as a result of increased investments; 

3. State and Federal revenues will increase by hundreds of millions of dollars; and 

4. These benefits can be achieved with little, if any, effect on consumer prices on the West Coast. When Congress enacted the Trans-Alaska Pipeline System (TAPS) legislation in 

1973 it did not ban exports. Rather, it recognized that exports might someday be 

in the national interest. As the Department of Energy's study demonstrated, that 

day has arrived. 

We now have an opportunity to spur additional energy production and create jobs. 

With oil imports now constituting over 50% of our domestic consumption, we must 

do something to increase energy production in this country. I believe the enactment 

of H.R. 70 will accomplish that goal. Mr. Chairman, I look forward to working with you, as well as ull the cosponsors 

from the Committee, to move H.R. 70 as quickly as possible. 

Thank you. 

The CHAIRMAN. Anyone else? 

In that case, we will have the first witness, Mr. White. Being 

that Mr. Thomas is not here Mr. White, Deputy Secretary, Department of Energy, will be the first witness today. Mr. White, welcome to the committee. 

STATEMENT OF WILLIAM H. WHITE, DEPUTY SECRETARY, U.S. 

DEPARTMENT OF ENERGY 

Mr. WHITE. It is good to be here, Mr. Chairman. 

I will not repeat the detailed points made in any statement 

which I will submit for the record. 

Our support for this approach to relaxing the ban on exports in 

Alaska arises from several principal reasons. First, and by far and 

away the most important, is we have gotten to a point in the United States where we need to do what we can to increase the productive capacity of American oil wells, and to the extent that this ban 

has created pricing for both Alaska and California producers that 

is below the pricing that would occur in a free market, then there 

needs to be that free market price incentive in order for us to 

produce oil that is there in the ground that would not be produced 

if prices were artificially suppressed. It is as simple as that. 
5 

Right now our dependence on imports is growing every quarter 

practically. The growth in the imports for the world in the next 15 

years is going to come from OPEC and the Persian Gulf members 

of OPEC in particular, and so our country needs to consider ways 

that we can give incentives to increase its domestic production. 

A quarter of our domestic production comes from the North Slope 

of Alaska. That doesn't just provide jobs for Alaska and Alaskans, 

but it reduces the trade deficit of the United States and therefore 

has an impact on the overall issues of the strength of the dollar, 

and it provides jobs for those American companies who support the 

production of that oil, the service companies that are located in different parts of the United States. 

The more oil that we can produce at any particular time, then 

the more oil that we will have available to us if there was a supply 

disruption because even if the oil can be exported the approach endorsed by the administration, which this bill and the Senate bill 

preserve, allows the President to say that the oil must stay here 

in case of an emergency. So if we are able to produce an additional 

50,000 to 100,000 barrels of oil in California and Alaska if we increase that productive capability, that will be a capability that will 

be a resource for the United States in case there is a supply disruption. 

There should be no impact on consumers. The gasoline market 

is about as competitive a market as you could imagine. Gasoline is 

shipped all over the United States. Actually, gasoline prices on the 

west coast have been higher than they are in other regions in the 

United States even at a time when the refiners' acquisition cost is 

lower. 

So it makes some sense that in a competitive market where there 

are many different sources of supply on the west coast other than 

Alaska it should be no impact on consumer prices. Any firm that 

had access to non-Alaskan crude could try to expand their market 

share if people started jacking up their price of gasoline. It is that 

simple. 

Finally, I'll note a little bit about its effect on some other industries, the shipbuilding industry and the shipping industry and the 

merchant marine industry, and employment in that industry. We 

know how important these particular cargoes are for the seafarers 

of the United States. They take a big chunk of their employment 

in trying to transport this oil. What is important for the long run 

health of the shipping industry and seafaring trades is that relatively more of this oil is produced than is shipped. The more oil 

that is produced and shipped, then the more sustainable that employment and that shipbuilding industry will be, and one way to 

ensure that relatively more of it is shipped is to make sure that 

the prices are not artificially suppressed so that the people who 

have in the past invested billions of dollars for enhanced recovery 

of this oil do so in the future and increase that investment in the 

future. 

Thank you, Mr. Chairman. 

[The statement of Mr. White may be found at end of hearing.] 

The CHAIRMAN. Thank you, Mr. White. 

Does the ranking member have any questions? 

Mr. MILLER. Yes, I do, Mr. Chairman. 
6 

The CHAIRMAN. Then I'll ask mine. 

Mr. MILLER. Mr. White, let me ask you, in terms of your studies 

and the changes that we have recently seen in the price of oil on 

the west coast and the differentials that have more or less disappeared between those crudes, how does that impact your study 

now? 

Mr. WHITE. It really doesn't impact the conclusion that the consumers would not be hurt. That is, that simply illustrates the fact 

that refiners' margins can be determined by factors other than simply the acquisition cost of crude oil. 

Mr. MILLER. Does it change any of our assumptions with respect 

to job creation? You have seen the increase in the Central Valley 

crude. 

Mr. WHITE. I don't believe so. The only way that it-any changes 

in the refiners' profit margins-would change any conclusion is if 

it affected the economics of a particular independent refiner, and 

at least in the past the independent refiners have had sufficient 

profit margins to stay open and do very well. I have not followed 

on a monthly basis or quarterly basis the profits of any independent refiner, although I did see one independent refiner who I think 

has a representative testifying here today. Their stock is at a 

record high. 

My point simply is, I don't think that this alone will affect the 

opening or closing of an independent refiner. 

Mr. MILLER. What happens if you turn out to be wrong, if we do 

this and then there are indications that that may in fact turn out 

not to be true? 

Mr. WHITE. As you can see from the testimony, which, as you 

know, we have discussed with your office, if there was a situation 

in which there was some anticompetitive behavior, some behavior 

which would force oil prices well above the world market prices of 

oil and try to squeeze an independent refiner out for some anticompetitive purpose, then that is something that we think there 

ought to be authorities that would permit the ban to go back into 

effect as another remedy. 

Mr. MILLER. Are you comfortable that that authority is now in 

the legislation? 

Mr. WHITE. No. 

Mr. MILLER. So that is for this committee to deal with? 

Mr. WHITE. Yes. We have recommended that there be some provision in here that would permit the export ban to be reinstated 

if there was some anticompetitive type behavior that would raise 

the acquisition costs well above what would occur in a competitive 

marketplace. 

Mr. MILLER. What about making sure that those refineries that 

are dependent basically on this oil have access to that oil as they 

have historically had? I'm not talking about the price of the oil, but 

I'm talking about access to the volume of oil. 

Mr. WHITE. We don't support the idea that a refiner should have 

a particular entitlement to the oil. I can see the appeal of that to 

an independent refiner, I'll be candid, and this country did have an 

entitlement system some 20 years ago that gave people rights to 

various categories of oil, but we don't think that there should be 

any entitlement to the oil as such. 
7 

Mr. MILLER. Axe you suggesting that those independents can 

then just flip over and process the California crude? 

Mr. WHITE. Or they could purchase crude at world oil prices. 

Mr. MILLER. I'm not talking about pricing, I'm talking about access. 

Mr. WHITE. Yes. There is nothing in this bill that would prevent 

a North Slope producer from selling to an independent refiner at 

world prices. 

Mr. MILLER. I understand that. There is nothing that prevents 

them not selling it, too. 

Mr. WHITE. Yes. In the normal market, whether it be in the Gulf 

of Mexico or the Pacific Northwest or the northeast part of the 

United States, refiners, you know, fend for themselves in the market to acquire their supply of crude oil. 

Mr. MILLER. One of the things we have learned about the oil 

market is the words "normal market" don't usually go together in 

describing it. We have had all of the great predictions over the last 

20 years about what was going to happen, and most of them turned 

out to be somewhat wrong. You have too, I think in Washington 

and certainly in my district, we find refiners that are fairly dependent upon this source of oil. Those refineries are operating. The 

question is, do they operate if they have to make substantial investment-if they lose the access to that oil, can they make that 

investment, and I just think there ought to be some contingencies 

for those events. 

Mr. WHITE. Normally, whether it be an independent refiner in 

the Pacific Northwest or anywhere else, they ought to be able to 

buy and have been able to buy oil at world market prices. The oil 

market, as you noted, is an unusual market, and the reason why 

the forecasts tend to be most wrong is the fact that price increases 

never occur as projected. 

Mr. MILLER. But that has also been based upon what has been 

perceived as-and I'll finish with this, Mr. Chairman-perceived as 

a glut, and obviously with prices hardening on the west coast some 

glut is disappearing because even the price of oil that is not preferable is hardening up, and in fact at some point as that disappears that market is going to change. So when you say normally 

in the past they have always been available, we are talking about 

what happens in the future when you change this set of circumstances, and I'm just asking whether or not we have walked 

through that kind of consideration. I'm not asking you not to do 

this or what-have-you, I'm asking before we make that decision, 

have we walked through those kinds of considerations, because 

often in this market looking at the past didn't tell you a hell of a 

lot about the future either in terms of supply or price or investment or source. 

Mr. WHITE. Well, I understand your point that it will be hard to 

predict-and harder to predict-where the particular source of supply for an independent refiner in the northwest might be when 

there is no glut on ANS crude oil, and we did consider very carefully whether or not there would be any reason why an independent refiner could not buy on the world market supplies of crude oil 

at prevailing prices, and we concluded that there was no reason 

why an independent refiner could not acquire crude oil at prevail-
8 

ing world market prices, except the only plausible scenario would 

be that if there was some kind of conspiracy in restraint of trade 

or monopolization on the part of some of the refiners to try to drive 

that company out of business. 

Mr. MILLER. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Miller. 

Mr. White, in your statement I think you have already clarified 

it, but could we reduce our net dependence on imports by adopting 

measures such as this? I know some people who have listened to 

this-we want to export oil, but they say if we want to export oil, 

we will have more dependency. What will be the result if we are 

given the ability to export oil? 

Mr. WHITE. The net effect would be to reduce our net dependence, net being the difference between, you know, what we import 

and what we export, because we would be producing more oil, then 

the balance of payments associated with the importation of oil 

would go down. 

The CHAIRMAN. The other question I have here is, you made 

mention in your statement of the maritime industry. It is my understanding that this legislation-that it will be American crewed, 

American-built ships, and any future ships built will be American 

crewed too, for this product. 

Mr. WHITE. Yes, I know there would be American crewed and 

there would be American flagships, and I believe that it is the expectation of all involved, based on contractual arrangements, that 

it is going to be American built. 

The CHAIRMAN. The question will come up later about repair work. Has that been considered in your report? 

Mr. WHITE. Yes. 

The CHAIRMAN. Because some of them fear that the work would 

be done overseas wherever they are exporting oil. Is there a possibility-that will be our responsibility-there would be support for 

any repair work to be done in American ports too? 

Mr. WHITE. Well, our analysis of that is that there would be a 

strong economic reason why that work would stay in American 

ports given both the cost of transporting one of these tankers as a 

deadhead and given that the cost of transporting just for the purpose of repair, and also when you consider some of the tariffs that 

are still applicable it still makes sense to use American yards. 

The CHAIRMAN. I know there will be some people opposing this 

legislation for that specific reason, they do not believe the repair 

work will be done in American yards: When they empty their oil, 

if there is any repair work to be done it will be done in a foreign, 

Korean yard or a Japanese yard, and somehow we are going to 

have to work around and relieve their anxiety over that because I 

think it should be done here. 

Last year the President told us he wanted the Nation to enjoy 

the benefits of exporting Alaskan oil as long as potential international trade problems were addressed. Is the administration satisfied that the U.S. flag requirement in our bill does not violate 

international trade obligations? 

Mr. WHITE. Yes. 
9 

The CHAIRMAN. And that is important because there have been 

some people from outside this arena that believe that this does violate it, and I'm glad to hear you say that. 

Mr. Gilchrest, do you have some questions? 

Mr. GILCHREST. Just a couple, Mr. Chairman. Thank you. The $180 million in tax revenue, is that total or on an annual 

basis that we get from the export of North Slope oil? 

Mr. WHITE. I believe that would be on a five-year basis. ·Mr. GILCHREST. Five-year basis? 

Mr. WHITE. Yes. 

Mr. GILCHREST. We couldn't use that as observers on fishing fleet 

vessels for NMFS, could we? 

The CHAIRMAN. If you will help me, we will do it, OK? 

Mr. GILCHREST. OK It is something to look at. 

This is sort of an indirect question to this particular bill, but 

since you work for the Department of Energy, is there any estimate 

as to the amount of oil that is left in the existing wells at the North 

Slope, the number of years of supply there, and is there any estimate at all in any way as to the number of years left for oil reserves in the world? 

Mr. WHITE. Yes. The first point I'll make concerning the North 

Slope, and it is a very important point concerning the North Slope. 

The original estimate of the recovery of oil from the North Slope, 

as the chairman well knows, is about 9 billion barrels. Because of 

enhanced technology, they have been able to increase that to, I believe it is about 12 or 13 billion barrels. 

The ability to recover that oil up there on the North Slope depends in large part on the economics of injecting various substances in order to push more of the oil that is there and make it 

more recoverable. They have been achieving fantastic recoveries up 

there, and they are estimating now-and staff can correct me-five 

or six billion barrels of estimated recoverable reserves left. 

Mr. GILCHREST. How many years would that be? 

Mr. WHITE. Right now the projections are that the economic limit 

is reached sometime between the year 2000, 2010. In part that depends on things like we are talking right now, what is the price 

of oil at the time. 

Mr. GILCHREST. So looking at probably under 10 years that the 

North Slope, the existing wells, will be tapped? Round figures. 

Mr. WHITE. That is what people in the industry say, but that is 

based on flat current pricing, and if prices go up that changes. 

Mr. GILCHREST. So that means it could be accelerated. 

Mr. WHITE. It means it could be accelerated; it also means that 

the field's life could be longer. 

Mr. GILCHREST. This is a much more difficult question, and I'm 

sure there is a wide range of perspectives on this, but how much 

more time do people have to use oil? Is it 50 years, 100 years, could 

it be 200 years, and is there any plan, or at least in the beginning 

stages, in the Department of Energy or anywhere else to look at 

the point in time when we will, like it or not, have to look for alternative fuels? 

Mr. WHITE. Yes, sir, that is an excellent question, and on the 

predictions I'll say this, that every prediction over the last 100 

years about that has always said-they always say the same 
10 

thing-that in 20 or 30 years we are going to be through. Actually, 

in World War I they thought it was more like 10 years to go with 

our oil production. 

Mr. GILCHREST. But at the level of technology that we have 

today, is that a question that can be asked? 

Mr. WHITE. It is, and one could probably say with confidence that 

there will be a point that occurs in the next 30, 40, 50 years when 

the world will be turning a lot more to alternative fuels for the 

automobile fleet, and that is what really powers demand for oil, 

and we will have to do that because of environmental issues, and 

one of the most likely alternative fuels-there are many different 

ones, but one is natural gas; there are also biofuels. We have a 

much longer supply of resource base in natural gas in the United 

States than we do oil. 

Mr. GILCHREST. So do you envision some day natural gas being 

used to fuel most combustion engines as opposed to gasoline? Is 

there any work being done with piston technology to enable that 

to accommodate things like soybean oil, linseed oil, ethanoi, methanol, things of that nature? 

Mr. WHITE. Yes, there is. There is a lot of that work in our budget, and we have brought the cost of all sorts of biofuels down very 

dramatically. It is not only the engines but it is the characteristics 

of the combustion of those fuels, and it is also just what the efficiency of the fuel crops is. We are doing a lot of work in crops. 

Mr. GILCHREST. You say you are doing a lot of work. Does that 

mean the Department of Energy or the Department of Energy with 

the private sector? Is there anybody out there doing that, other 

than the Government? 

Mr. WHITE. Department of Energy and the private sector and a 

number of private sector firms. For example, I'll furnish you some 

information concerning a large joint venture we have with Amoco 

in biofuels. 

[The following was submitted:] 

JOINT VENTURE WITH AMOCO 

Amoco Corporation is investing up to $25 million, with the Department of Energy 

contributing up to $4.3 million, in a cooperative research and development agreement to convert waste products into ethanol for immediate applications. Under the 

auspices of this agreement, Amoco is the first user of the new biomass-to-ethanol, 

one-ton per day process development unit, located at the National Renewable Energy Laboratory in Golden, Colorado. On a cost-shared basis, this pilot plant allows 

concepts to be evaluated on the economic and the technical feasibility of using the 

enzymatic hydrolysis conversion process to produce ethanol from various feedstocks, 

including agricultural wastes, municipal solid waste, and dedicated energy crops. 

This biofuels conversion process has been under development by DOE since the 

early 1980s. A recent oreakthrough with a genetically engineered organism, 

Zymomonas mobilis, that converts different types of sugar substrates to ethanol, 

should help make this technology more economically viable. Amoco is evaluating a number of potential feedstocks, including rice straw wastes from Sacramento Valley of California. 

Mr. GILCHREST. Could I ask just one more question? I'm almost 

out of time. The North Slope-and we begin to export, and I understand the information we have been given here this morning, the 

positive aspects of that-how will the oil, if it is going to be exported, will it continue to go down the pipeline? Will tankers come 

into the North Slope and pick it up? 
11 

Mr. WHITE. It will go down the pipeline, and in all likelihood it 

will either be transported to Japan or continue to be transported 

to the west coast, only it will not be transported to the west coast 

at a steep discount from world prices. 

Mr. GILCHREST. I see. Thank you very much. 

If we can get a few more observers on those fishing fleets. 

The CHAIR.MA..>if. You have got my attention. 

Mr. GILCHREST. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Gilchrest. 

Mr. Kildee. 

Mr. KILDEE. Thank you, Mr. Chairman. 

Going back to the question raised by Mr. Miller, what objective 

criteria should be used to determine if there is the development of 

an anticompetitive element on the west coast? 

Mr. WHITE. I would say many of the criteria that are developed 

in antitrust analysis, and that could include indicators of the concentration in the market and looking at the conduct of the firms 

and seeing where that conduct in the patterns of pricing are predicted by normal competitive considerations or something else. 

Mr. KILDEE. Should we include those criteria in the bill then, at 

least the outline of some criteria? 

Mr. WHITE. I think when we refer to anticompetitive, now I'm 

stepping a little bit into the realm of a draftsman, but when we 

talk about anticompetitive, or something along those lines, then we 

have the richness of the antitrust laws that could be more or less 

incorporated by analysis. So much depends on the circumstances in 

trying to infer anticompetitive acts that in the past efforts to sort 

of write detailed antitrust criteria into law have been very difficult. 

Mr. K.ILDEE. Could we refer just by reference to the antitrust 

laws? 

Mr. WHITE. That is an idea. 

Mr. KILDEE. Another question, Mr. Chairman. 

You mentioned that the administration's feelings would be that 

there be no violation of international trade laws for Americanflagged vessels. Would there be a possible violation of American requirement-requirement for American-built vessels? 

Mr. WHITE. I have got to tell you, I'm not an expert in international law so I'm relying very heavily on the opinion expressed 

by Ambassador Kanto in his letter to Senator Johnston on this. It 

is my understanding that there would be much more serious international trade implications if there were an American-built requirement as such. 

Mr. KILDEE. That could be appealed under GAIT to the World 

Trade Organization then. 

Mr. WHITE. I believe that is the case, but I really don't want to 

venture too many opinions on exactly what the legal proceeding 

would be. I know that there would be much greater risk. 

Mr. KlLDEE. But there is much less risk, and you feel little risk, 

if we just say American-flagged ships. 

Mr. WHITE. Yes, sir. 

Mr. K:lLDEE. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Calvert of California. 

Mr. CALVERT. I have no questions, Mr. Chairman. 
12 

The CHAIRMAN. Thank you. 

My good friend from American Samoa, the great chief, fine leader. 

Mr. F ALEOMA V AEGA. Small chief, Mr. Chairman. 

I have a couple of questions. I wanted to know why the Congress 

was so discriminating against Alaska to specifically disallow Alaska from exporting. Do I take it that the other States, exporting 

States, do not have this same restriction that Alaska has? 

Mr. WHITE. Not like this. I think there are some permitting restrictions on oil export that are applicable to some in California, 

but they are not anything like this. 

Mr. FALEOMAVAEGA. I'm surprised that there is such unfairness 

in the way we treat Alaska if that is the case. 

Alaska was formerly a territory, and we do have a real sense of 

closeness when it comes to those issues, Mr. Chairman. 

You know, the good Senator from Hawaii had proposed that the 

State of Hawaii establish a petroleum reserve for the obvious reason: Not only do we have a very strong national interest in our 

strategic and military situation in Hawaii but the fad that the oil 

is totally imported for the needs of Hawaii as well as other flag territories in the Pacific; and in our efforts to try to propose this idea 

we keep getting opposition, and I want to ask Mr. White if disallowing or allowing Alaska to do this thing will also give an opportunity for the State of Hawaii or for the Federal Government to establish a national petroleum reserve similar to what we have in 

California. I mean why are we not allowing this-allowing the 

State of Hawaii to have a similar privilege? 

Mr. WHITE. Well, we, I think, had some very constructive conversations with Senator Akaka on this and did work with him on 

some language concerning the-a study about this. I'll tell you candidly what the concern is, and that is simply the concern of the cost 

of an additional storage facility. Currently our storage facilities are 

in salt domes on the gulf coast, and it is not the cheapest thing in 

the world, but it is relatively cheap to store large volumes of oil 

there in salt domes. Mr. FALEOMAVAEGA. Are you saying, Mr. White, that the cost factors in the state of a national emergency-that if we don't have in 

the State of Hawaii to respond in terms of our strategic and military interests, for that reason alone we cannot establish a reserve 

petroleum facility in that State? 

Mr. WHITE. No. I think if it were cost alone I share your views, 

but then you would have to say OK, does the President have the 

authorities or do we have the authorities to shift oil within the 

United States if there was an emergency, and that is something 

that obviously we think needs to be addressed. 

The question I was talking about is just the storage. I mean as 

it is right now, Hawaii does not refine the oil that is stored in Hawaii. Some of it comes from Indonesia, it comes from the United 

States, it can come from other places, and our principal concern 

would be that the people of the United States have enough oil, and 

then allocating within the United States, we ought to do that on 

a fair basis. 

Mr. FALEOMAVAEGA. I understand that was the initial concern 

why we made that restriction to the State of Alaska. Do you think 
13 

it is possible that the State of Alaska can export some of this oil 

to Hawaii to establish this reserved petroleum facility if we have 

the capacity to meet our domestic needs? 

Mr. WHITE. I think yes-well, not as a condition, but I'll tell you 

what we have been talking to Senator Akaka about. 

Mr. FALEOMAVAEGA. My good friend from Hawaii is right here. 

I know he is very familiar with the case. 

Mr. ABERCROMBIE. Mr. Chairman, he is getting the right hook. 

The left one is coming up. 

Mr. WHITE. We want to make sure that Hawaii has access to the 

oil from the strategic petroleum reserves in the case there would 

be some actual physical shortage at a given price, and that is a 

way that we want to work with you and others to address that, to 

ensure that. 

Mr. FALEOMAVAEGA. I have got a problem with this, Mr. White, 

because my understanding is that the only refinery facility or company that now operates out of the State of Hawaii is owned by a 

foreign company. 

Mr. WHITE. BHP. 

Mr. FALEOMAVAEGA. That is right, and the current ownership, we 

have no domestic or American oil refinery presence in the State of 

Hawaii. Is that an added complication to the problem, or do we 

have other competing oil interests that do not want the State of 

Hawaii to have a reserve petroleum facility? 

Mr. WHITE. I believe that Chevron also has oil refining capacity 

there, and I'll furnish you with our exact information, and I can assure you that the only consideration that we are looking at in this 

is just what the relative cost could be compared to the benefit of, 

for example, allowing the President in the case of a true emergency 

to suspend the relaxation of the ban on exportation of Alaskan oil. 

[The following was submitted:] 

REFINERIES IN HAWAII 

There are two refineries operating in Hawaii. The foreign-owned one is Broken 

Hill Proprietary Limited (BHP) and the American oil refinery is Chevron. AB of January 1, 1995, BHP has a crude oil distillation capacity of 93,500 barrels per day; 

Chevron, which is located in Honolulu, has a current crude oil distillation capacity 

of 54,000 barrels per day. 

Mr. FALEOMAVAEGA. Mr. White, I just want to say that the lives 

of 1.2 million Americans living in that State tells me that it is in 

a dire state of emergency and we should hope that the administra- tion as well as Federal Government will seriously look into this, 

not just look into the cost factors but the cost of lives of Americans 

if we do end up in the state of a national emergency and we don't 

have enough oil to provide for that need. I mean I'm totally at a 

loss on this. 

Mr. Chairman, I also want to state that I want to put my name 

as an added cosponsor of this legislation. The CHAIRMAN. Thank you. I appreciate that. 

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Cooley I think is up next. 

Mr. COOLEY. Thank you, Mr. Chairman. 

I would like to have one clarification on this proposed legislation. 

In reading through this, I see that certain countries that have bilateral agreements to ship U.S. crude subject to-to do it without 
14 

U.S. flag transportation requirements. Can you tell me, other than 

Israel, any other countries that have that ability under this legislation? I'm just curious how many of those countries are in the world 

that have a bilateral agreement with us. 

Mr. WHITE. No. I know that Israel is one. I do not know that information, but I will supply it for the record. 

Mr. COOLEY. Do you know if it is many or one or 30 or 40, or 

do you have any idea how many is involved in that? 

Mr. WHITE. I believe it is a very small group of nations, and the 

only one that I know of is Israel, but to tell you the truth, I don't 

have that information right in front of me and I will supply that 

information to you. 

Mr. COOLEY. OK. I appreciate that. 

Thank you, Mr. Chairman. 

[The information follows:] 

BILATERAL INTERNATIONAL OIL SUPPLY AGREEMENTS 

The reference to bilateral international oil supply agreements applies only to the 

United States-Israel oil supply agreement. Last year the parties extended this 

agreement for an additional ten-year term. 

The CHAIRMAN. Thank you, Mr. Cooley. 

The gentleman from Hawaii. 

Mr. ABERCROMBIE. Mr. Chairman, just by way of brief preamble, 

Hawaii and Alaska and the territories outside the continental United States-the Lower 48, I guess, depending on how you look at 

it-have unique circumstances, and obviously we are depending on 

you to take that into account as we try to with Alaska, and in that 

respect, Mr. White, I'm a little disturbed that in all of your discussion, aside from that which my good friend from American Samoa 

has brought up, apparently the middle of the Pacific doesn't exist. 

You talk about the west coast, you talk about Alaska, you don't 

talk about Hawaii. You say-I think I'm quoting you directly- there should be no impact on consumers. I would like to be for this 

bill. I'm in favor of the merchant marine, I would like to see American shipping, I want to see American seafarers back in action, but 

I don't want to see Hawaii hurt in the process. 

Mr. WHITE. I understand. 

Mr. ABERCROMBIE. It is not fair. It is a question of fairness. 

I'm told, and my information is that the prices will go up. I'm 

sure you are already well aware that we have the highest gasoline 

prices in the United States. I'm assuming you are familiar with 

that. 

Mr. WHITE. Yes. 

Mr. ABERCROMBIE. Now I find it passing strange that we would 

be passing legislation that would actually increase the cost of gasoline in the State of Hawaii and if that in fact is the case, and I 

would like to hear your comment on it, and I would also like to 

hear your comment on what the effect not so much of the strategic 

reserve might or might not be-l think that has been covered in 

the previous question-but what the changes are going to be just 

for military alone, because the refineries there are Chevron and 

BHP, and we have got the military presence; the forward basing 

in the United States is in Hawaii. So what is going to be the impact if this legislation passes as is? 
15 

Mr. WHITE. Well, we have done some analysis of what the impact 

would be, both what the inputs to those refineries are today and 

what it would be if they had no access to the Alaska North Slope 

oil. AB you know, there are two refineries there. Most of the crude 

that is refined by those refineries does not come from Alaska, and 

they are dealing in the Pacific Rim market for crude oil. 

Now the acquisition cost-if the price rises, then the acquisition 

cost of Alaskan North Slope oil for those refineries would increase. 

We have estimated that the-and I'll supply you with the source 

of the estimates-that before west coast prices and world prices became a little closer, as Mr. Miller had indicated, before that, we 

had indicated that there would be an average supply cost increase 

of about 2 cents per gallon into the refinery. 

Mr. ABERCROMBIE. You say most of it doesn't come. That is not 

the information I have. If you don't consider half, most or 30 to 60 

percent depending-Chevron is 30, 60 percent. BHP says 50 percent of the crude oil in the refinery comes from Alaska. The Hawaiian Electric Company is estimating up to $2 a barrel coming in. I 

ask you the simple question, are prices going to rise in Hawaii or 

not? 

Mr. WHITE. We don't think that there will be any discernible 

price rise. That is, we think it is 2 cents per gallon going into the 

refinery, and that was based upon the prices last year where there 

were a greater differential between world prices and ANS prices, 

and we believe that the refinery margins should absorb most, if not 

all, of that. 

Mr. ABERCROMBIE. You believe it should. Can you write into the 

legislation then or is the legislation providing in our estimation 

that-it says here-U.S. refineries must have continued access to 

adequate supplies of crude oil at prevailing market prices. So Hawaii is going to get into this prevailing market price. Mr. WHITE. Yes. 

Mr. ABERCROMBIE. And isn't one of the arguments being made 

that if the exporting is able to be done that prices will increase? 

Mr. WHITE. The prices for the Alaskan crude oil will increase, 

but the prevailing market price for crude oil in the Pacific Rim 

would not increase, as big as this oil production is, just one element 

of the overall oil supply in the region coming from the Persian Gulf 

and Indonesia and other nations. 

Mr. ABERCROMBIE. So can we be guaranteed that there is not 

going to be any price increase in Hawaii if this happens? 

Mr. WHITE. Well, there are no guarantees except by the laws of 

economics, and, with respect, you make a very interesting suggestion, but I'm trying to visualize how you would do that without 

some form of price controls, which have proved to be a failure in 

the past. 

The CHAIRMAN. The gentleman's time has expired. 

The good lady from Washington, Mrs. Smith. 

Mrs. SMITH. Thank you, Mr. Chairman. 

I was just trying to go quickly through your testimony, but I 

don't see anything on the economic impacts on shipbuilding in the 

Northwest or that industry at all although you address several 

other economic impacts. Can you address what you think will happen? You do say you are going to increase jobs overall. Have you 
16 

shown the net decrease on other things that aren't shown here to 

the Northwest? 

Mr. WHITE. Yes, we had an estimate of about 140 shipbuilding 

jobs being lost. I will say, however, that estimate was done before 

there were contractual arrangements reached with various of the 

shippers and shipbuilders. So there has been an analysis. There 

should not be, if these contractual arrangements that I understand 

have been made are in effect-and I've seen the paper-any net impact on the shipbuilding business. 

Now we have also analyzed this question of ship repairs, and 

right now, at least when you compare the relative transportation 

cost which favors the shipyards in the Pacific Northwest, and compare that to the labor cost which would favor more the Asian shipyards, it looks like the ship repair costs are still well within-you 

know, that repairs ought to be done in the United States, andremember that we are only talking about a very small, relatively 

small, fraction of that oil from Alaska that is in the surplus category. That is, last year there was only a couple of hundred thousand barrels of the Alaskan oil that was really surplus to the market, and that amount is projected to decrease in the future. 

So when you compare where we are now versus where we would 

be in this bill, it is not likely that it would be some major driver 

of either shipbuilding or repair in the Pacific Northwest. 

Mrs. SMITH. So your assumption is that the competitiveness of 

the base costs will still be there because there will be other shifts. 

In reference to the contracts, is that in writing? You were talking 

about other contractual agreements. Mr. WHITE. I believe that, yes: 

Mrs. SMITH. And how would we go about getting that as a committee? 

Mr. WHITE. I would say that you would have to deal with the 

companies that were involved. Principally it is British Petroleum, 

and I have forgotten what the names of the shipyards are, but we 

could furnish you with that information. 

Mrs. SMITH. That would be helpful. Thank you. 

Mr. WHITE. Thank you. 

[The information follows:] 

CONTRACTS AT BRITISH PETROLEUM 

Our contracts at British Petroleum indicate that these contracts, if they exist, 

would be treated as propriety and not publicly releasable. British Petroleum, in a recent letter to Congress, did submit to employing U.S. shipyards to satisfy any future construction needs associated with the ANS oil trade. 

Mrs. CUBIN [presiding] Do you have anything further, Representative Smith? 

Mrs. SMITH. No, I don't. Thank you. 

Mrs. CUBIN. Representative Tauzin. 

Mr. TAUZIN. I thank the chair. I want to compliment the chair 

on its latest appearance. It is much more favorable than the last. 

Mrs. CUBIN. Well, thank you very much. 

Mr. TAUZIN. Let me, Mr. White, ask you, this is a relatively new 

position, the administration's support of the lifting of the ban, is it 

not? 
17 

Mr. WHITE. Well, we have been in support of the principle since 

at least last summer with the qualifications that we needed to 

make sure that the international trade implications are lifted, but 

this is a big change from what administrations have said in the 

past, no question about that. 

Mr. TAUZIN. As I understand it, part of the reason why you have 

taken this new position from the past administration is based upon 

the triple benefit package of additional revenues both to the State 

and Federal Government, additional oil production likely in the 

United States as a result of this change, and additional oil production-related employment in the country as a result of the change. 

Mr. WHITE. Exactly. 

Mr. TAUZIN. All positive net benefits for the country, as opposed 

to the old policy which would have not yielded any of those three 

positive effects. Is that right? 

Mr. WHITE. Exactly. 

Mr. TAUZIN. You also indicate that there would not be, in your 

opinion, according to your views, several negative effects that you 

were concerned about. One was the effect on refining employment, 

and you indicate that really is a factor more determined by consumption than it is by the nature of the location of production. 

Mr. WHITE. That is true. 

Mr. TAUZIN. And you also indicate that it would not have, in your 

opinion, although you are going to call for an environmental assessment, any negative impacts for the environment. In fact, in your 

statement you say that any activity or increased California production would be strictly regulated under existing regulatory regimes 

so that there should be no negative impacts. 

Mr. WHITE. Exactly. 

Mr. TAUZIN. Which leads me to my next question. Then you say 

the legislation should not be linked to any change in the status of 

the Arctic National Wildlife Refuge. The administration maintains 

its opposition to exploration or development of any oil resources 

under the coastal plan of the Arctic National Wildlife. 

Could not everything I have just said also apply to production in 

the Arctic, ANWR, and also to production in offshore California 

areas that are currently off limits because of the moratorium? 

Would you not get all three positive benefits? Would not they be 

limited strictly by existing regulatory regimes, and would they not 

all help the country by adding more productive capacity to a nation 

that is still at risk and probably more at risk today than we have 

ever been to foreign imports? Why wouldn't you consider at least 

changing administration policy in those areas as you have in this 

area? 

Mr. WHITE. Because there is a difference in the quality of the potential environmental risk here. In the case of-I'll put it as 

straight as I can--

Mr. TAUZIN. You saying we don't have enough environmental 

regulatory authority in the country relative to the production of oil 

in this country, that you wouldn't trust our authorities today in the 

ANWR or any other place in America? 

Mr. WHITE. The record of being able to go into wilderness areas 

and to do so without a lasting impact on those wilderness areas 

has not been as good in this industry as it should be, and I'm some-
18 

body who-let's take a look at the Exxon problem. In the case of 

this bill, Congressman--

Mr. TAUZIN. Mr. White, are you talking about Valdez? 

Mr. WHITE. Yes. 

Mr. TAUZIN. The Exxon Valdez? 

Mr. WHITE. Yes. 

Mr. TAUZIN. We are talking about a bill that is going to allow 

more exports. I assume they are going to be in tankers. 

Mr. WHITE. Yes. 

Mr. TAUZIN. And you are using the Exxon Valdez as an example 

of why you wouldn't want production in America instead of tanker 

shipments to and from America. Isn't that-excuse my-I'm not 

going to use that term, but isn't that a little backwards? 

Mr. WHITE. No, I don't think so. You ask me why, given all the 

existing laws that we have, given the existing laws, why don't we 

have more certainty that we will avoid environmental risk, and I'm 

just telling you that there have been environmental risks and hazards in the past despite the fact that we had laws. 

Mr. TAUZIN. But, Mr. White, I don't have a lot of time; let me 

just make my quick point; and I realize that I'm butting a stone 

wall, but if you can see in this instance that this change in policy 

is going to increase California production but you a:re not worried 

about the environmental impacts because, to quote your language, 

they would be strictly regulated under the existing regulatory regime, my only question is, how can you use the excuse of environmental concerns not to open up areas of offshore California that 

are currently closed and everybody knows are being closed for political reasons, not environmental reasons. We have had discussions 

with representatives of former administrations who have conceded 

that, at the very table you are sitting at. Why wouldn't we open 

up those areas, for the very good reasons that you make, for making this change in Federal policy, which I support? 

Mr. WHITE. Well, I was trying to answer that by saying that in 

this case, in a straightforward manner, this is actually going to decrease the tanker traffic because the export routes will be shorter, 

so there is no reason at all why this would do anything but better 

the environment. In the case of Santa Barbara or some other areas, 

the public in those areas remembers that there have been problems 

in the past, and the shoreside public has an important role in these 

decisions in the United States. 

Mr. TAUZIN. My time is up. I think you understand my drift. I 

would love to see a revisit of some other policy. 

The CHAIRMAN. Thank you, Mr. White. 

Mr. Thomas, would you like to testify at this time? Mr. White 

has been answering questions. We would be glad to have you go 

down to the chair. 

And while he is doing that, Mr. White, if you would like to go 

get a drink of water or do something else, you can do that and then 

get back here so we can finish the questions. All right? 

Mr. WHITE. Good. Thank you. 

Mr. THOMAS. Mr. Chairman, I would like to give Mr. White all 

the time he needs. 
19 

The CHAIRMAN. Well, we understand that, but he has been doing 

well. I'm just saying, if you wish to do so, it would be your time 

to do it now. 

Mr. TAUZIN. Can we take a vote? 

The CHAIRMAN. That is true. Shall we take a vote if we want to 

hear Mr. Thomas? And then you are up next. 

Mr. Thomas-the honorable. 

STATEMENT OF HON. WILLIAM M. THOMAS, A U.S. 

REPRESENTATIVE FROM CALIFORNIA 

Mr. THOMAS. Did I win? 

Mr. Chairman, I have a written statement. I would ask that it 

be submitted for the record. The CHAIRMAN. Without objection. 

Mr. THOMAS. And I apologize for not being here at the beginning 

of these hearings. They are extremely important to me and to my 

district. But there was a task force on a contested election that required my presence. That is now over, and I'm pleased, Mr. Chairman, that you are holding hearings on H.R. 70, a bill that now has 

more than 70 cosponsors. 

You may want to know that when I first introduced it there was 

one sponsor and we have now extended the list of sponsors to a bipartisan structure, including the former chairman of the Merchant 

Marine Committee, and we now have the administration in support 

of the idea, which was always of interest to me, and that was the 

legislation, if you will allow me to put it, required the largest oilproducing State in the Union to require movement to, in essence, 

the third largest oil-producing State in the Union. The statute 

never said that it had to go to the Lower 48, but obviously once 

the Government dictated that, economics indicated that it went to 

the State of Washington, the State of Oregon, or the State of California. Given the population and the oil demands, more than 

800,000 barrels a day come to California by Government fiat. 

Incidentally, by the same Government fiat Elk Hills, one of the 

largest oil-producing regions in the United States, and a Government-owned facility since 1974, has been producing at a Government-required maximum efficient rate. It means that this large oilproducing area, Kern County, in my district and Mr. Dooley's dis- trict, is not able to produce as much oil as it otherwise could. Kern 

County, if it were a State, would be behind only Alaska, Texas, and 

Louisiana in oil production, that single county, but because of the 

required Federal Government edict of Alaskan oil coming to the 

Lower 48 and, as I said, principally in California, you have a depressed market. 

Our goal is not to require that oil to go somewhere else, it is to 

remove the Government edict, as you well know, Mr. Chairman, 

and let the oil find its economic home. If that were to occur, the 

assumption is, some of the oil would go someplace else. It would 

relieve the environmental concerns along the coast. It would, in actuality, enhance national security by increasing production of oil in 

oil fields by people who want to produce oil and whose communities 

support them in the production of oil. That is not always the case 

in a number of areas around the country. In addition to that, CBO 
20 

has indicated that it will produce additional revenue to this country. 

So when you begin looking at arguments that have been presented about a broad coalition in opposition to this, any real factual 

examination indicates that the broad coalition is for change and 

that all of the positives support the change. 

One caveat, Mr. Chairman. Armed Services Committee is currently looking at marking up legislation which would put on the 

market the sale of Elk Hills. If in fact this legislation does not proceed to the sale of Elk Hills, yet another irony would occur. That 

is, it is clear, according to CBO and others, that if the Alaskan 

North Slope oil were allowed to find its economic home, the value 

of oil in California would appreciate, including the oil in the 

ground. The benefit of that appreciated value of oil should go to the 

taxpayers when we sell Elk Hills. So we have got to move the Alaskan North Slope legislation before we privatize Elk Hills. 

If we were to do what Government often does and. sell Elk Hills 

before we open up the Alaskan North Slope oil to allow it to find 

its economic home, then those private folks who purchased it will 

gain the benefit of the increased value of the oil, and that just 

doesn't make sense. So there may be arguments mad'e to slow down 

the process of moving H.R. 70 forward. I think you will find the administration and all of the cosponsors, you and I clearly, would 

urge that we move with as much speed as possible in getting the 

ANS legislation in front of the sale of Elk Hills. It doesn't make 

sense not to do it, and I would urge this committee to move forward on this legislation. 

Mr. Chairman, I want to thank you very much for the hearing. [The statement of Mr. Thomas may be found at end of hearing.] 

The CHAIRMAN. I thank you, Mr. Thomas. 

Does anyone have any question for our good colleague? 

Mr. Hawaii. 

Mr. ABERCROMBIE. Thank you very much, Mr. Chairman. 

Mr. Thomas, before you came I indicated that I would like very 

much to be able to accommodate this legislation and be favorable 

toward it for reasons having to do with, among other things, the 

merchant marine and increasing our ability to put people to work, 

shipbuilding and all the rest. 

On the other hand, I'm a little worried that in the context that 

has been established before you arrived, that Hawaii is going to be 

left out of the equation. When you say finding its home, right now 

a good portion of that Alaska oil finds its home in Hawaii, we import everything, and have had represented to me that there is excess oil, and I think, if I understood your testimony correctly, you 

are indicating the same thing, that in fact there is more oil that 

could be sold in more markets than is allowed right now. Is that 

a fair summary? 

The reason I'm asking that question, by the way, is that if that 

is the case then I have obviously no objection to excess oil being 

sold anywhere it can to accrue profit and good jobs for people, but 

if in the process Hawaii, which already finds itself paying the highest prices in the country for gasoline post refining, has to have its 

prices increased, I'm sure you can well imagine why I would have 

some reservations. 
21 

Mr. THoMAS. Neil, I would tell you that some of the studies indicate that there would be a very slight marginal increase in the cost 

of gasoline, but it would be very, very small. It is partly a chicken 

and egg, and that is, we have enormous resources in Kern County, 

but if you have 100,000 barrels of oil a day by edict coming in, people are not willing to open up resources, and in fact wells are being 

shut down that still have marginal productivity capability. I believe 

there would be a clear net plus in oil production in the United 

States were we to redirect it. 

The idea that there would be a massive and immediate shifting 

of markets for this oil I believe is not true either. I believe that the 

vast bulk of the oil for the foreseeable future will continue to travel 

the route that it now travels, that this market will develop over 

time. It is just that when you have people in the chain of production and refining and marketing, a segment of them know that oil 

will be available by Government edict, that you don't get the economics of the marketplace working. 

I would not worry at all about a significant increase in the price 

of oil in Hawaii. What I would like to think is that, because we 

allow it to find its economic home, that not only from the Lower 

48, California included, but from Alaska, Hawaii has a much longer 

guaranteed provision of oil than would otherwise be the case. 

Mr. ABERCROMBIE. Then on the surface-and this will be all I 

have to say on it, Mr. Chairman-<>n the surface, one would think 

that inasmuch as there is obviously a market in Hawaii because we 

have to import all the oil-you can't get much more of a market 

than that, it is an absolute market-that there would be an increase in production, that prices would come down. I mean ordinarily that is what one would think, but the fear is that-and in 

fact the statement of the Department of Energy appears to be that 

if the world market comes-<>r if the oil from Alaska enters into a 

wider market, a broader market, that that will increase prices. I 

don't mind that at all, I just don't want to see it increase for us 

in the sense that all of a sudden we have to start competing 

against Japan or something. There is no way the State of Hawaii 

can compete there. That way, market forces become a euphemism 

for being crushed by the ability of somebody to command a higher 

price at our expense. 

Mr. THOMAS. Let me add one final equation because it is also a 

Government policy that has been reversed by administrative decision. Interestingly enough, while requiring all of this oil to come to 

the Lower 48, there was an inability of our folk to export oil, and 

we got a clearance from the Bush administration for 25,000 barrel. 

So once again, if we can get Government out of the marketplace, 

there will be this movement of oil. It is entirely possible that the 

price will go up or go down, that is the marketplace. 

I think the fundamental concern would be a longer guarantee of 

U.S. produced oil as the ultimate winner, and, as you clearly indicated, with the way in which H.R. 70 is written, we do make, I 

think, a very strong statement in terms of our merchant marine, 

indicating that there is going to be a greater opportunity not only 

for employment but a greater employment for a longer period of 

time. Mr. ABERCROMBIE. Thank you very much. 
22 

Mr. Chairman, just by way of conclusion then, I won't belabor 

the point, but I hope that as the legislation develops a sensitivity 

will remain, which I know already exists on your part, toward the 

issue here and see if we can't accommodate that while we get to 

the bigger issue as well. 

The CHAIRMAN. Well, we will be working with the gentleman, 

and hopefully everything will be copacetic when we finally move 

the bill. 

Thank you, Mr. Thomas. 

The CHAIRMAN. Mr. White, now you can sit down, and I would 

like to recognize the gentleman, Mr. DeFazio. You got overlooked 

a while ago, and the gentlelady does apologize; she didn't know of 

the previous agreement. So go ahead. 

Mr. DEFAZIO. Thank you, Mr. Chairman. I appreciate it. I'll still 

make it-get to my next appointment. 

Mr. White, I would like to ask, the assumptions used by-particularly the economic assumptions, the price assumptions used by 

DOE, when were they arrived at? 

Mr. WHITE. The analysis was done basically in the early part of 

last year. 

Mr. DEFAZIO. OK, the early part of last year. 

Mr. WHITE. Yes, it was done in 1994. 

Mr. DEFAZIO. I mean this is 1995, so that would have been 1994. 

Mr. WHITE. 1994, exactly. 

Mr. DEFAZIO. OK Have conditions changed since then? 

Mr. WHITE. Not in a way that would change our basic conclusions. 

Mr. DEFAZIO. Well, I guess I disagree with that. It seems that 

the benchmark price has somewhat equalized. We have seemed to 

have moved away from the surplus, so I would question the assumptions, but we will leave that aside for a moment. 

The other question relating to your analysis is this one that 

takes just sort of a beneficent view of the refinery industry. What 

do you base that on? Do you base that on some testimony? Documented letters? Conversations with the executives? The fact that 

they are already charging us a premium in Oregon and California 

and Washington, that they will eat the additional cost and lower 

the premium, they won't just add it in and jack u.s u:p-I mean how 

do we get to that point? I have never seen this as a particularly 

beneficent sort of industry since they have been gouging us for 

years on the west coast. Why are they going to stop gouging us? 

Mr. WHITE. Well, you are right that the margins on the west 

coast historically have been higher than they are in other places 

in the country. 

Mr. DEFAZIO. Right, but you are assuming that they will stop 

gouging us and they will eat the increased costs. What do you base 

that on? Just sort of a change of heart? 

Mr. WHITE. No. I'll tell you exactly. Based on the economic interests of those refiners. Most of the supply comes from the pipelines 

through Canada. Most of the people that have access are either integrated refiners such as Arco and Exxon, which take their crudes 

from the Alaskan North Slope and will not be exporting, or have 

other sources of supply, and if you have, say, an Arco gas station 

across the street from another gas station and the other gas station 
23 

tries to jack up its prices, then, you know, the customer will go to 

the Arco gas station. 

Mr. DEFAZIO. Well, the problem is-and I know the Secretary 

has been in this part of the country and appreciate his attention 

to some of our other concerns, but in my State we don't have much 

competition any more. You know, Mobil sold out to BP, and then 

BP sold out to someone else and took over and closed a bunch of 

stations, and that has been going on all around our region. Since 

we have more intensively gone after underground storage tanks 

than other areas, we have had a phenomenal number of gas station 

closures. The independents have been squeezed down to virtually 

nothing. There is very little competition. So I doubt that this beneficent view is going to come to pass. 

So what I would like to ask is, would the administration support 

amendments or codicils or whatever on this bill that would say, if 

our predictions are wrong, if in fact price gouging continues in the 

western part of the United States or increases and you are off with 

your projections here, would you allow some sort of safety valve if 

untoward effects happen, that there would be a point at which the 

Secretary would have the discretion to restrict exports or reconsider this because of detrimental economic impacts? 

Mr. WHITE. In general terms yes, and I think you see that in my 

testimony, and I think one way to get at it is just the way you are 

talking about, focusing on whether or not there is anticompetitive 

conduct going on. 

Mr. DEFAZIO. Well, I have been asking for years the Justice Department to do-l think there is anticompetitive now, and I don't 

see how it is going to get better with this export of the oil. 

Mr. WHITE. And on that, I think that something that says that 

if there is anticompetitive conduct that is linked to these refiners, 

then there is indeed the ability to go back and remove-and reinstate the ban. That is an idea that we will support, and you will 

find it in my testimony. 

Mr. DEFAZIO. OK. Then I will look forward to working with the 

administration and the chairman on something that will protect the consumers. 

Thank you. 

The CHAIRMAN. Thank yon. 

The cochairman-{)r Mr. Longley. 

Mr. LONGLEY. Thank you, Mr. Chairman. 

I have got concerns in three areas, and one or two of them have 

been touched on. First is the impact on maritime issues; second, 

the environmental concerns; and third, the impact on world oil supply, particularly our dependence on foreign oil. 

I have listened to the testimony on the maritime issues, and that 

seems to make some sense. Could you just touch for a second on 

the environmental procedures. I think you mentioned that there 

were no concerns from the standpoint of the administration. 

Mr. WHITE. Well, I would say this, that there are two points on 

environment. In the course of trying to figure whether this was a 

good idea, we attempted to identify if there were concrete environmental problems that people had, and generally there were two of 

them. One was that there are people who were concerned about 

what the tanker routing would be, and there were people who 
24 

would be concerned that somehow the double hull r'equirements of 

OPA 90 would not apply and so that you would have more unsafe 

tankers, and we satisfied ourselves that that didn't look like there 

was a serious problem in either of those regards be1~ause, first, on 

the first thing, the shipper intends to go way outside the islands 

and be some 200 miles outside, off the coast, and the tanker routes 

would have to be approved by the Coast Guard, and it would be 

a criminal act if they didn't follow them; and on the double hull requirement there is nothing that would relax that requirement or 

waive that requirement as a result of this legislation .. Now we do think that to satisfy everybody concerned, you know, 

so that the public can go through the same process that we have 

gone through, we think it is a good idea to do some kind of expedited assessment. That doesn't need to be necessarily a full blown 

environmental impact statement unless there was some environmental threat, but as you will see in my testimony, we do think 

there ought to be some procedure for going through an environmental assessment, and I'm told that that could be done in a matter of months once the legislation passes. 

So those are the two points that I would make in that regard. 

Mr. LONGLEY. The third piece is, what percent of our oil comes 

from the Middle East-from other sources? Could you give me a 

breakdown of how much of our oil is supplied domestically, how 

much comes from overseas, and where. 

Mr. WHITE. Yes. Right now the United States consumes something right around 17 million barrels a day; 1.6, 1. 7 million barrels 

more or less supplied from Alaska is about a quarter of our domestic supply. The net imports to the United States right now are, for 

the last year, were about 45 percent-the net imports; that is, imports minus exports; and, finally-and this is a very important 

point that I think your question highlights-the amount of oil imported into the United States from the Persian Gulf went up from 

less than half a million barrels a day in 1986, to about 2.2 million 

barrels a day, from Persian Gulf oil in 1990, and now it is down 

to about 2 million barrels a day. 

But unless our country takes some actions that would increase 

its productive capability of oil or unless the price of oil goes up, 

frankly, to allow it to be produced more economically here, we do 

face a specter of having more imports from the Persian Gulf, and 

we think that of course the amount that we are going to get of domestic drilling activity is principally going to be drinn by the price 

of oil. When you take all the rhetoric away, that is what determines it, and right now we are at oil prices which, adjusted for inflation, are about where we were in 1973 before the embargo. 

Mr. LONGLEY. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Dooley, waiting patiently. 

Mr. DOOLEY. Thank you, Mr. Chairman, and I just want to add 

a little bit to Congressman Thomas' comment. Not only does the 

bill have the administration's support and bipartisan support of 

Members of the House, but it also has the support of Governor Wilson and Democratic Speaker of the Assembly Willie Brown. 
25 

I guess there has been a lot of reference given to some of the 

anticompetitive potential if you allow for the export. I guess I have 

some trouble with that, because I think precisely what is motivating this legislation is that we have created in fact an artificial barrier to competition now, and it was basically your analysis that 

came to the conclusion, because of the mandates to domestically 

consume and utilize all the Alaska North Slope oil, that it was creating such distortions and resulting in inefficiencies. 

I guess some of these have gone as far as what we are hearing 

from people in my area, in the Kern County area, that you are actually having oil that would not otherwise be shipped even through 

the Trans-Panama Canal from the west coast actually being refined in the gulf region, which probably wouldn't take place under 

normal market conditions. Is that correct? 

Mr. WHITE. That is absolutely correct, and although the gentleman from Hawaii has left, our calculations are, what the excess 

is-in 1994 we calculated the excess to be about 255,000 barrels, 

and of that amount 95,000 of that was going to the Virgin Islands, 

and that was oil for which there simply wasn't sufficient demand 

on the west coast, and yet there is this market distortion that is 

out there. That is why the Alaska and California producers are getting less than they otherwise would. 

Mr. DOOLEY. So it should allay some of the fears of the gentleman from Hawaii that if we know that currently, under current 

market conditions, that we are shipping 95,000 barrels through the 

Trans-Panama Canal into the Virgin Islands, obviously it is going 

to be much less cost in terms of transportation to ship that into 

Hawaii if we had that capability. 

Mr. WHITE. I would think so. 

Mr. DooLEY. So in terms of potential for upside, an increase of 

prices in Hawaii would most likely be unlikely if we did allow for 

the export. 

One other issue is, there has been some contention that the Department of Energy analysis, as it relates to the potential for increasing employment as well, which would be the result of the increased price in some of the heavy crude produced in California, is 

inaccurate and cannot be substantiated. The argument is that the 

heavy crude in the Central Valley of California will not track the 

price of Alaskan North Slope but, rather, will be based on other 

similar products. I would just wonder, the Department of Energy 

didn't come to that conclusion, obviously felt that there would be 

some increase in price. How do you respond to that question or 

charge? 

Mr. WHITE. Well, first I have tremendous confidence in our analysts who looked at the cost structures, who looked at the markets, 

who have spent a lot of time on this; and, second, to be quite candid, there is nobody who knows their costs and markets the way 

that producers do, and the California producers have been analyzing this for a long time, and they know what the effect of, you 

know, what the effect on them is, and they agree with our analysis. 

So some California producer has a better idea of what affects his 

own economics than some Washington consultant. 

Mr. DoOLEY. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlelady from Wyoming. 
26 

Mrs. CUBIN. Thank you, Mr. Chairman. 

I just want to make a statement that I'm in complete agreement 

with this legislation, and it sort of defies logic to me to be in opposition to it in view of the state that the oil industry is in and the 

cutback that there has been in the past many years. 

I, too, would like to address the anticompetitive aspect that was 

discussed earlier and particularly into gouging of gasoline prices in 

California. It seems to me that rather than putting that blame on 

the big oil industry, and, right or wrong, I'm not making a judgment, but most of the independents where I live anyway have gone 

out of business due to the regulations of the underground storage 

problems and due to environmental problems that they inherited, 

and their going out of business didn't really have anything to do 

with price fixing or gouging by the major oil companies. I think 

that was a distortion, or at least a lot of information had been left 

out. 

Again, I think it is important for our national security that we 

do this. I think we need to work harder to make it easier in an environmentally safe fashion to explore and produce in the United 

States, and I frankly would like to see us become energy independent at some point, and of course oil and gas has to be a large part 

of that independence. 

That is the only thing I had to say. Thank you for being here. 

Thank you, Mr. Chairman. 

Mr. WHITE. Thank you. 

The CHAIRMAN. I thank the gentlelady. 

The gentleman from the great State of Puerto Rico. 

Mr. ROMERO-BARCELO. Thank you, Mr. Chairman. I wish your 

statement were true. 

The CHAIRMAN. We are working on that. 

Mr. ROMERO-BARCELO. I just wanted to preface that I favor this 

legislation. Unfortunately, I will only be able to vote for it in committee, I won't be able to vote for it after the process of the committee, so I hope it will be soon. 

The CHAIRMAN. We welcome your vote in committee though. 

Mr. ROMERO-BARCELO. Thank you, Mr. Chairman. 

I wanted to ask a couple of questions to get things clear in my 

mind. You said the net imports of the crude oil were 45 percent of 

the total consumption. What percentage of the total consumption 

are the imports? 

Mr. WHITE. They are about 50 percent. 

Mr. ROMERO-BARCELO. About 50 percent of the total consumption 

of crude is from foreign imports. 

Mr. WHITE. Yes. 

Mr. ROMERO-BARCELO. Now how much do we pay for that a year? 

What is the cost? 

Mr. WHITE. Well, it depends on what the prices are, but in the 

general range, if you want a ball park, depending on what the 

prices were last year, $50 billion. 

Mr. ROMERO-BARCELO. Fifty billion. 

Mr. WHITE. A lot. 

Mr. ROMERO-BARCELO. So what I fail to understand is, when I 

took economics in school it always showed to me that the law of 

supply and demand prevails, and if the demand is reduced, there-
27 

fore the prices should go down. Now here we are talking about increasing the production and yet we have the possibility of a higher 

price. Why is that? 

Mr. WHITE. The price, the higher price, will be the price that is 

realized by the producer in the Alaska North Slope. It won't be dramatically a higher price, it will be a modestly higher price, maybe 

$1, $1.50, per barrel for oil, and the reason why there will not be 

a decrease in the demand for that oil is that-there are two reasons. First, at the consumer level there is not going to be an increase in price, and, second, the worldwide demand for oil is growing and it is growing dramatically. 

Mr. RoMERO-BARCELO. In other words, the foreign oil price is 

higher than our domestic oil price? 

Mr. WHITE. In this one place. In general, the world oil pricethere are transportation and quality differences, but in general we 

have a world oil market. There is one protected exception to that 

rule within the United States, because the oil produced from Alaska cannot go out into the world oil market right now. 

Mr. ROMERO-BARCELO. That is why it keeps it a little bit lower? 

Mr. WHITE. Yes, and it is a little bit lower because historically 

they have had more oil than the west coast of the United States 

could consume, so then you have got to take it around the Panama 

Canal or ship it across the country, and it would be much more economical for those producers, they would get a higher realized price, 

if they were to take some of that excess and ship it to East Asia. 

Mr. ROMERO-BARCELO. The other thing is, upon going over your 

testimony, at page 4 you said that one of the requirements that 

must be addressed in the legislation is, require the export in U.S. 

flag vessels. 

Mr. WHITE. Yes, sir. 

Mr. ROMERO-BARCELO. And all U.S. oil must be exported in U.S. 

flag and U.S. crude vessels. 

Mr. WHITE. Yes, sir. 

Mr. RoMERO-BARCELO. On page 6 you say in the third condition 

there, adherence to international commitments, it says, "Of course 

any conditions imposed on exports must be consistent with established U.S. international trade policies. A home build requirement 

for ANS crude exports raises legal issues of concern vis-a-vis U.S. 

international trade obligations. Thus, we oppose any requirements 

that ANS oil exports be carried on U.S. built vessels." Now there 

is an inconsistency in those two statements. 

Mr. WHITE. Yes, there is. One is a requirement concerning what 

the nationality of the crew is, and we believe it should be U.S. 

crewed, and then there is an issue concerning ownership, and we 

think they ought to be U.S. owned, and then there is the issue of 

whether or not they must be built in the United States, and that 

last one is what causes the international trade problems. 

Now I believe the private entities who are likely to ship this oil 

do have contracts with American shipyards for their work, this is 

only a small portion of the oil from the Alaskan North Slope, and 

I think that is what gives a lot of people comfort that we would 

not lose shipbuilding jobs. 

Mr. ROMERO-BARCELO. I am through my time, but I understand 

that U.S. flag also requires U.S. built. 
28 

Mr. WHITE. No, I don't think that is correct. 

Mr. ROMERO-BARCELO. All right. Thank you. 

The CHAIRMAN. I thank the gentleman. 

The gentleman from California. 

Mr. FARR. Thank you very much, Mr. Chairman, and I apologize 

for being late. I hope that my questions aren't repe~titious of what 

you have already presented. 

I am a long time fan of yours, and I think you are doing a great 

job in the department, and I appreciate your coming here today. I 

wanted to just ask a couple of questions. 

It appears to me that this legislation is headed in the right direction. I have a long question on the policy of banning export of oil 

from one State like we have from Alaska primarily because it puts 

the pressure on tanker traffic off the California coastline and puts 

pressure on not as much production in California. We have fought 

a long battle in California to try to protect our coastal resources, 

and it has been across socioeconomic lines and political lines to ban 

offshore oil drilling because we wanted to do onshore before offshore, and I think this bill probably gives some incentive, as you 

pointed out, to do some onshore production. 

Mr. WHITE. Yes. 

Mr. F ARR. Has the department been able to estimate-and I see 

that you have an estimate of adding $180 million in tax revenue 

to the U.S. Treasury, creation of 25,000 jobs a year by the year 

2000, preserving 3,300 marine jobs, and increasing American oil 

production as much as 110,000 barrels per day in Alaska and California. Do you have any figures as to what it might do for local 

economies in California, for the job market in that State, and for 

local tax revenues? 

Mr. WHITE. Yes, we do. Those are in our study on the issue both 

on California revenues and jobs. I would ask if somebody could clip 

that and I could get the exact figure to you. 

Mr. F ARR. Yes, I would like to have the exact information if your department has done it, or if the California Energy Commission 

has done it, because the way the taxes work in California, it is not 

like a severance tax, it is a property tax, so counties where you 

have oil production could benefit, and there are a 'certain number 

of counties in California that that would affect, and I happen to 

have one of them, Monterey County. The southern part of Monterey County may be affected by this, and I would like to know that. 

Mr. WHITE. OK, we will get you that information. 

[The information follows:J 

OIL PRODUCTION AND ITS EFFECT ON TAX AND JOBS 

About 4.3 million barrels per year of crude oil are produced in southern Monterey 

County. Most of this is very heavy crude oil from the San Ardo Field. Based on the 

methodology on DOE's Alaskan North Slope crude oil study, we estimate that prices 

for the County's crude oil would rise by 70-75% of the increase seen in ANS crude 

oil, or by $0.84 to $1.20 per barrel. 

Monterey County's revenue receipts from this price increase de.pends on its specific tax structure. In hearings conducted by DOE for its study, a D1strict Supervisor 

for Kern County provided tax estimates that indicated a 6.4% marginal tax rate was appropriate for his County. Applying that rate to Monterey County oil production 

produces an incremental revenue estimate of $220,000 to $330,000 per year. This 

excludes the effects of any increase in oil production that might o'ccur. 

In its study, DOE did not make state-specific job estimates, much less county-specific estimates, because the employment data available at the time did not support 
29 

accuracy at the regional level. A conservative estimate for Monterey County might 

be made by noting that it produces about 1.5% of California's production, that the 

predominant amount of direct and indirect employment increase would be local, and 

that California would see at least half the total rise in direct and indirect employment resulting from exporting ANS crude oil. The result of these assumptions 1s an estimate of 50-100 direct or indirect jobs for the County if ANS crude oil export ban 

is removed. 

Mr. FARR. Let me tell you one of the spins that I'm hearing that 

I'm a little concerned about. As I said, the battle in California has 

been to prevent OCS drilling. There is a moratorium. That moratorium expires this year. The concern is that if pressure on production is increased, will it move offshore. The movement in California, I think, politically from Governor Wilson to everybody, both 

sides of the aisle, is that they would like to see the moratorium 

continue because the State of California has actually put a moratorium on coastal waters. 

Mr. WHITE. Yes. 

Mr. FARR. But they don't apply to Federal waters except through 

the OCS Management Act, the Coastal Act. Has the department 

taken a position on the lifting of that moratorium, and would you 

indeed support its continuation so that we could support onshore 

production before we moved into offshore? 

Mr. WHITE. The Department of the Interior will speak officially 

for the administration on this, but let me make several observations which are consistent with, I believe, the concerns and interests that you have shared with us. 

One is that we ought to do everything possible to produce from 

existing and mature fields before we wander into wilderness areas 

and start drilling for oil, and a good example of that would be the 

fields around Prudhoe Bay where there has been development, and 

this legislation does what you say it does, as I mentioned in a colloquy with Mr. Tauzin earlier who took a little different point of 

view and was critical of our views on California offshore. 

Mr. FARR. Well, he is from Louisiana and we are from California. 

Mr. WHITE. There you go. I think you will find that the administration's view on this is 

going to be governed, as it should in a democracy, by the real concerns of the citizens who are in the States that would be affected 

by offshore drilling, and there is no reason for us to apologize · about 

that. I think there are some citizens who have some real concerns. 

Finally, I would say for those people who say that we do nothing 

in this administration to further drilling or production, if you look 

at the offshore production figures in California, the offshore production from existing fields has been increasing in this administration, 

and there is no reason for the Federal Government to try to impose 

on local citizens their preference concerning drilling. 

Mr. F ARR. My time has expired, Mr. Chairman. Could I make 

just one comment? 

The CHAIRMAN. Go ahead. 

Mr. FARR. Thank you. 

What I see in this legislation, and I hope we can promote it, is 

really a win/win from an environmental standpoint. The biggest 

issue in California has been not only the preventing of offshore oil 

drilling in Northern California but the tanker safety traffic, and 

after the Exxon Valdez we enacted in California a law that is as 

91-746 0 - 95 - 2 
30 

stiff, if not stiffer than, the Alaskan law, and the whole dialog 

there was the amount of tanker traffic along the California coast. 

Mr. WHITE. Exactly. 

Mr. FARR. And it seems to me that this is going to diminish that 

tanker traffic and therefore ought to be an environmental gain for 

the State. 

Mr. WHITE. I agree. 

Mr. FARR. Thank you. 

The CHAIRMAN. I thank the gentleman from California and thank 

you, Mr. White, for your testimony. 

I'm not going to comment. Some comments were made by other 

people, including yourself, about other subjects, but as far as this 

subject, I think you do an excellent job and I do appreciate your testimony. 

Mr. WHITE. Thank you. 

The CHAIRMAN. The next panel that will be up is Mr. Roger 

Marks, Mr. Terry Turner, Mr. Jeffrey Hoffman, Ms. Linda 

Adamany, and Mr. Kent Jeffreys, and I hope all of you will summarize your statements, and I know most of you have b1~en on the Hill 

many, many times and had this opportunity. 

Unfortunately, as you can see, we have the gentleman from California and myself as the remaining listeners to your testimony, so 

submit your testimony for the record and summarize as close as 

possible, we are here to listen to what you have to say, and we will 

start with Mr. Roger Marks. 

STATEMENT OF ROGER MARKS, PETROLEUM ECONOMIST, 

STATE OF ALASKA, DEPARTMENT OF REVENUE, JUNEAU, 

ALASKA 

Mr. MARKs. Thank you, Mr. Chairman, members of the committee. 

I am Roger Marks, petroleum economist for the State of Alaska 

Department of Revenue. On behalf of myself and Governor 

Knowles, I thank you for the opportunity to speak to you today 

about this issue of long-standing importance to the State of Alaska. 

As an economist, I hope during my testimony to briefly describe 

the benefits of lifting the ban. I also hope you will come to understand that lifting the ban should neither increase the cost of oil 

products to the west coast consumers, imperil the profitability of 

those refineries, nor create west coast refiner supply disruptions. 

The export ban on Alaska North Slope ANS crude oil has effectively held the west coast oil market captive for the past 18 years. 

It has negatively impacted the value of every barrel of oil transported through the Trans-Alaska Pipeline, undervaluing ANS production by a total of nearly $14 billion. The diminished value of our 

royalty oil and the loss to the State in tax revenue is felt especially 

now as we face the seventh consecutive year of dedine in produc- tion from our North Slope fields. 

The economic impact of the export ban of course goes far beyond 

Alaska's borders. When the value of oil in the ground is decreased, 

less oil is feasible to produce. Every barrel less feasible to produce 

must therefore be imported. In addition, the capital, equipment, 

and personnel invested for the Alaskan oil industry comes from all 

across the country. Thus, the ban continues to depress U.S. eco-
31 

nomic growth and employment. Also, we all recognize that the dollar is very weak now. Any addition to U.S. exports increases the 

strength of the dollar and decreases inflationary pressures in the 

domestic economy. 

The closest geographic market destination for ANS is our own 

west coast. Even in natural post-export ban market conditions, 

most of Alaska's production will be sold there. The next closest 

market for ANS is the Pacific Rim. ANS is the only U.S. oil production encumbered with an outright export restriction. Because of the 

ban, most ANS oil not sold in Washington or California must be 

further transported all the way to the Gulf of Mexico. This routing 

more than doubles what it would cost to move the oil to Japan on 

American flag vessels. 

As you can see, the ban drives down the value of ANS in two 

ways: First, because of the export ban it is necessary to transport 

the surplus west coast crude to the Gulf of Mexico market. Currently 15 percent of ANS production, 240,000 barrels a day, leaves 

the west coast. During the mid-1980's the volume was as high as 

one million barrels a day, 50 percent of production at that time. 

This adds approximately $2.50 a barrel to transportation costs, a 

net loss of nearly 25 percent of the well head value. 

Second, because the additional transportation costs to the Gulf 

are so high, not all the excess west coast crude is moved to the 

Gulf, some of the excess remains on the west coast creating a glut 

on the market. Currently west coast ANS prices lag Gulf coast 

prices by 50 cents a barrel. During the eighties this was nearly $2 

in loss per barrel. The gut of course affects not only ANS oil but 

California production as well. We estimate that these two effects 

will cost the State of Alaska $80 million in 1996. Lifting the export 

ban would change the west coast from a restricted market to a 

competitive market. It is important to note that under the free 

market conditions we request, just as much oil will be available to 

the west coast as is available now. 

At this point I would like to refer you to the last page of the testimony, the map, and kind of explain what those numbers mean 

and how they suggest this. The numbers here are not formed in 

concrete, they are approximate, but the relative value pretty much 

stays constant over time. It costs about $1.50 to ship oil from 

Valdez to Los Angeles, and-anywhere between $1.20 and $1.80 

really, depending on the vessel and market conditions-and it costs 

about $1.75 to ship it from Valdez to Japan. 

The first thing to notice here is that, given that is 4,000 miles 

from Valdez to the west coast and 7,000 miles from Valdez to 

Japan, the natural market for the ANS will be the west coast; it 

is closer; it will cost less to ship it there. 

The other thing to look at on here is that the value of crude in 

the markets is set by the marginal barrel which is imported. If we 

assumed the competitive barrel in both and the Gulf coast comes 

from the Mideast and, for example, if Mideast prices are $20 a barrel, it would be worth $21 on the west coast. 

However, Japan is also closer to the Mideast than the west coast. 

It is only about 65 cents to ship from the Mideast to Japan, so as 

long as it costs less to ship from the Mideast to Japan than it does 

to ship to Los Angeles or the west coast, the value in Japan will 
32 

be less than what it is on the west coast just because the cost to 

get the marginal barrel there will be higher. For these two reasons, 

the natural market for ANS, even when the ban is lifted, will still 

be the west coast. 

Allowing ANS to rise to its natural value will actually encourage 

additional production from existing fields in Alaska and California. 

This, ironically, will have the effect of reducing our national dependence on imports. If ever there was a consumer price benefit 

created by the ban, it has yet to show itself. 

Due to the market restriction created by the ban, crude oil prices 

for American west coast refiners are the lowest in the world. None 

of this benefit, however, has ever been passed on to the west coast 

consumers. Gasoline prices in California are the same or higher 

than they are anywhere else in the country despite the area's low 

crude oil prices. 

Although there is an excess of crude oil on the west coast which 

must be shipped to other markets, light refined products, like gasoline, are actually imported to the west coast. In other words, there 

is a shortage of refinery capacity to satisfy west coast indigenous light product. 

The price of the marginal imported gallon is the d«~termining factor in setting the price for all the other gallons of products sold in 

the West coast markets. There is no reason that these import 

prices will change if the export ban is lifted. Because this is a free 

market, any attempt to increase product prices will be offset by 

more attractive, lower cost imports. 

The demand for petroleum products will not change. Accordingly, 

although the prices of crude oil will rise approximately 50 cents a 

barrel to world levels, any reasonably efficient refinery should be 

able to compete with imported products that still have to incur additional transportation costs. 

With this bill, the U.S. maritime crude oil trade is maintained; 

with this bill, production of U.S. reserves is increased because the 

value of the resource is allowed to rise to world market prices; and 

because the President retains the emergency authority to reimpose 

the ban, the national security is protected. 

The CHAIRMAN. Mr. Marks, how much more do you have? 

Mr. MARKS. Less than a minute. 

The CHAIRMAN. All right. 

Mr. MARKS. The export ban has burdened the State of Alaska 

and the North Slope producers for every single one of the 11 billion 

barrels produced over the last 18 years at the cost of economic 

growth, employment, and national security. Again, ANS is now in 

its seventh year of irreversible decline. In an age of increased market freedoms, it is absurd that American industry is inhibited from 

realizing full market value. It is the view of the Knowles administration, Mr. Chairman, that the ban on the export of Alaska oil has 

unnecessary, unfair, and unintended consequences. It certainly has 

long outlived the reasons it was put in place. 

Once again, Mr. Chairman, thank you for the opportunity to 

speak to the committee on this bill. 

[The statement of Mr. Marks may be found at end of hearing.] 

The CHAIRMAN. Thank you, Mr. Marks. We will have questions 

later. 
33 

Mr. Turner. 

STATEMENT OF TERRY TURNER, LEGISLATIVE DIRECTOR, 

SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA, 

CAMP SPRINGS, MARYLAND 

Mr. TuRNER. Thank you, Mr. Chairman. 

On behalf of the Seafarers International Union, I urge you to 

enact legislation that would permit exports of Alaskan North Slope 

crude oil carried on American flag tankers. This legislation, H.R. 

70, will help preserve the independent tanker fleet at no cost to 

American taxpayers and save jobs of the merchant mariners that 

otherwise will be lost with declining Alaska oil production. 

Mr. Chairman, prior to last year we had been strong opponents 

of Alaska oil export because the oil would have been carried on foreign flag vessels. Had they been authorized, those exports would 

have led to the destruction of our Nation's independent tanker fleet 

and caused a devastating loss of jobs for our members. The Nation 

would have suffered the loss of a militarily useful fleet essential to 

national defense. 

Last year, however, we began to see how the law passed in 1973 

was beginning to have unintended consequences. After extensive 

discussions with BP America and our contracted ship operators, we 

began to appreciate how declining North Slope production would 

prematurely lead to the scrapping of vessels in the Alaska oil 

trade. 

The fleet had already begun to shrink as a result of increased 

movements of oil to the Gulf coast and other market factors. Clearly with the North Slope fields entering a phase of sustained decline, something had to be done to preserve the fleet and the jobs 

of our members. Mr. Chairman, as you know well, our industry is in the midst of 

a depression. For too long an essential national resource has been 

threatened with extinction. Operation Desert Shield/Desert Storm 

showed how vital the commercial sealift is to projecting force in a 

hostile world and sustaining our troops in battle. Our experience 

in the Persian Gulf highlighted the strength of the U.S. flag commercial fleet, but it also showed its weakness, a shortage of vessels 

to carry out the responsibilities imposed on it during a national 

emergency. As important, the Nation learned we lacked the skilled 

crews needed to man all the ships necessary to provide sealift during the emergencies. At present much of the independent tanker 

fleet is in lay-up or headed for the scrap heap. 

In the mid-1980's my union alone crewed 18 vessels. Unfortunately, when tankers sit idle so do our men and women. With the 

export of Alaska oil, however, these vessels will have employment 

opportunities not available today. Moreover, by improving production economics, exports will extend the life of the Trans-Alaska 

Pipeline and the jobs of those men and women who keep it in operation. That is why so many members of the labor movement support the proposed legislation. 

Mr. Chairman, in closing, we wish to emphasize that we believe 

the historic purposes for preserving Alaska North Slope oil production for domestic consumption have been substantially served. 

After careful consideration of the present situation, we believe the 
34 

conditions that precipitated the enactment of the export restrictions two decades ago have changed sufficiently that the Nation 

and labor in particular would be better served by a change in policy. 

Mr. Chairman, we therefore implore you on behalf of our members to preserve jobs and our vital independent tanker fleet by 

moving H.R. 70 as quickly as possible this year. Together we can 

enhance our national security. 

Thank you very much, Mr. Chairman. 

[The statement of Mr. Sacco may be found at end of hearing.] 

The CHAIRMAN. Thank you, Mr. Turner. 

Mr. Hoffman. 

STATEMENT OF JERRY HOFFMAN, PRESIDENT Al"ffi CHIEF EXECUTIVE OFFICER, BERRY PETROLEUM COMPANY, SACRAMENTO, CALIFORNIA 

Mr. HOFFMAN. Mr. Chairman, I have already submitted written 

testimony so I will try to summarize this as much as I can. 

I am the President and Chief Executive Officer of Berry Petroleum Company located in Taft, California. I am also the chairman 

of the Alaska North Slope Export Committee of the California Independent Petroleum Association, better known as CIPA, which is a 

500-member nonprofit group which represents independent crude 

producers, natural gas producers, and other energy-related industries in California. To give you a feeling as to the size of Berry Petroleum Company, we produce about 9,000 to 10,000 barrels a day, 

primarily of heavy crude, which represents about 1 percent of the 

State's production, so I think Berry represents a relative cross section of the typical California independent producer. 

As you have heard today, basically the problem is, because of the 

export ban, you have the number one producing State, Alaska, 

shipping crude oil into the number three producing State, California, thereby creating an oversupply and depressin~~ the price of 

crude oil in California. Even though this country in 1994 imported 

over 50 percent of its crude needs, because of this law we create 

an oversupply of crude oil on the west coast, thereby depressing the 

prices of indigenous Alaska and California crude. 

Because of this oversupply, this excess crude has to be shipped 

to other U.S. ports either through the All-American Pipeline, transshipped through the Panama Canal, or around Cape Horn, at a 

cost of $1.50 to $2 per barrel more than it would cost if it went to 

the Far East. The result is a lower crude oil net back price to Alaska and, more importantly to me, to the California producer. 

There have been numerous studies addressing lifting the ban on 

the export of Alaska North Slope crude, one commissioned in December of 1993 by CIPA and more recently in June of 1994 by the 

Department of Energy. Each of these studies have c:oncluded that 

lifting the ban on ANS will benefit the United States, California, 

and Alaska, and, more specifically, the studies found that California and Alaska crude prices would increase. 

The estimates vary as to how much the prices will increase but 

are roughly in the neighborhood of a dollar to two dollars per barrel. There is ample proof that higher crude prices in California will 

result in increased production, exploration, and California jobs. For 
35 

example, during the invasion of Kuwait, the California production 

declined, actually halted, and in four short months that halt turned 

into an increase in the State of about 50,000 barrels a day. 

Furthermore, California has more proven, undeveloped crude reserves than any other State in the Lower 48. It is not a geological 

risk, an engineering or technological risk, but rather an economic 

risk that keeps these crude oil reserves from being developed and 

produced. 

California heavy oil production, by its very nature, requires high 

operating and capital costs to extract. In California we are further 

burdened by higher than average regulatory costs, and, because of 

the oversupply of crude oil on the west coast caused by the ANS 

export ban, our prices are depressed and well below prices in other 

parts of the country. California producers are being hit from both 

directions. 

Opponents of lifting the ban on the export of ANS crude oil claim 

that it would result in increased petroleum product prices. This is 

simply not true. Gasoline prices are not dictated by the west coast 

crude oil market but by the world crude oil market. Furthermore, 

there are no Government prohibitions on the export or import of 

petroleum products as there is in crude oil. Therefore, if gasoline 

prices were to increase abnormally in Los Angeles, for example, the 

world economic markets would quickly react and transport gasoline 

into this market to capture those abnormal profit margins and 

quickly drive prices back down to world market levels. As you have heard today, there is wide bipartisan support for 

lifting the ban on ANS, including Governor Pete Wilson, Willie 

Brown, other California assembly persons and senators, and counties, including my own Kern County. It is time the United States 

of America developed a strong national energy policy. Lifting the 

ban on the ANS crude oil is the first step. Thank you for your time today. 

[The statement of Mr. Hoffman may be found at end of hearing.) 

The CHAIRMAN. Thank you, Mr. Hoffman. Ms. Adamany. 

STATEMENT OF LINDA ADAMANY, SENIOR VICE PRESIDENT, 

BP OIL SffiPPING COMPANY, USA, CLEVELAND, OHIO 

Ms. ADAMANY. Thank you. On behalf of my company, BP, I'm 

pleased to appear before you today. We too have submitted written 

testimony, so I will try to just highlight the major points of that 

testimony for you. · At the outset, I want to emphasize how pleased we are that the 

administration supports lifting the ANS export ban carried in U.S. 

flagships and manned by American crews. We are committed to 

working with the administration to ensure that exports are authorized pursuant to appropriate licensing mechanisms and only after 

completion of the appropriate assessment of the environmental implications of proposed exports. 

Today, based on the State of Alaska's own forecasts, the North 

Slope is producing some 600,000 barrels a day more than was originally projected as recently as 10 years ago. These achievements are 

particularly notable given the inherent competitive disadvantage 

that producers of the North Slope have to entertain, the disadvan-
36 

tages that stem primarily from harsh climatic conditions, the geographic remoteness from marketplaces, and the Federal restrictions 

to access world crude oil markets imposed by the ANS export ban. 

BP America and our 16,000 employees are very proud to now be 

the largest producer of crude oil in the United States. Today the 

future of this critical domestic resource is in double jeopardy. Production is on decline, as you have heard, and margins that are the 

lifeblood of the ongoing investment decisions that get made on the 

North Slope are being squeezed as never before as upward pressure 

on North Slope costs continue to increase. This is compounded b~ 

the fact that with the current export restrictions in place we cant 

sell our crude oil in a competitive market. 

Because ANS is surplus to west coast demand and because of the 

restrictions, we are forced to accept prices for crude oil that are 

below world market parities. In recent years we have seen our 

netback in Alaska squeezed to the point where making additional 

investments just cannot be easily justified compared to other opportunities across the world. 

As the domestic maritime industry and maritime labor in particular have come to appreciate-and you have just heard their testimony-their future depends in part on our ability to extend the 

life of the North Slope fields. By enacting legislation to remove the 

current export restrictions, you can help create the market conditions that will raise the netback in Alaska and generate the incremental returns that we will ultimately need to stimulate higher 

production for the benefit of all Americans. 

By insisting on the use of American flag ships and manned by 

U.S. crews, you can helf preserve a domestic merchant marine that 

is vital to our nationa security. Moreover, as the Department of 

Energy found and independent producers have just testified, you 

can spur additional heavy crude oil production in the State of California without hurting the consumers at the pump. 

Mr. Chairman, after looking at the export issue with fresh perspective, we and the maritime industry have concluded that we can 

work together to enhance our Nation's energy and the national security. We encourage Congress to do so now as well, and as partners we can spur energy production, preserve the domestic merchant marine, create jobs, and raise State and Federal revenues. 

We urge the committee to report out H.R. 70 as soon as possible 

to help us realize our shared objectives and to enhance our national 

security and our energy. Thank you. 

[The statement of Ms. Adamany may be found at end of hearing.] 

The CHAIRMAN. Thank you, Linda. 

Mr. Jeffreys. 

STATEMENT OF KENT JEFFREYS, SENIOR FELLOW, NATIONAL 

CENTER FOR POLICY ANALYSIS, WASHINGTON, D.C. 

Mr. JEFFREYS. Thank you, Mr. Chairman. My name is Kent Jeffreys, and I'm a senior fellow with the National Center for Policy Analysis which is based in Dallas, Texas, 

and I work out of the Washington office. 

Over the past eight or 10 years I have worked with a number 

of different public policy organizations actually starting with the 
37 

House Republican Study Committee, the late lamented Republican 

Study Committee, on energy and environmental issues, and I can 

say that in all of those years there has been a unanimous opinion 

about this particular prohibition on the export of Alaskan oil, and 

it is that it should not exist and it should be repealed. 

When it was passed in 1973, this export ban was justified as a 

means to protect American jobs and to keep our oil here at home. 

I think the testimony you have heard today and the history of the 

past 22 years has indicated that both of those assumptions were 

flawed and that, in fact, more jobs have been lost due to the ban 

and, in fact, we might have increased imports overall. This is due 

to the fact, as you have heard from other witnesses, that the glut 

of oil on the west coast actually drives down the net price received 

by the producers, and, in addition, the Department of Energy has 

estimated that in terms of jobs, repeal of this export ban would increase the jobs in the oil industry by 10,000 to 25,000 nationwide. 

I'll skip through some of this because the points have been made 

quite thoroughly by other witnesses, but in a new study being released by the Cato Institute, Mr. Samuel A. Van Vactor out in 

Portland, Oregon, has estimated that if you look at the reduction 

in price due to the oversupply on the west coast and factor in the 

transportation costs and that sort of thing, it actually is more cost 

effective for the marginal barrel to go to Japan, so you would be 

likely-or at least East Asia-you would be likely to increase exports to some certain degree, which is rather important. In this 

time when we are pressuring Japan to accept our products, we actually have a ban on one of the products that they would like to 

have at least the option of buying. 

In addition, Mr. Van Vactor estimates that the net return on a 

barrel of Alaskan oil with all of these factors considered is as much 

as five to eight dollars lower than world oil market averages in 

terms of the net return, and that is before you calculate the Federal taxes and royalty payments. Because of that, it is anticipated 

that many billions of barrels of potential production in the State 

of Alaska will remain in the ground simply because the economic 

climate is not sufficient to encourage the investment required to 

bring it out. 

Now when you compare that with the current trade policies concerning East Asia, you are actually preventing the possibility of 

Japan or Korea investing in some of these facilities in an effort to 

secure an alternative source of supply for their own domestic economies. I seem to recall that in the past there actually was an opportunity for developing liquefied natural gas facilities and some other 

possible investments from Asian countries, and those of course will 

not occur if they cannot then bring some of the product back into 

their own countries. 

I believe that if you look at the economics of the oil export ban 

it certainly is no longer justified; if you look at the domestic production of oil, it is no longer justified; and if you look at the fairness, the equity of it, considering that the State of Alaska, which 

is heavily dependent on the production of its North Slope, is bearing the major brunt of the economic and jobs impact from this ban, 

it certainly is unfair to Alaska. 
38 

So I would speak not merely for my own organization, the National Center for Policy Analysis, but I have done sort of an informal survey of many other organizations across the country which 

do economic and energy analysis, and, as I have said before, in 

terms of the conservative, the libertarian, and the free market oriented groups, there is a unanimous opinion that the ban on export 

of Alaskan oil should be ended. 

I would be happy to take any questions you have. I see my time 

is up. 

[The statement of Mr. Jeffreys may be found at end of hearing.] 

The CHAIRMAN. Thank you, Mr. Jeffreys. 

I have a couple of questions, if I can. 

Ms. Adamany, export opponents claim that enactment of H.R. 70 

will not increase production in Alaska. What are your projections? 

Are your projections consistent with DOE as far as production 

goes? 

Ms. ADAMANY. Yes, directionally they are very consistent. As 

much as half of the production that has yet to be produced between 

today and the next 10 years is dependent on investments that have 

not yet been made, and by enhancing profitability of the Alaskan 

North Slope it makes it that much more competitive for our company to invest dollars in that area versus other opportunities 

across the world, we would become more competitive, and in that 

regard we would have enhanced production opportunities that, as 

I say, are directionally consistent with the DOE report. 

The CHAIRMAN. In that report it talks about the decline, and you 

did also, so you are talking about additional fields being found or 

have been found but are not competitive at this time. 

Ms. ADAMANY. We are talking mitigating decline. I would still expect decline to be taking place but not at the rate that we have 

been seeing over the last several years. So we are talking about 

production from known, existing reservoirs. 

The CHAIRMAN. All right. That doesn't preclude, though, knowing 

the areas I know, that there are some areas that haven't been explored to an extent, but this would give an added incentive for exploration, would it not? 

Ms. ADAMANY. Certainly, yes. 

The CHAIRMAN. Just for the record, I'm one of the few people 

that were here when we passed this original Act. Some people say 

while it was imposed the State of Alaska bought off on it. One of 

my good ex-governors forgets that he signed off on this, including 

myself, including the Senators that were sitting at that time, because we were in an embargo stage and the market was in the 

United States, it wasn't any place else, and we didn't foresee the 

imbalance it would create, and times have changed, so I believe it 

is time to be changing also. 

Mr. Miller, do you have some questions? 

Mr. MILLER. Mr. Chairman, I have a series of questions for the 

witness from British Petroleum, but I think time would be better 

utilized if I could submit those for the record. 

The CHAIRMAN. Without objection, the questions will be submitted to British Petroleum at this time. 

The CHAIRMAN. Do you have any other questions? 

Mr. MILLER. No, thank you. 
39 

The CHAIRMAN. Mr. Turner, the question that keeps coming to 

my mind-and I'm one that is deeply affiliated with your union, in 

the sense that I was in the maritime business-you have stated 

this will keep your people working, and in the bill it says American 

flag, American crewed. Do you think the language is strong enough 

to make sure that there is no way this can be overturned? 

Mr. TuRNER. Make sure that--

The CHAIRMAN. Or somehow circumvented? 

Mr. TuRNER. We are confident that the language as written in 

the legislation requiring U.S. flag, which means U.S. owned and 

U.S. crewed, will sustain itself, yes. The CHAIRMAN. All right. And do you have a memorandum or 

some correspondence concerning the GATT agreement and international trade that this will meet the criteria? 

Mr. TuRNER. Of course we are relying on USTR, and they are 

submitting to the record that, given the fact that there is not a 

U.S. build requirement in this bill, that it would not violate GATT. 

The CHAIRMAN. Of course if I had my way, I would have it U.S. 

built too, but I'm not going to fight that battle if I can't get the support of the administration, because I do think that is the way to 

go. I think it is the safest way to go, and it does employ people, 

and it is a better tanker. We build better tankers, contrary to what 

people may think. But that is a problem that I can't cross over 

right now. 

Mr. Marks, just your comments about the State and lost revenues-! will buy that argument, I'll buy that presentation, but if 

this doesn't pass, what are your estimates-being that you are in 

that field of money-that would occur to the flow of cash to the 

State treasury? 

Mr. MARKs. We estimated that the loss would be $80 million in 

1996. Our estimate for the 1996 budget, for the State, I think is 

$1.6 billion. That is a 5 percent loss. 

The CHAIRMAN. And that is just on the present inclined plane. 

If it continued, it would get much worse, much more rapidly, in a 

very short period of time, wouldn't it? 

Mr. MARKs. That is correct. The State Government gets 85 percent of its revenue from oil. Production has declined 25 percent in 

the last seven years. It is a declining base, and, dollar for dollar, 

every decrease in the value of oil is directly passed on as a reduction in State revenue. 

The CHAIRMAN. Mr. Hoffman, I didn't realize that California and 

Kern County was the third largest producer. That is an amazing 

thing. 

Mr. HOFFMAN. Yes. It is behind, I'd say, Texas and Alaska. 

The CHAIRMAN. Right. That is an amazing amount of oil in an 

area from California, because we are from the northern part of 

California, and we didn't have much to do with the southern part, 

so we didn't realize you were producing that much oil. 

Does anybody else have any questions at this time? 

Mr. Dooley. 

Mr. DOOLEY. Thank you, Mr. Chairman. 

I should point out that Kern County is Central California and 

not Southern California. Sometimes we don't want to be confused 

there. 
40 

The CHAIRMAN. I beg your forgiveness. That was a slip of the 

tongue. 

Mr. DOOLEY. Yes. 

Ms. Adamany, I guess we have heard some concerns by some of 

my colleagues related to creating a situation where there is a potential for anti-competitiveness. I guess from BP's perspective you 

produce about 50 percent of the oil produced out of the North Slope 

now. If you are allowed to export it, what is your market analysis? 

I mean have you folks made any determinations on what potential 

amount of that oil that you might export? 

Ms. ADAMANY. A couple of comments. We produce now about 38 

percent of the total production coming ofT of the North Slope. At a 

minimum, the most obvious production that would be exported 

would be the barrels that are now surplus to west coast demand. 

You have heard other testimony to that effect. Today that number 

ranges between 200 and 250,000 barrels a day. In addition to that, 

we would like the opportunity to be able to export barrels that are 

currently placed on the west coast to the extent that the marketplace would dictate that the higher value for the oil could be realized somewhere else. That is not predictable, it is a function of the 

day-to-day marketplace. I can tell you that in the Far East, while we havE! not done any 

sort of exhaustive market research, we didn't feel it was appropriate yet because we are not allowed to market the oil yet, our 

preliminary analysis looks to us like markets like Korea and Taiwan would be a primary target for us because the refining capacity 

in those countries is less sophisticated and are therefore unable to 

extract some of the high sulphur content that other crude oils have. 

ANS has a relatively lower sulphur content, about 1.7 percent, and 

so those refineries in theory should be willing to pay more for our 

crude oil. But given a finite demand in those two countries, then 

of course other areas in the Far East would be looked at as an alternative. 

But beyond that, we have not done more. We have not talked to 

anyone, and we have not done more research. 

Mr. DOOLEY. Mr. Hoffman, there is some contention made that 

the increased price that has been determined in a number of studies, a couple of which you cited, are inaccurate because the heavy 

crude that is produced in the Kern County region won't track ANS. 

But it is your contention that because we will have the freeing up 

of refinery capacity, that will then provide the opportunity, or market opportunity, for some of the heavy crude now that is being basically eliminated because of the mandate that perhaps as much as 

200,000 additional barrels beyond what the market would demand 

is coming down from Alaska. 

Mr. HOFFMAN. Yes, that is correct, and I would say also, if you 

look back before the price collapse back to 1986, the State produced 

about 1.2 million barrels, a lot more heavy, and there was no particular problem at that particular time with refining capacity to 

handle that. 

Now there have been some closures of refineries, but there have 

also been some expansions during that period, so I would contend 

that there is room for more heavy oil. 

Mr. DOOLEY. Thank you. 
41 

Mr. COOLEY [presiding] Mr. Abercrombie. 

Mr. ABERCROMBIE. Thank you very much, Mr. Chairman. 

Ms. Adamany, you were here before when I was asking questions. You have hit on one of the key points for me. One of the representations made to me is that there is excess oil; that is to saystop me if I'm wrong here-that there is more oil available that 

could be shipped elsewhere than could actually be consumed at the 

present time regardless of source, whether it is domestic, foreign, 

et cetera, right? 

Ms. ADAMANY. Correct. 

Mr. ABERCROMBIE. 250,000. 

Ms. ADAMANY. Roughly, yes. 

Mr. ABERCROMBIE. If that is the case, then can't there be some 

provision here, or can I be assured that Hawaii-that you could 

stop off on the way to selling this excess oil? Because one of the 

points made by Mr. Jeffreys had to do with the question of market, 

free market. Well, I have real reservations about what the word 

"free market" means. Obviously you can't have a better market 

than Hawaii. We need all the oil that comes-! mean all the oil 

that comes in there is refined; all of our energy virtually is dependent on it. 

Now I get conflicting arguments being made as to whether or not 

there is going to be a significant increase or even a minor increase, 

because the cost to us right now is exorbitant. We call it the price 

of paradise. One of the things that we have to do-and this goes 

back to market again-is, we pay that. We don't like it, but we pay, 

but we sure don't want to have to pay any more in the process. 

Now the low sulphur fuel that characterizes the shipments from 

Alaska is what we use, and our refineries are capable of using it, 

and we have that relationship. 

So what I really need to know from you, inasmuch as it is excess 

then, can an arrangement be made either by way of legislation, or 

does the legislation, in your opinion, now, as written, in such a way 

as to protect the market that we have in Hawaii? 

Ms. ADAMANY. I think there are really two separate questions 

you are asking. One is about the security of supply to the State of 

Hawaii. 

Mr. ABERCROMBIE. That was implied, you are right. 

Ms. ADAMANY. And the second part of that question was concern 

over the potential price increase to the consumer. Let me talk 

about those two things separately. 

First of all, I would agree with all the comments you have heard 

so far from other people who have testified that while yes, we expect that the price of crude oil would increase somewhat, rather 

modestly in the scheme of things, that does not translate or should 

not translate to an increase in the product prices at the consumer 

level. The reason, very simply speaking, is that product prices in 

the State of Hawaii, for example, and certainly on the west coast, 

are dictated by world market economics. That is not the same case 

for the price of crude oil where the restricted marketplace that we 

are dealing with now forces our prices to be depressed relative to 

crude oil prices. 

What I'm saying is that, quite frankly, for over 20 years the west 

coast refiners and the refiners in the State of Hawaii have enjoyed 
42 

relatively low acquisition costs for crude oil but have not passed 

that along to the consumer because they are able to set their gasoline prices, for example, based on world market conditions. 

So I'm in complete agreement with other testimony you have already heard that the consumers in the State should not see a significant price increase, if any at all. 

Mr. ABERCROMBIE. If I can interrupt, depending then on what 

the refiners do, you are saying, this is not a question of supply, 

even the security of supply, not a question of the crude oil, it is a 

question of what the refiners are going to do once they acquire it. 

Ms. ADAMANY. It is a question of what the refiners do, but, again, 

because their price is going to be dictated by alternative supplies 

that would compete for Hawaiian business, their ability to pass 

through price increases is capped by a price that the world market 

would see and have incentive to bring gasoline, for example, from 

offshore. 

Mr. ABERCROMBIE. Right. 

Very quickly on that, we have got to go to places like Oman or 

Ecuador. The logistics are horrendous. The logistics also could be 

interrupted by closing off the Straits of Malacca or something like 

that. There are all kinds of difficulties. One would presume that if 

we are thinking about domestic producers, Alaska, Hawaii, and 

there is an increase, if not an increase in production, an increase 

in availability, that prices would go down. 

Ms. ADAMANY. Again, if we were enjoying a normal set of world 

supply/demand factors you would be exactly correct, but we are not. 

Mr. MILLER. Would the gentleman yield? 

Mr. ABERCROMBIE. Certainly. My time is up, however. 

Would you grant another minute? 

Mr. COOLEY. We will extend the time. 

Mr. ABERCROMBIE. Thank you. 

Mr. MILLER. The suggestion is, therefore people on the west 

coast, when the world price of oil goes up, the west coast is in a 

surplus market and the price of gasoline goes up on the west coast 

just like it does on the east coast, because it does. What really then 

has been going on, as your testimony, is that the refiners have 

been gouging the consumers on the west coast, because you are 

saying they cannot justify the increased price on product because 

they are buying at a lower price. 

Ms. ADAMANY. I think the refiners on the west coast have enjoyed extremely high profit margins. 

Mr. MILLER. I didn't expect you to use "gouging," but they are 

arguing that their margins are as low as they have ever been at 

the current time. 

Ms. ADAMANY. They may be historically low, but relatively 

speaking, I would argue, they are still high compared to the rest 

of the United States. 

Mr. MILLER. So it really isn't a world price. OK. 

I just want to know why, when the price of oil is going to go up 

as a result of this act.ion, gasoline prices wouldn't go up then, but 

they have always gone up when the price of oil has gone up because of other actions. You are saying because now the refiners are 

going to decide, even though their margins are at an all time low, 

that they are going to eat that acquisition cost. 
43 

Ms. ADAMANY. I would argue that supply/demand economics will 

not allow them to pass it through. 

Mr. MILLER. In this captive market where they have had a captive market, right. 

Mr. ABERCROMBIE. It is like sugar, Mr. Chairman. You are never 

going to see a lower price of sugar reflected in a candy bar. 

Mr. CooLEY. Let's not get into that. 

Mr. Farr. 

Mr. F ARR. Thank you. 

I'm just curious, the panel kind of stimulated an interesting 

thought here, and Mr. Marks said that there was a shortage of 

product on the west coast. 

Mr. MARKS. Yes. 

Mr. FARR. Is that true also in the Gulf refineries, and what kind 

of paradigm shift are you going to see by suppliers then if-where 

will the supply come from? Will it indeed come from California by 

more production on the west coast, or will it come from import from 

Mexico and BP's consortium in Columbia? What do you see this 

shift in the supply side--

Mr. MARKS. I'm not sure there will be a shift in supply side. 

Mr. F ARR. I mean supply source. 

Mr. MARKs. The source of light product? 

Mr. FARR. Yes. 

Mr. MARKS. I'm not sure there would be a significant shift. I 

think the point is that the sources that are there now will continue 

to be there, and since the prices to a refiner, say, in Canada or the 

Gulf coast, the price of their crude won't go up as a result of lifting 

the ban, their prices stay the same, so the price of their product 

that they sell on the west coast will be the same, and if there is 

any attempt by west coast refiners to increase prices to the 

consumer, there would always be a supply of lower price product 

from the Gulf, from Canada, from overseas, that would be more attractive, and I think that puts the ceiling--that is the natural ceiling on why product prices won't increase. Mr. FARR. Mr. Hoffman, you have stated this will increase production in Kern County. 

Mr. HOFFMAN. Yes, sir. Mr. FARR. Have you got any estimates as to what that would be? 

Would it be true for Monterey County too? 

Mr. HOFFMAN. Probably especially for Monterey because in 

southern Monterey County most of that production is very heavy 

and it is very price sensitive, so to the extent there is an increase 

in price, it is going to be very price elastic. So I would think yes, 

there would be some production increase in Monterey County. 

Mr. F ARR. Have you done any estimates as to what the revenues 

would be to those counties? 

Mr. HOFFMAN. No, I haven't done any specifically. In Kern County we have taken a look, which I don't have right now with me, 

but we have taken a look at the impact that it would have on property taxes. That is pretty easy to do because we do have an ad valorem tax issue pointed out earlier. But I have not done anything on 

Monterey County. I think the DOE may have looked at the -,rarious 

counties. 
44 

Mr. FARR. Just simply, do you think that there will be more production in California because of this, or where we in California 

would look for other import markets? 

Mr. HOFFMAN. Absolutely, I think there would be more production in California as a result of lifting the ban. 

Mr. F ARR. So we are not going to just shift from Alaskan tankers 

to South American tankers coming north. 

Mr. HoFFMAN. No. I think the Alaska production wil.l continue to 

come to California, but it will come at world market prices rather 

than a depressed price. 

Mr. F ARR. Does anybody on the panel disagree with that? OK. 

The CHAIRMAN. Is everybody through? 

Mr. ABERCROMBIE. Mr. Chairman, can I follow up on one--

The CHAIRMAN. Whatever you wish, sir, just within an amount 

of time though. 

Mr. ABERCROMBIE. Yes. I do appreciate that because we don't 

necessarily have another chance, Mr. Chairman, and I appreciate 

your indulgence. 

Ms. Adamany, I want to make sure that I understand the shipping question because I would like to say, as Mr. Young knows 

very well, I'm very adamant about merchant marinE! recovery in 

this country, including American-built ships, not only American 

sail and American flag but American built and repaired. Am I in 

a difficulty then, a dilemma, where my principles will <:rash against 

the reality of American-built ships or the lack of American-built 

ships with respect to the shipment of oil then to Hawaii? 

I'm already in a difficulty because if there is increaSE!d production 

of oil in California it is not necessarily the kind of oil that we could 

use most efficaciously in Hawaii, so I can't necessarily look to the 

coast. I have a Jones Act situation that I have to deal with there. 

How would that affect it? I'm thinking about having the ship stop off. You are going to Japan, you are going to the Far East, you can 

stop off in Hawaii, but if it is not an American-built ship, then I've 

got a problem with the Jones Act, right? 

Ms. ADAMANY. It is not the Jones Act so much as--let me back 

up and say that, first of all, over a year ago our initial position, 

as BP, in order to secure lifting the ANS export ban was to in fact 

require U.S. built, U.S. flag, and U.S. crude ships. It was subsequently that we were informed that the U.S.-built stipulation 

might be in violation of international trade agreements, and on 

that basis only we have retreated from that position being written 

into the legislation. 

Having said that, while we don't want to appear to be in violation of international trade agreements, BP would say that we 

would certainly look to U.S. shipyards for new build requirements 

as long as the rates are competitive with other alternatives. 

That does lead me to another point though. You have heard Mr. 

Turner testify earlier that he has got a number of ships, Jones Act 

ships; therefore U.S.-built ships, currently in lay-up, and should 

this ban get lifted--

Mr. ABERCROMBIE. We could get them out. 

Ms. ADAMANY. We would envision the employment of the ships 

that are currently in lay-up, and so between the ships that are currently in use today along with the ships that are in lay-up, we 
45 

would expect there to be an adequate supply of tonnage for the 

foreseeable future without actually having to commission new 

building. 

Mr. ABERCROMBIE. OK. So might the Chairman be able to look 

at this legislation from the point of view, if it needs to be added, 

of trying to encourage the introduction of those ships into the 

trade, if that might be possible? 

Ms. ADAMANY. Requiring that-if additional tonnage is a requirement, that existing Jones Act tonnage be used? 

Mr. ABERCROMBIE. Be used first or looked to first? That wouldn't 

violate any agreement. Those ships are already built. 

Ms. ADAMANY. While I would personally notMr. ABERCROMBIE. I'm not asking you to rule on a point of law. 

Ms. ADAMANY. No. I was going to say, I'm not an attorney, so I 

really can't give you an opinion on the legality of that. 

Mr. ABERCROMBIE. From a policy point of view, would BP be willing to adopt that in order to advance this, if that was one of the 

policy questions? 

Ms. ADAMANY. Using existing Jones Act ships? 

Mr. ABERCROMBIE. Sure. 

Ms. ADAMANY. Certainly. 

Mr. ABERCROMBIE. Good. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. You are welcome, and the panel is dismissed, but 

the gentleman from Hawaii brings up some valid points. I have not 

analyzed this with lawyers on international trade and GATT. That 

is another reason I voted against GATT, by the way. And I want 

to compliment BP because that was their position, and I think it 

is the right position to have. We may want to look at this as this 

legislation evolves. 

Mr. ABERCROMBIE. I don't think it does violate it, but I'm not a 

lawyer either. 

Mr. MILLER. I'm a lawyer, and I don't think it violates it. 

The CHAIRMAN. All right. 

You are excused. Thank you for being here. 

The CHAIRMAN. The next panel is Mr. Peter Sutton, Mr. Nolan 

Hancock, and Mr. Thomas Jones, Junior. 

Gentlemen, under the same agreements you will be given, with 

the lights, the time, and if you have a longer written statement 

please submit it for the record. We look forward to your testimony. 

Mr. Cooley. 

Mr. CooLEY. Mr. Chairman, could we hear also from the Port of 

Portland? 

The CHAIRMAN. He is going to answer questions? 

What is your name. 

Mr. DECKER. Tom Decker with the Port of Portland, Portland 

Shipyard, and I have been invited to join the panel just in case 

there were questions related to us. 

The CHAIRMAN. That is fine, just for identification. 

M:r. Sutton, proceed. 

STATEMENT OF PETER A. SUTTON, SENIOR VICE PRESIDENT, 

TOSCO REFINING COMPANY, CONCORD, CALIFORNIA 

Mr. SUTTON. Thank you, Mr. Chairman. 
46 

My name is Pete Sutton, vice president of TOSCO. I would like 

to thank you again for inviting us to another hearing on this very 

important issue and especially the fact that we are opposing H.R. 

70. 

With me today are senior executives from other west coast independent refiners, namely Ultramar, Powerine, U.S. Oil and Refining, and Kern Oil and Refining, and the independent refining sector on the west coast produces and sells about 25 percent of all the 

gasoline transportation fuels in that market. Each of us has submitted a prepared statement to the committee and request that 

they be included in the record. 

TOSCO itself is the largest independent refiner and purchaser of 

ANS oil. We have two refineries on the west coast, one in California and one in the Northwest in the State of Washington, and we 

process about 180,000 barrels a day of ANS crude and also 65,000 

barrels a day of California crude. 

Data from the State of Alaska shows that on the west coast we 

are going to be crude deficit within two to three years, and that includes the State of Hawaii when we say west coast in all my comments today. 

Mr . .ABERCROMBIE. Thank you. 

Mr. SU'ITON. Therefore, with regard to the proposed exports I 

would like to emphasize three points. 

First of all, ANS is currently selling on the west coast at a price 

which is at world parity, and allowing exports would simply increase the ability of just one company, British Petroleum, to greater manage the supply and the price of ANS oil. 

Second, the west coast refining industry is experiencing severely 

tight operating margins, and the price increase above world parity 

which will result from exports would threaten the economic viability of west coast independent refiners and thousands of family 

wage manufacturing jobs. 

Third, allowing exports will result in relatively little, if any, net 

increased investment production and employment in Alaska and 

California as claimed by the Department of Energy. Since 1991, the 

price of ANS has increased by almost $3 a barrel relative to the 

world benchmark price of WTI, West Texas Crude. The result is 

that ANS is currently at world parity, and this fact has been ac- knowledged by the Alaska Department of Revenue :in their Spring 

1995 report. 

British Petroleum is the largest producer, as we all know, and 

controls about half of the ANS crude. They are tht~ primary spot 

market seller of ANS to independent refiners. Other major oil company producers of ANS onll occasionally offer to sell spot volumes 

of ANS, and in fact one o them has been in the market buying 

ANS crude oil. That tells you how short this crude is becoming. By 

controlling the supply of oil delivered to the west coast and Gulf 

coast markets, British Petroleum has effectively managed the price 

of ANS on the west coast and driven it up to world parity. 

If Congress allows unrestricted exports, the price will be bid up 

above world price parity because some refiners cannot readily import substitute foreign oil due to various logistical and quality constraints. This will permit the primary seller of ANS to extract a 

premium for it above world price parity. Thus, allowing exports of 
47 

ANS would increase the ability of a major foreign company to exercise its already considerable market power over the supply and 

pricing of ANS on the west coast market at the expense of independent refiners and ultimately consumers on the west coast. 

I want to stress that the increased price of ANS relative to world 

prices has been a major factor in the recent dramatic decline in 

west coast refining margins. In fact, gross refining margins on the 

west coast have decreased about the same $3 per barrel since 1991 

as the increase in the ANS price, and in fact west coast refining 

margins have fallen to their lowest levels in 10 years. Unlike the ANS market, the gasoline market is very competitive 

on the west coast. If TOSCO was forced to absorb further increases 

in the price of ANS, we may face the decision whether or not to 

close one or both of our west coast refineries, which would mean 

the loss of hundreds of well paid manufacturing jobs, and I dare 

say taking that much gasoline out of the marketplace will certainly 

increase the price of gasoline, there is little doubt about that. 

In fact, during the past two months we have been forced to reduce employment at our California refinery by 80 employees. This 

week layoff notices have been given to about an additional 100 employees in California, which represents 25 percent of our salaried 

staff. These are real jobs being lost today, not the promises of 

phantom jobs by the other side. In addition, discussions are ongoing with our unions regarding even further job cuts. 

Contrary to claims by the DOE, the damage to the west coast refining industry and its employees from ANS exports would not be 

offset by a net increase in oil production and oil field employment 

as forecast by that department. In the case of Alaska, these forecasts are based on the totally--

The CHAIRMAN. How much more time do you have? 

Mr. SUTroN. Two minutes. 

The CHAIRMAN. All right. Make it a minute and a half. 

Mr. SUTrON. All right, sir. 

The CHAIRMAN. The reason I say that: I have got another appointment at two o'clock, and I still don't want to cut you short and 

ignore the other people for questions, OK? 

Mr. SUTrON. Well, I'll make the point as far as the production 

issue and the increase. The oil price of ANS has gone up $3 a barrel since 1991 relative to the world oil price. It is up at world parity, and yet production has continued to decline. One has to ask, 

why do we think an increase of 50 cents to a dollar is going to drive 

prices up or drive production up further and create 25,000 jobs? In 

fact, the jobs issue is one where there are only 34,000 jobs in the 

entire industry on the west coast, including Alaska and California. 

If you produce an extra hundred thousand barrels a day, which is 

claimed by the other side, how are you going to increase jobs almost 100 percent? The math doesn't compute. 

The same issue in regards to the jobs pertains to California. 

Their price has gone up $4 a barrel in the last four years relative 

to world oil prices, and their production continues to decline. They 

are not adding jobs, they are not adding production. So why is a 

50 cent to a dollar increase going to automatically increase production? We wish it would, but we don't think it is going to happen. 
48 

So I'll just summarize the following, Mr. Chairman. Allowing exports of ANS will only, first of all, we believe, strengthen British 

Petroleum's already substantial market power over the supply and 

price of ANS oil, threaten the economic viability of independent refiners, jeopardize family wage refining jobs, and ultimately lead to 

higher prices for consumers on the west coast because refiners will 

not survive, they cannot continue to absorb these increases, and 

what you finally do is shift the energy security to the Far East, little doubt about that, and with, we don't think, any offsetting benefits. 

Thank you for your time, Mr. Chairman. 

[The statement of Mr. Sutton may be found at end of hearing.] 

The CHAIRMAN. Thank you, Mr. Sutton. 

Now we have Mr. Hancock, citizenship/legislative director, Oil, 

Chemical and Atomic Workers International Union. 

STATEMENT OF NOLAN W. HANCOCK, CITIZENS/LEGISLATIVE 

DIRECTOR, OIL, CHEMICAL, AND ATOMIC WORKERS, LAKEWOOD, COLORADO 

Mr. HANCOCK. I thank you, Mr. Chairman and members of the 

committee. 

I would request that my written statement be entered into the 

record as printed, and I will summarize some of the important 

points. 

Our union strongly supports the extension of the 'existing statutory restrictions on the export of Alaska crude. This has been our 

position for almost two decades, and it remains our position today. 

Mr. Chairman, it is important to remember why the restrictions on 

Alaska oil exports were adopted in the first place. In 1973 Congress 

passed legislation authorizing the construction of the Trans-Alaska 

Pipeline. As part of the agreement to pass this legislation, Congress required that none of this oil would be exported unless the 

President and Congress found that it was in the national interest 

to do so. These restrictions were passed because Congress wanted 

to reduce our dependence on foreign oil. They didn't want the State 

of Alaska or any multinational oil company deciding what was in 

their best interest in making more tax revenues or profits. 

At the time that the U.S. experienced its first interruption in foreign oil, in 1973, we depended on foreign oil for about a third of 

our domestic production demand. Today we depend on imported oil 

for over a half of our needs. It simply doesn't make sense to export 

Alaska oil and import more oil to replace it. That just puts us more 

firmly in the hands of oil-producing nations that have shown that 

they are politically unstable. 

It is important to remember that the AFL-CIO strongly supported the development of the Trans-Alaska Pipeline with the condition that there be strong export restrictions. That remains the 

AFL-CIO position today. We in OCAW fought hard to get those restrictions enacted in 1973, and we have continued that fight ever 

since. When those restrictions were enacted an entire refining and 

transportation infrastructure was developed on the west coast to 

handle the Alaska oil. Thousands of U.S. jobs have been created. 

Exporting Alaska oil amounts to an export of all too many of those 

U.S. jobs. This country can ill afford another policy which sends a 
49 

precious crude resource abroad where the value-added work is done 

by foreign workers. 

Mr. Chairman, we know the State of Alaska supports the export 

and it will gain tax revenue if H.R. 70 becomes law, and we know 

that British Petroleum will save transportation costs and shipbuilding costs, but we also know that our members and thousands 

of other U.S. workers will be the biggest losers if exports are permitted. Whatever small increase in Alaska production which export 

proponents claim will occur is completely overshadowed by the loss 

of refinery jobs that will occur on the west coast, not to mention 

the loss of shipyard repair and construction jobs. 

Let there be no mistake, Alaska oil exports will cost thousands 

of American men and women their jobs. Many west coast independent refineries depend on the supplies of Alaska crude oil. If that 

oil is exported, they will have to pay more to get replacement oil 

from the Mideast carried on foreign flag tankers. 

The U.S. refining industry is already threatened by gasoline imports from low-cost foreign refiners, which are typically Government owned, which are not subject to strict U.S. environmental and 

safety standards. U.S. refiners will face an additional competitive 

disadvantage if their preferred Alaska crude oil supplies are diverted to the export market. 

With competition from low-cost foreign refiners and rising crude 

oil costs, the west coast refining industry is currently facing its 

most difficult operating conditions in a decade. Several refineries 

have been forced to close, and others are reporting operating losses. 

In California alone, employment in the refining industry has declined from 23,000 to less than 19,000 in 1994. If west coast refiners lose their supply of preferred Alaska crude feedstocks, the higher cost of using foreign oil will further undermine their competitiveness. That will inevitably lead to further refining job losses. 

I want to remind this committee that the west coast contains one 

of the most modern, sophisticated, and complex mining industries 

in the world. Our Nation simply cannot afford further harm to this 

crucial part of our domestic manufacturing base. Our union is particularly concerned about the risk that the Alaska crude oil would be replaced by gasoline and other refined products from foreign refiners. Foreign refiners are not subject to the 

strict U.S. environmental and safety standards. If they are allowed 

to take the crude oil from Alaska and replace it with finished product that is marketed on the west coast, this would constitute a direct displacement of U.S. refining capacity and U.S. jobs. 

Over the past decade more than 100 domestic refineries have 

been forced to close, resulting in the loss of nearly 50,000 well paid 

manufacturing jobs. Any further reduction of U.S. refinery capacity 

would mean further job loss. 

The CHAIRMAN. How much more time do you need? 

Mr. HANCOCK. About one more minute, sir. 

I would like to close with the following. I have a letter that I received yesterday from a refinery worker in Martinez, California, 

and he says, ''The Avalon refinery that I work in has been here for 

over 80 years. My grandfather came to work here in 1928 as a stable boy fresh out of high school, and he has worked his way to shift 

foreman over 45 years. He believed this was a good place to work 
50 

and to provide for his family. I have followed in his footsteps, as 

did many of my coworkers followed their fathers and grandfathers. 

Our livelihood is in jeopardy due to the cutthroat nature of the oil 

industry, the general sorry state of the economy, and now by the 

possibility of losing the very lifeblood of our refiner~ our jobs are 

in serious jeopardy," and he says let those folks in Congress know 

that we put them there to protect our interests, not just those of 

a few big companies. 

Ours is a little company by oil industry standards, but these are 

good people, and we will not only supply but we will prosper given 

the opportunity. 

Thank you, Mr. Chairman. 

[The statement of Mr. Hancock may be found at end of hearing.] 

The CHAIRMAN. Thank you. 

Now we will have Mr. Jones. 

STATEMENT OF THOMAS P. JONES, JR., CHAIRMAN, SHIPBUILDERS COUNCIL OF AMERICA, ALEXANDRIA, VIRGINIA, 

ACCOMPANIED BY TOM DECKER, PORT OF PORTLAND, OREGON 

Mr. JONES. Thank you, Mr. Chairman. 

My name is Thomas P. Jones, Junior, vice president of Atlantic 

Marine Holding Company of Jacksonville, Florida, and I'm chairman of the board of directors of the Shipbuilders Council of America. 

Mr. Chairman, I have a written statement which I would ask be 

entered into the record, and I will very briefly summarize a few of 

the key points. 

I will start out that I do represent the Shipbuilders Council 

whose members are builders and repairers of Jones Act tonnage. 

We represent private shipbuilding, ship repair yards, marine suppliers, and naval architects. 

The Shipbuilders Council categorically opposes lifti.ng the ban on 

export of Alaskan oil. The Council originally opposed utilization of 

U.S.-built ships because we believed it would violate the GATT 

agreement and the agreement to end shipbuilding subsidies which 

was finalized last year under the OECD. The existing proposal to 

limit this c~rriage to U.S. flag, U.S. crewed ships, will also face 

GATT and bilateral treaty challenges. We further believe that the 

seagoing unions which actively support this proposal will eventually see their job opportunities in this trade exported overseas. 

We have already had indications that our foreign trading partners will object to these provisions. The ambassador from Denmark 

has written a letter to certain Members of Congress opposing this 

legislation because they find that such provisions are deeply objectionable, they are discriminatory, they constitute a threat to the 

system of international free trade, and the provisions would contravene the U.S. international commitments and obligations and 

depart from normal commercial practice, and the provisions for restricting the types of ships also represent a material and significant breach of U.S. obligations as entered into in bilateral treaties 

with a number of governments. 

The ambassador stated that grave concerns that he e:l{pressed 

are shared by the Governments of Belgium, Denmark, Finland, 
51 

France, Germany, Greece, Italy, Japan, the Netherlands, Norway, 

Portugal, Spain, Sweden, the United Kingdom, and the Commission of European Communities. What this leads me to conclude is that the legislation will come 

under attack in international forums, and how that all turns out 

is of grave concern to us. 

Recently Mr. Roger Clarke, chairman of the Consultative Shipping Group, composed of 14 nations involved in international 

trades with the U.S., stated that, "countries are very angry and 

concerned that their treaty rights will be violated," and nine of 

those 14 nations have bilateral shipping agreements with the United States. So we see that our trading partners see this as a violation of GA'IT and existing bilateral treaties, and therefore we expect there will be significant challenges if this is enacted. Let me talk a little bit about job loss in our industries. We have 

done some analysis of the implications of job loss. First of all, I 

think the Port of Portland will confirm that they see some 500 to 

800 jobs lost in the Port of Portland alone. According to our own 

analysis and to some independent oil and shipbuilding industry 

economists, there will be some 8,000 to 10,000 jobs lost in our industry if this bill is passed. 

The threat to the Jones Act posed by this bill is very real. Thousands of American jobs in ship, boat, and barge construction and 

repair yards are at risk, as are thousands more seafaring union 

and nonunion jobs. 

The recently completed OECD shipbuilding agreement leaves the 

Jones Act as the only long-term assistance program for U.S. shipyards. We need Jones Act tanker construc:;ion to build the base 

from which to compete in the international marketplace. If the 

Jones Act falls or is significantly weakened and if OPA 90 is significantly weakened, U.S. shipbuilding and ship repair will be devastated. In addition, we believe that if all Alaskan oil were exported, which is unlikely, but if it were, U.S. oil imports would rise 

from their present level of about 52 percent to over 60 percent, and 

by any standard U.S. interests are not served by an avoidable increase in our national dependence of foreign oil. 

Mr. Chairman, thank you very much for your attention. 

[The statement of Mr. Jones may be found at end of hearing.] 

The CHAIRMAN. I thank you. 

I'm just very curious, and I understand each one of our groups 

are opposing this, but I'm very curious, especially on this shipbuilding. I don't buy our neighbors telling me GATT is going to interfere. We are the only nation in the world that doesn't have a cabotage law. Now how and where do our trading partners get off telling us what to do? I mean that is pure nonsense. I voted against 

GATT. I hope you didn't support GATT. If you did, I'm disappointed. 

Secondly, I think this Congress has the right to do anything it 

wants to do and I agree with the idea of American flag, American 

crude, and I had American built in my original bill, and BP supported that, and I think that at the appropriate time it would be 

right to go back to the American-built ship and then let one of 

those countries disagree with us and find out who is going to win 

that battle. That ought to take care of your problems. 
52 

I mean as shipbuilders you ought to love that, because that 

keeps the Jones Act in place, keeps the repair work in your yards, 

and what are you going to lose? 

Mr. JoNEs. If the administration and future administration and 

the Congress take that attitude, there would be nothing to lose, but 

I think to bet the future of our industry on the resolution-that 

kind of resolution and forthrightness that you have stated--

The CHAIRMAN. I resent another country telling us we can't export something that we wish to export on our ships when they do 

it themselves. Is that correct? It is correct. If you look at the percentage of every country, including Denmark, including Norway, 

including Britain, including Japan and Korea, what they export 

has to be on their ships, or a large percentage of it, and here we 

are, the biggest importer, the biggest exporter, and we don't use 

our ships, and they are telling us that we can't use our ships. Now 

that, to me, shows very little credence. 

I mean I'm not lecturing you. I have never understood that battle, why we can't in fact, as a Congress and with your industry, 

quit responding to every little penny-ante country telling us we 

can't do something. That is what I'm saying. Maybe I'm wrong. I 

have never understood this whole argument. 

Mr. JONES. You are not wrong. 

The CHAIRMAN. OK. And you are a shipbuilder. You know I support your industry. I think we are so far behind. The seafarers are 

trying to defend what few jobs they have got left. We ought to be 

united on this thing, and this is not just oil, as all the things, grains and everything else-timber, by the way, talking about 

15,000 jobs, you know, all shipped on foreign-bottomed ships. I 

think that is wrong, but I understand your position, I understand 

why you are saying what you are saying. 

The only question that I have for my good friend, Mr. Sutton: 

Who owns those private refineries? Who is the parent company? 

Mr. SU'ITON. In our company it is TOSCO Corporation. 

The CHAIRMAN. Where are their headquarters? 

Mr. SU'ITON. The headquarters are in Connecticut, but we have 

three operating companies. We have got the TOSCO Refining Company, which I'm aff'!liated with, in California; we have got TOSCO 

Northwest Company, which is in the Seattle area and has a refinery in the Northwest; and we have the Bay Way Refining Company, which is the largest refinery in New York Harbor on the east 

coast. So there are really three companies that roll up to the corporate head office. 

The CHAIRMAN. That was alluded to by a gentleman a while ago. The Coalition to Keep Alaska Oil has argued that Alaskan oil is 

sold at a discount on the west coast. Have you or any other independent refiners shared that discount with your consumers? 

Mr. SU'ITON. In the past? Is that your question? 

The CHAIRMAN. Present, past, or in the future. 

Mr. SU'ITON. That goes to the issue of margins, refining margins, 

and the data in the DOE study boggles my mind, Mr. Chairman, 

how they came up with the data they came up with. 

The CHAIRMAN. Along those lines, can you cite any documents 

that dispute what they had said? 

Mr. SU'ITON. Absolutely. 
53 

The CHAIRMAN. Outside your regime. 

Mr. SUTTON. We can give you data which shows that the refining 

margins on the west coast have been declining steadily and that 

the refining margin-you see, they refer to gross margins. That is 

a smoke and mirrors. The gross margin has nothing to do with 

your profitability. You have to go to the net margin. We have the 

highest refining costs in the world, because of environmental, because of the type of crude oil we process. So when you get to the 

net margin and you compare that across the country, all the refining regions, we compare very favorably. This notion that we are out 

here and the rest of the world is here is absolutely false. The CHAIRMAN. OK. I would like to see those, just out of curiosity. 

My time is just about up, but one question for my friends from 

the unions there. Have you made a point of studying why those refineries have closed down in California, the loss of work? 

Mr. HANCOCK. We have not made a study, no, but I can tell you 

that back during the early eighties when we were opposing the de- control of oil and the companies were telling us that we wouldn't 

be losing refineries because of that decontrol, we lost 136 refineries, 

over 50,000 members of my union, because of that particular piece 

of legislation. 

The companies are telling us now that the margins are so low, 

and you just heard the gentleman say that they are now in the 

process of laying off additional workers. It is these jobs that we feel 

are in jeopardy, and the workers in those plants are certainly telling us that those jobs are in jeopardy. The CHAIRMAN. The thing that concerns me the most: I think if 

you will check out why most of them closed, it wasn't because of 

the inability of feedstock, it was all the other things we piled on 

to the industry. There are no new refineries being built, as you well 

know. Mr. HANCOCK. From the analysis that we did at that time, it was 

that the feedstocks ended up costing more than the value of the 

gasoline that they were able to sell. 

The CHAIRMAN. Again, we have not encouraged any domestic pro- duction in the United States, we are importing everything now, by 

the way on foreign bottom ships, not one gallon of gasoline that 

comes-m jet fuel that comes into the United States on one of our 

ships, and that is what we are driving our cars with. 

Anyway, my time is up. 

Mr. Miller. 

Mr. MILLER. Thank you, Mr. Chairman. 

Mr. Sutton, I share your concerns that the Department of Energy 

study draws some conclusions based upon some evidence that just 

isn't consistent with the information that we have about the indus- try across the board on the west coast. 

I just sat through the presentation where one of the refiners in 

my district-you know, there is a process which refiners go 

through, and they are compared to all of the other refineries and 

it is an annual thing that all refiners do to see kind of where they 

are. I forget the name of the fellow that does it. 

The fact is, they are very competitive in every part until you get 

down to margins, and these margins on the west coast are in fact 
54 

very small and very tight, and the question-one of the questions 

I would have for you, in that you run both California crude and 

Alaska-what happens if you have to back out, if the availability 

of this crude is not available? What are the dynamics of replacing 

that with California crude? 

Mr. SUlTON. If ANS is not available? 

Mr. MILLER. In the amount that you would need. 

Mr. SUTION. In the amounts that we need. If it is exported, the 

notion that we are going to substitute barrel for barrel heavy California crude oil is incorrect. We have been stating this for years, 

and it is the following reason. That crude oil is not of like quality. Number one, it is a much heavier, low quality crude oil. It takes 

certain processes to turn it into gasoline. 

Keep in mind, the west coast is a gasoline market, it is not a fuel 

oil market, and if you take heavy crude oil and you process it beyond the capability of the units you have to make gasoline, you 

wind up making fuel oil, and therefore you have to export the fuel 

oil, and that is why the heavy crude oil price is driven to a great 

extent by the fuel oil price, the incremental barrel it makes, and 

it moves with that price and with foreign, offshore heavy crude 

prices. 

So we would not be substituting barrel for barrel. What we would 

be doing is going offshore to find some kind of crudH that was compatible in quality to the ANS, whether it be Oriente or some crude 

from Latin America, Oman, whatever, and with all the problems 

attendant with bringing that kind of crude in. 

There was some comment earlier regarding environmental risks, 

and the comment was that, gee, we are going to be having less 

tankers coming in and out of the west coast if we export crude oil. 

Not true. When we bring in foreign crude oil, we have to lighter 

that crude oil into multiple ships in the San Frandsco Bay. Here 

we are talking the most pristine bay in the world probably, and we 

are going to do multiple, multiple lighterings. This is a risk that 

our company is scared to death about, quite frankly. 

Mr. MILLER. What bothers me is the suggestion that there is 

going to be an increase of jobs in Alaska because BP is going to 

reinvest 100 percent. There is no indication of anything in that 

company that suggests they are going to reinvest 100 percent. The 

suggestion is that you will easily replace this with California crude, 

thereby increase the price of California crude to those people, and 

yet you are saying in your company that that is not available to 

you, and then there is no benefit in the balance of payments here 

if you are going to go offshore to retrieve the oil that is not available to you from Alaska, or certainly it is diminished, from what 

DOE talks about. 

Finally, on this point that the Chairman has raised and Mr. 

Abercrombie and myself and others, I'm looking at minutes of a 

meeting that was held with the State of Alaska on April 7-21, excuse me-or I think the meeting was on the 7th, and Roger Gale 

of BP Shipping estimates that export to Asia would require fewer 

vessel calls at the Alyeska Terminal rather than more, citing figures of the average vessel tonnage required to move a barrel of oil 

to a given estimation, that they may step up the class of tanker 

I guess is what that suggests coming there, and yet the person sits 
55 

at the table here from BP and says, oh, we are going to take these 

ships out of mothballs and we are going to bring them back. 

Something is not right here. I mean the evidence for this policyand I understand why many people want the policy change, but the 

evidence is sort of these shifting sands. You can't quite get your 

hands on it in terms of getting it tied down, and it is inconsistent 

with what we know happens on the ground in terms of operations 

and procedures, and even in the case of the shipping, whether 

these are going to be American bottoms, whether it is going to increase jobs, the suggestion is almost the opposite, because the size 

of the tanker doesn't equate to increased jobs, and if you are going 

to have fewer runs, if you get into the Asian market, I suggest that 

the dynamics, at least in my mind, they are not quite as settled 

as people have made to make this decision. 

The CHAIRMAN. The solution, if the gentleman will yield, is of 

course, as I said, to build American ships, and that solves the 

whole problem. 

Mr. MILLER. That solves part of the problem, it doesn't solve the 

refining problem. 

The CHAIRMAN. There are ways that can be done. 

Mr. MILLER. Let me ask you a question about the issue of access 

versus price. One of the concerns would be that if BP, which controls 40 percent of this operation, decides not to sell into the west 

coast but to sell somewhere else, for whatever reasons, then you 

have got to go out and look for that other oil. Is there an issue here 

about having access to an historical amount of oil for your refinery, 

the refinery in Washington? 

Mr. SUTTON. The issues are linked. I think access and price are 

linked. 

Mr. MILLER. I know they are linked, but this Congress is probably never going to get back into the business of controlling price. 

Mr. SUTTON. Access to the oil is very important to us, quite 

frankly, but the thing that concerns me is that BP may control 40 

percent of the oil but they might as well control all of the oil from 

the standpoint of its impact on availability and price. If we had to 

choose one over the other, if we have availability and the price isn't 

right and we are absorbing it, we are just going to be out of business that much quicker, so there is a linkage there. 

The CHAIRMAN. Would the gentleman yield? I'm not about to sit 

and say you're going to set the price that makes you profitable. 

That is not fair. Now what you need is, you need accessibility to 

that oil. Now if the price is different, that is your problem. You can 

move it on to the consumer. 

You just said what has been my problem. Your refineries have 

had the challenge of having not only guaranteed supply of oil but 

also fixing the price and the profit level. Now your margins may 

be smaller, but you are guaranteed a profit. I don't think that is 

cricket. 

The gentleman from Oregon. 

Mr. COOLEY. Thank you, Mr. Chairman. 

I would like to ask Tom Decker some questions, because he came 

all the way from Portland, Oregon, and it is something that very 

much concerns us. 
56 

The CHAIRMAN. I appreciate that, and, Tom, we aren't ignoring 

you. You were supposed to be there to answer questions according 

to my people, but go right ahead. 

Mr. COOLEY. Right. 

Tom, would you tell the subcommittee why the port made that 

huge investment in the shipyards that we built there. 

Mr. DECKER. Let me give you a quick bit of background. We are 

a repair yard, not a new building yard. The improvements in the 

yard were financed by an $84 billion bond measure by our taxpayers in 1976. That was predicated to a large degree on Alaska 

oil supplies and the congressional action to limit the export of Alaskan North Slope oil. So Alaska oil has figured importantly in our 

success over the years. 

I think the key I would talk about today though is the fact that 

it is not really the port that is at risk here in this equation, the 

folks who are at risk in Portland are the shipyard workers and the 

taxpayers who would have to foot that bill if it goes back on the 

tax rolls. 

Mr. CooLEY. How much was that bond? 

Mr. DECKER. The bond was for $84 billion in 1976. 

Mr. CooLEY. Could you give me the impact on the jobs in the oil 

tanker business in Portland right now. 

Mr. DECKER. A typical tanker repair job will take between 300 

and 600 workers while the vessel is in the yard. Given the number 

of vessels we do in a typical year, that equates to fiOO to 800 jobs 

right now that are directly related to Alaska oil tanker business, 

and when the yard is working -at full capacity those numbers are 

more like 900 to 1,200 family wage jobs directly related to Alaska 

oil tankers. 

Mr. CooLEY. OK. And then another thing: Under the present 

law, the U.S. flagships, aren't they required by current law to be 

repaired in U.S. yards? Is that true or not? 

Mr. DECKER. The law does call for repair in U.S. yards, but I 

think most people are aware that that law has been circumvented 

quite frequently in actual practice. In other words, a shipowner can 

usually have repair work done overseas and cite the fact that once 

they get into dry-dock emergency repair work is required. They do 

pay an ad valorem duty on some of those repairs when the ship returns to this country, but I think most of the committee members 

are aware, we expect that the administration is going to propose 

repealing that ad valorem duty in the near future, but even with 

the ad valorem duty in place it is circumvented so often that we 

don't think it is really effective. 

Mr. COOLEY. Thank you. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. 

One of the things we are having these hearings for, we are trying 

to look for solutions. I do want to lift this ban, and we can solve 

your problems, which I think can be done, because you are right, 

they have circumvented the intent of the law for repair. 

But my intent as I said, American crewed, American flagged, and 

American repaired, and that will solve a lot of our problems, and 

if we can figure out a way to get you a guaranteed supply of oil 
57 

at a reasonable world market price where you have access, we will 

solve your problems. You see, I'm solution oriented. 

My good Hawaiian friend. Mr. ABERCROMBIE. Thank you, Mr. Chairman. I realize you have 

an appointment right now, and I'll be very brief. 

First, I just want to say to you that I support your position with 

respect to the American-built ships. I don't think it is being arbitrary, I think it is well within the GATT principles. I don't think 

we signed away that element of our trade avenues. So I would like 

to see that in this legislation if that is your pleasure. 

We don't need to discuss it now, but I just want to indicate to 

you, I think your position is a sound one. 

And, Mr. Jones, I hope that you folks would have that in mind. 

I think you will find a lot of support in this committee across the 

board for that kind of legislation. I realize your testimony has to 

be based on the legislation that is in front of you as you look at 

it, but that doesn't prevent you from being able to make suggestions or to follow up. Then, Mr. Chairman, the last thing I want to say-and, Mr. Sutton, I think this applies to you and Mr. Hancock as well-is that 

I too am having a little trouble grasping the sand that seems to 

be here. It is running through my fingers. On the one hand I'm 

being told you have nothing to worry about, and logic dictates, any 

time I deal with logics and politics, I start quaking, and so with 

that in mind, Mr. Chairman, I'm just going to follow along and 

count on your good offices and my knowledge of you. I know you 

are going to try to make this as fair as you can all the way around. 

So I'll leave it at that for the time being and try to work with 

you and the staff to see that it is fair to everybody. The CHAIRMAN. I thank the gentleman. 

I want to thank the panel too. I know it is late, and you had to 

sit through this whole thing. In closing--

Mr. ABERCROMBIE. Mr. Chairman, excuse me. Before you close, 

may I have your permission and the committee's permission to submit questions to be asked for the record? 

The CHAIRMAN. Absolutely. 

Mr. ABERCROMBIE. Thank you. 

The CHAIRMAN. I'm here to solve problems. But do me one favor. 

I have little feelings for people that say no way, because that is not 

the way you solve problems, because you end up bringing them up 

against a brick wall. 

This does affect my State. We have lost millions of dollars because of this provision to my taxpayers too and to my people, and 

we are trying to make sure that we have created this challenge, 

that we take care of those that would be hurt but also give us an 

opportunity to do what we think is correct, because every time we 

use $1 or $1.50 or $4 a barrel, that I don't think is correct to a resource that belongs to the State of Alaska. This is not national oil, 

it is Alaskan oil, and we need every bit of benefit ourselves. 

So I thank the panel and the people who are here today, and this 

committee is adjourned. 

[Whereupon, at 2:11p.m., the committee was adjourned; and the 

following was submitted for the record:] 
104TH CONGRESS 

1ST SESSJO:\ 

58 

H.R. 70 

To permit exports of certain domestically produced crude oil, and for other 

purposes. 

1::\ TilE HOUSE OF REPRESE::\T.ATf\'ES 

JAXl.:ARY 4, 1995 

Mr. Tt!mtA.o.; (for himself, .Mr. Yorxu of Alaska. l\lr. Roli!L\l!Al'lii::H. :'llr. 

l>IHH,ITII,E. :\1r. DIHILEY, :\Jr. (l.\J,J,EGLY, and :\lr. AHC'IIEH) introdut•ed 

the follm,;n~r bill; which was refl'm•cl to til<' {'ommitt<•t• on lksoun.·c•s 11111!. 

in addition, to the Committt•t• 011 lntenmtionul Hclations. for 11 period to 

ht· suhs<•qucntly determinl'<.l h.'· til<' Speaker. in each cas<· for <'<>ltsidcrlltion of such prm;sions as fall \\;thin tht• jurisdiction of th<· <·ornmitt<'<' 

concemed 

:\lAY 4. 1995 

Additional sponsors: Mr. :lkCREHY, l\lr. Cox of Culifontiu, l\lr. C,\l.YEHT, l\1r. 

l.u\t:GIILI;);, Mr. E;);GLISII of Penns~·lyuniu , :llr. TACZI:'\, !llr. 

BALLE!'GEH, Mr. l''IELI>l' of Texas, .Mr. &n.mto:'\, !11r. PmtHO, :llr. 

J'ARKEH. 1\lr. STl:nns, :11r. :l!l'KEo:-;, l\1r. PI::TE UEHI::;); nf Texas. :11r. 

Btu:w:·nEI<. :llr. l"t.A:'\AGA..-.:. :llr. EDWAHils, :llr. CILAl'~!.\!'\, !\lr. HTDII', 

:'llr. TAYI..IIH of :\orth Can.>linu, l\lr. HKEE:'\, :llr. llcm.-.:. :llr. 

Ct.:;);XI!'GILA.\1, Mr. };E\\11' of California, 1\lr. DELAY, :lk Bo;);o, :\lr. 

Knt, Mr. GE!\"E GR££;); of TCX!IS, Mr. BoEHXER. Mrs. SE...\STHA..'\11, l\1r. 

1\.LUG, Mr. RoYCE. !\1r. MA..-.:TO!'i, Mr. llt.:!\'TEH, Mr. Co~!I!E:ST, :'llr. 

THUHXREHHY, Mrs. LIXCOL!'\, Mrs. CHEXOWETH, Mr. SMITH of Tex.as, 

!\tr. EHRLICH, Mr. BARTLETI of .Maryland, 1\lr. PAXo:-;, ~r. Bo:'\ILI..A, 

l\lr. RAI>A!'O\'lCII, l\1r. CILUIOT, Mr. li.AsTI:'\Gs of Washin!!Wn. !\1r. 

BILRRAY, l\lr. A.'I;DHEWS, l\lr. CLEME!\'1', Mr. STE!'HOl..!\1, Mr. l..AlWE;);T, 

Mr. PosiLARI>. Mr. UXDERWOOI>, l\lr. RoAERTs, !\lr. SA.\1 JoH;);SO;); of 

Texas, 1\tr. WATI~ of Oklahoma, !\lr. MoORHEAD, :\lr. IIALL of Texw;, 

!\lr. FAZIO of Califomiu. !\lr. CRE~IEA.'\~. 1\lr. :'IIAHTI:'\EY.. :1!rs. \'IT.\;);O-

\'Il'll, :\lr. ToHKILI>SE:'\, and :\lr. FROsT 

Deleted sponsor: :\h. ToRHEs (11ddcd Febru11ry 3, 19!15; dclctl~l Fchrua~· ~~. 

1995) 
59 

2 

A BILL 

To per:nllt exports of certain domestically produced crude 

oil, and for other purposes. 

Be it enacted by the Senate and llouse of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXPORTS OF ALASKAN NORTII SLOPE OIL. 

4 Section 28 of tlw ~1ineral Leasing Act (30 L.S.C. 

5 185) is amended6 (1) by amending subsection (s) to read as fol7 lows: 

8 "E:AI'OHT:-; OF AL.AHK.A:'\ :'\OHTJ! SLOPE OIL 

9 "(s)(1) Subject to paragraphs (2) and (~1), 110h\ith10 standing any other provision of law (including an~· regula11 tion), any oil transported by pipeline ovcr a right-of-way 

12 granted pursuant to section 203 of the Trans-Alaska Pipe13 line Authorization Act (43 U.S.C. 1652) may hr e:qmrted. 

14 "(2) Except in the case of oil e},:ported to a country 

15 pursuant to a bilateral international oil supply alrl'ecment 

16 entered into by the United States \\ith the country before 

17 June 25, J 979, or to a country pursuant to tlw lnter18 national Emergency Oil Sharing Plan of the International 

19 Energy .A¥enPy, the oil shall be transported by a vessel 

20 documented under the laws of the United fitates aud 

21 mmcd by a eitizen of the United States (as dl'termiued 

HR. 70 sc 
60 

3 

1 in accordance with section 2 of the Shipping Act, 1916 

2 (46 U.S.C. App. 802)). 

3 "(3) Nothing in this subsection shall restrict the au4 thority of the President under the Constitution, the lnter5 national Emergency Economic Powers Act (50 U.S.C. 

6 1701 et seq.), or the Xational Emergencies Aet (50 U.S.C. 

7 1601 et seq.) to prohibit e}qJortation of the oil."; and 

8 

DR 70 SC 

(2) by striking subsection (u). 

0 
61 

STATEMENT 01" 

WILLIAM H. WHITB 

DEPUTY SBCRBTARY 01" BNBRGY 

before the 

COMMITTBB ON RBSOURCBS 

U.S. HOUSB OF RBPRBSBNTATIVBS 

MAY 9, 1995, 

91-746 0 - 95 - 3 
62 

Mr. Chairman, it i s a pleasure for me to appear before the 

Committee today to discuss permitt i ng the export of Alaskan North 

Slope (ANS) c·rude oil. I am pleased to report that th<: 

Administration support s this initiative and hopes to work with 

the Congr ess toward enactment of legislation to pe rmit the 

exportat ion Qf Alas kan North Slope crude oil. 

The export of Alaskan North Slope crude oil i s an important 

component of this Administration's energy policy because it has 

broad i mplications f or the nation and for the states o:: Alaska 

and Ca l ifornia. The benefits (discussed below i n more detail) 

inc lude: 

increased federa l and state revenues, 

more oil produc tion from fields in Alaska arid California 

while addi tional reserves are created, 

mo re jobs in the oil sector a nd indirect ly in the broader 

economy, while saving jobs in the maritime industry, and 

little or no impact on the e nvironment or on consumer 

prices for gasoline. 

We have r eached t hese conc lusions after studying the impacts 

of permitting export of ANS crude oil and issuing a detailed 

report on June 30, 1994. Copies o f that report have been 

provided to the Committee. 

- 2 -
63 

Fundamentally, the existing export restriction distorts the 

crude oil markets in Alaska and the West Coast in 

counterproductive ways . The benefits of permitting export of ANS 

crude oil , according to our analysis, are significant: 

Revenues to State governments would rise during 1994-2000 

by: 

$180 to $230 million for California from Federal 

royalties and state and local taxes; 

$700 million to $1.6 billion for Alaska from severance taxes and royalties. 

Federal receipts related to royalties and sales of Elk . Hills oil production would total between· $99 and $180 

million. · 

Oil production-related employment would increase by a net 

of 10,000 to 25,000 jobs nationally; many would bE!' in 

California oil production. This takes into account a small number of job losses (less than 500) in the 

maritime sector. 

Refining employment overall would not be affected; 

history shows that refinery capacity, and therefore 

refining industry employment, is determined by U.S. 

petroleum consumption. 

In Alaska alone, reserve additions could be in the 200 to 

400 million barrel range by the year 2000, a size that 

roughly equates to the known reserves in major North 

Slope fields such as Point Mcintyre and Endicott. 

Incremental oil production would be between 30,000 and 

50,000 barrels per day in California by the year 2000, 

and 50,000 to 70,000 barrels per day in Alaska . 

The Department has consulted with the broad range of 

interested parties. We held public meetings in San Francisco and 

Anchorage in March of 1994, at which more than 50 organizations 

presented their views. We had a great deal of comment on our 

- 3 -
64 

draft report. Since the report's release last June, the 

Secretary of Energy, I. and both our staffs have met many times 

with members of Congress, various associations and int erest 

groups, and the public on this iss ue. I believe that this 

process has helped a ll of us unders tand the concerns of all the 

interested parties. 

Based o~ this extensive consultation process, the 

Administ ration is convinced that there are significant economic 

and energy benefits that can be gained from permitting exports of 

ANS crude. In the cours e o f our review, however, the 

Admin istration ident i fied f ive requirements that must be 

addressed in the legislation: 

1. Retain Emergency Authority--The President must retain the 

authority he has under current law, including the 

Constitution, the International Emergency Economi c Powers 

Act, and the Nationa l Emergenc ies Act, to re inst at e the ban 

should exports be found to be contributing to adverse energy, 

economic or envir onmental conditions, or otherwise threatening the national economic security. 

2. Require Export in U. S.-Flag Vessels--All ANS oil must be 

exported in u.s.-flagged and u.s. - crewed vessels. Reforms 

should not transfer existing seafarer employment abroad. 

Leg islation must provide substantial protection of seafarer 

employment opportunities for American workers. 

3. Rev iew Environmental Effects--Befo re any oil is exported, an environmental review must be undertaken, consistent with the 

National Environmental Policy Act of 1970. Environmental resources must be fully protected. 

4. Assure Supplies for U.S . Refineries--U.S. refineries must 

have continued access to adequate supplies of crude oil, 

incl uding crude oi l at prevailing market pri ces. Refiners must be protected from anticompe titive activi ty th3t would 

threaten that supply. If evidence of such ant icompetitive 

- 4 -
65 

behavior develops -- such as sustained crude supply shortages on the West Coast or price increases significantly above 

world market levels -- appropriate enforcement action should 

be taken, including the denial or suspension of crude oil 

export licenses. 

5. Appropriate Export Administration--Any export of ANS crude 

oil made pursuant to this bill should be approved and 

administered through the appropriate export licensing process 

that gives the President authority to impose such terms and 

conditions on exports as are necessary or appropriate. 

Licensing· will assure the monitoring and enforcement of all 

conditions under which the exports are permitted. Any export 

license will be processed on an expedited and user-friendly 

process that is consistent with obligations to consider 

environmental and energy security impacts. 

H.R . 70, Mr. Chairman, already contains provisions corresponding 

to the first and second elements on this list. In addition to 

these requirements, key factors that must be addressed as 

legislative action is pursued include: 

1. Consumers Protection -- Exports must not cause substantial 

increases to retail gasoline or other petroleum product 

prices. Our assessment is that the product price impacts of 

permitting ANS crude oil exports would be minimal or non- existent. 

2. Job Growth and Protection --Any proposal to permit ANS 

exports should reasonably be expected to expand employment 

opportunities in the U.S. economy, without causing undue job 

loss in sectors currently dependent on ANS production and 

transportation . 

Employment in tbe Oil Production and Refining %ndustries. 

DOE's analysis concludes that permitting ANS exports 

would result in increased oil industry employment of 

between 10,000 and 25,000 jobs. Reforms should permit 

the crude oil market to operate more efficiently. We 

would anticipate that ANS crude oil will continue to be 

made available to West Coast refineries, but that the 

price would adjust to prevailing market prices. We 

believe that the abundant worldwide supply of crude oil 

will ensure that prices for ANS crude sold to U.S. 

refiners will not rise above world market levels. 

- 5 -
66 

Employment for U.S. Seafarers. Reforms should r..ot 

transfer seafarer employment opportunities abroad. 

Employment for U.S. Shipbuilders. The Administration is 

engaged in ongoing efforts to enhance competitive 

opportunities for U.S. shipyards by opening foreign 

markets to U.S. shipbuilders. In October 1993, the 

Clinton Administration announc2d a comprehensive plan to 

stren9then the U.S. shipbuilding industry. This plan 

includes the following elements: ( 1) ensuring fc.ir 

international competition; (2) improving competitiveness 

throu9h increased research and development funding; (3) 

eliminating unnecessary government regulation; 14) 

financing ship sales through Title XI loan guarantees; 

and (5) assisting international marketing. Consistent 

with this plan, on December 21, 1994, the United States, 

alon9 with other major shipbuilding nations, sic;rned an 

agreement that requires signatories to eliminate 

subsidies and other trade distorting measures, including 

"home--build" requirements, to the commercial shipbuilding 

and repair industry. The Agreement was ne9otiated under 

the auspices of the Organization for Economic Cooperation 

and Development (OECD) . This multilateral a9reement will 

eliminate foreign shipbuilding subsidies and other 

distortive trade practices that limit competitive 

opportun~ties for U.S. shipyards. 

3. Adherence to International Trade Commitments-- Of course, 

any conditions imposed on exports must be consistent with 

established U.S. international trade policies. A home-build 

requirement for ANS crude exports raises legal issUE!S of 

concern vis-a-vis U.S. international trade obligations. 

Thus, we oppose any requirement that ANS oil exports be 

carried on U.S.-built vessels. 

There has been concern expressed that requiring U.S. flag 

vessels to carry exports of ANS crude oil would set a 

dangerous precedent with respect to extending cargo 

preference in shipping trade. The Administration views the 

requirement of flag-preference for ANS crude as unique, since 

there is the very real danger of lost seafarer jobs resulting 

from the displacement of shipments now carried in the 

coastwide trade. This action should not be viewed as opening 

further possibilities for extending cargo preference. 

4. Environmental Protection -- Environmental resources must be 

fully protected, DOE analyzed potential environmental 

impacts in our June 1994 study. In the course of that 

initial review, we found no plausible evidence of any direct, 

negative ·~nvironmental impacts. There would be no need to 

- 6 -
67 

expand the Trans-Alaska Pipeline, and the number of overall 

tanker movements in U.S . waters would be reduced. Moreover, 

indirect effects, such as changes in California refinery 

activity and increased California production, would be 

strictly regulated under existing regulatory regimes. 

All shipping that occurs as a result of permitting ANS 

exports, including exports from Alaska and offsetting imports 

into the U.S., will have to meet all prevailing U.S. 

environmental protection requirements, including the new provisions of the Oil Pollution Act of 1990. 

Nonetheless, before any export of ANS crude oil is permitted, an environmental assessment consistent with the requirements 

of the National Environmental Policy Act of 1970 should be 

undertaken. 

Legislation to permit export of ANS crude oil should not be 

linked to a change in status of the Arctic National Wildlife 

Refuge. The Administration has not altered its opposition to 

exploration and development of any oil resources that may be 

under the coastal plain of the Arctic National Wildlife 

Refuge. Further, the Refuge will continue to be managed for 

its wildlife and wilderness values. 

5 . ANS Export Policy Monitoring -- Interested parties should 

review ANS export activities periodically. Once ANS exports 

have begun, appropriate federal agencies should consult with 

affected state and local governments, interested industry and 

worker representatives, and environmental organizations to 

help ensure that the policy is implemented consistent with 

all license terms and any other applicable energy, economic, 

and environmental criteria . Moreover, we are prepared to 

track petroleum market and refining activities in the period 

following Congressional modification of the ban. · 

Mr. Chairman, I believe that H.R. 70 provides a vehicle for 

permitting Alaskan North Slope crude oil exports consistent with 

these principles. We believe the bill would be substantially 

improved by requiring an appropriate environmental assessment 

before approving export activities and by providing for 

approp~iate enforcement action, including revoking permission to 

-· 7 -
68 

export, in the event of anticompetitive behavior that injures 

U.S. industry. 

Some argue that allowing exports of ANS crude oil will 

increase product costs to consumers. We believe the export of 

ANS crude oil should not affect consumers adversely. Our 

evaluations indicate that ANS oil exports might :raise th•: market 

prices of California and Alaskan crude oil by as much as $1.20 

and $1.60 per barrel. More than half ANS crude oil and 75 

percent of California crude oil is produced by refiners •:hat 

process it themselves, or trade it for more convenient supplies. 

When this is taken into account, the average cost increa:se to 

refiners is slightly over one cent per gallon of crude. 

We examined historical price movements on the West Coast and 

discovered that small movements in West Coast crude oil prices 

were much less a determinant of gasoline and diesel fuel prices 

than were prices for these products in other markets such as the 

Gulf Coast. We concluded that plentiful supplies of petroleum 

products would make it impossible for retailers to increase 

gasoline or other product prices above those market levels. 

Accordingly, we anticipate that higher refiner ANS crude 

acquisition costs will not passed through to consumers. As 

stated earlier, we also believe that plentiful cru de supplies 

will prevent refiners' crude costs from rising above market 

levels. 

- 8 -
69 

Thqse who are concerned about the potential environmental 

effects of permitting exports fear that •replacement crude' will 

be imported into environmentally fragile areas of the West Coast 

on poorly maintain foreign flag vessels. Assuming West Coast 

refiners are willing to pay world market prices as all other 

U.S . refiners now do they should continue to have access to 

ANS crude. Therefore, we do not believe there will be 

significant additional shipments of crude brought into the West 

Coast, beyond quantities they currently import, as a result of 

ANS exports. In any event, any tanker traffic will of course 

have to meet rigorous national environmental safety standards, 

including Oil Pollution Act of 1990 regulations, just as they do 

now. 

In conclusion, Mr. Chairman , I want to reiterate the 

Administration's support for a policy that permits export of 

Alaskan North Slope crude oil in a manner that is consistent with 

the five principles listed above. 

- 9 -
70 

TESTIMONY OF THE HON. WILLIAM M. THOMAS 

HOUSE OF REPRESENTATIVES 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

MAY 9, 1995 

Mr. Chairman, I applaud the Committee's decision to conduct a comprehensive overhaul 

of an archaic export policy. The conclusion of the Cold War gives us an opportunity to enhance 

the ability of U.S. businesses to compete in the arena of international trade. 

Today I am speaking in support of my bill, H.R. 70, which will end the ban on exports of 

Alaskan North Slope (ANS) crude oil. 

The ANS ban has been in effect for over twenty years, and was created in order to, 

among other things, "safeguard our energy security". During this twenty year period, I have 

seen no evidence to support this hypothesis. In fact, the evidence clearly demonstrates that our 

dependence on foreign oil has increased over this period. Domestic production is declining as a 

result of this export ban, while demand for oil continues to increase. The shortfall can only be 

met through increased imports, which helps to explain why we now import around 50 percent of 

all energy consumed in the United States. Perhaps the supporters of the ban could try to explain 

to the American people how a continued decline in domestic production, coupled with increasing 

demand , has enhanced our energy security" 

Recently. there has been discussion of the possible sale of the Naval Petroleum Reserves 

at Elk Hills, California. With the current price of crude artificially depressed due to the ban on 

the sale of ANS crude , eliminating the ban would greatly enhance the value of the facility and its 

return to the taxpayer would be subsequently enhanced. 

It is critical that we recognize the importance of the ANS issue. Do we want to sell the 

Na va l Petroleum Reserves or increase its value" Do we want to help heavy oil producers 

maintain their economic viability through royalty relief proposals such as those offered by the 

Bureau of Land Management') If so, we must repeal the ANS ban first, to ensure that we are 

dea ling with the cause of the problems, and not just the symptoms. 

For years, efforts to repeal the ban have been met with opposition from maritime unions, 

who were concerned that the repeal of the ban would adversely affect the U.S. merchant tleet 

jobs. Now, a compromise has been reached which accomplishes the goal of lifting the ban while 

ensuring the interests of the maritime unions. 

The unions now agree that ending of the ANS crude ban is consistent with the economic 

security and defense interests of the nation in that it provides employment opDortunities for 

American citizens and ensures the nation a fleet of American-flag tankers. 

Given the current declining North Slope Production. the independent tanker fleet and the 

men and women who crew the vessels face a bleak future. By encouraging oil production, ANS 

exports can help secure their future and preserve jobs that otherwise would '~ lost. 

1 
71 

On March 1, the Administration announced that it was "convinced that there are economic 

and energy benefits that can be gained from permitting exports of ANS crude." 

In setting forth requirements for inclusion in the final legislative language, the 

Administration stated: 

"All ANS oil must be exported in U.S.-flagged and U.S.-crewed 

vessels. Reforms should not transfer existing seafarer employment 

abroad. Legislation must provide substantial protection of seafarer 

employment opporrunities for American workers." 

As introduced, H.R. 70 satisfies this condition. Under the bill, ANS crude may be 

exported only if "transported by a vessel documented under the laws of the United States and 

owned by a citizen of the United States ... " 

In addition, our government's own energy experts have recently confirmed the 

substantial benefits to be gained in lifting the ban. Ten months ago, the Department of Energy 

(DOE) released a report, outlining the effects of lifting the current Alaskan North Slope (ANS) 

crude oil ban. The report confirmed what we have been arguing for years, that is, repealing 

the ban will add to our energy security, protect the environment from tanker spills, create 

thousands of jobs, increase domestic production and increase federal and state revenues. 

The multi-department srudy determined: 

• There would be a net increase in U.S. employment of up to 16,000 jobs. By the end of 

the decade, job increases could reach 20,000. 

• Oil production in Alaska and California could be increased by as much as 100 to 110 

thousand barrels per day by the end of the decade. Reserve additions in Alaska alone 

could be as large as 200 to 400 million barrels of oil. 

Increased federal receipts related to royalties and sales of oil would total between $99 

and $180 million. 

All of these benefits would occur without any significantly negative environmental 

implications. 

A Congressional Budget Office srudy has also reviewed H.R. 70, and confirmed the 

positive effects which were indicated in the DOE report, indicating a savings to the federal 

government of $55 million. The DOE and the CBO reports clearly show there are now no 

valid reasons other than politics for the ban to remain in place. 

2 
72 

Government interference in this market has not worked and must be ended. Our 

economy is based on the operation of the market, and there is no economic argument that can 

be advanced to justify the continued market-distorting ban on exports of ANS crude. The 

market can and should dictate where this oil goes and the price for which it is sold. 

Additionally, lifting this ban would lead to a reduction in the number of tankers, loaded 

with crude oil, traveling along nearly the entire western coastline of the Nort11 American 

continent. By allowing the export of ANS crude, some amount of this oil will be shipped to 

markets in the Far East. As a result, fewer tankers will make the trip along the coast to their 

current destinations in Washington and California, and eliminate movement of ANS crude oil 

to the Gulf Coast that involves multiple loading and unloading operations. This clearly 

translates into a reduced risk of oil spills, small and large, along both Canadian and U.S. 

coastlines. 

I urge my colleagues to give this issue careful consideration and not overlook the fact 

that our domestil: oil industry is being harmed by this knee-jerk reaction in the days of the 

energy crisis. If we are truly serious about encouraging domestic production and exploration 

of our natural resources, we should end this market-distorting ban on the export of Alaskan 

oil. 

All of the issues have been settled: the unions have agreed that this legislation will 

ensure an independent tanker fleet; the trade issues have been addressed. and the US Trade 

Representative has noted that the U.S.-flag requirement does not present any legal problems to 

international trade; producers will benefit as increased revenues from marginal wells are 

realized. 

Mr. Chairman, who can argue against national security, increased jobs, more domestic 

oil production, increased federal revenues and reduced environmental danger~· The DOE study 

repudiates all of the arguments used for years by supporters of the ban. Let us change this 

outmoded policy and pass H.R. 70 which will repeal the ban on Alaskan North Slope crude 

oil, and spur domestic energy production at a savings to the taxpayer of $55 million. 
73 

TESTIMONY OF 

ROGER MARKS 

PETROLEUM ECONOMIST 

STATE OF ALASKA, DEPARTMENT OF REVENUE 

BEFORE THE 

HOUSE RESOURCES COMMITTEE 

REGARDING 

HOUSE BILL 70, TO PERMIT EXPORTS OF ALASKA NORTH SLOPE OIL 

May9, 1995 

Mr. Chairman, members of the Committee, I am Roger Marks, Petroleum 

Economist for the State of Alaska Department of Revenue. On behalf of 

myself and Governor Knowles, I thank you for the opportunity to speak to 

you today about this issue of long-standing importance to the State of Alaska. 

The export ban on Alaska North Slope (ANS) crude oil has effectively held 

the West Coast oil market captive for the past 18 years. It has negatively 

impacted the value of every barrel of oil transported through the TransAlaska Pipeline, under valuing ANS production by a total of nearly $14 

billion. The diminished value of our royalty oil, and the loss to the State in 

tax revenue, is feit especially now, as we face the seventh consecutive year of 

decline in production from our North Slope oil fields. 

The economic impact of the export ban, of course, goes far beyond Alaska's 

borders. When the value of oil in the ground is decreased, less oil is feasible 

to produce. Every barrel less feasible to produce must therefore be imported. 

In addition, the capital, equipment and personnel invested for the Alaskan 

oil industry comes from all across this country. Thus, the ban continues to 

depress U.S. economic growth and employment. Also, we all recognize that 

the dollar is very weak now. Any addition to U.S. exports increases the 

strength of the dollar and decreases inflationary pressures in the domestic 

economy. 

The closest geographic market destination for ANS, as you know, Mr. 

Chairman, is our own West Coast. Even in natural post export ban market 

conditions most of Alaska's production will be sold there. The next closest 

market for ANS is the Pacific Rim. ANS is the only U.S. oil production 

encumbered with an outright export restriction. Because of the ban, most 

ANS oil not sold in Washington or California must be further transported all 

the way to the Gulf of Mexico. This routing more than doubles what it would 

cost to move the oil to Japan on American flagged vessels. 
74 

As you can see, the ban drives down the value of ANS in two ways. First, 

because of the export ban it is necessary to transport the surplus West Coast 

crude to the Gulf of Mexico market. Currently 15 percent of ANS production 

- 240,000 barrels a day - leaves the West Coast. During the mid 1980's the 

volume was as high as 1 million barrels a day, 50% of production at that time. 

This adds approximately $2.50 a barrel to transportation costs, a net loss of 

nearly 25 percent of the wellhead value.1 

Second, because the additional transportation costs to the Gulf are so high, 

not all the excess West Coast crude is moved to the Gulf. Some of the excess 

remains on the West Coast, creating a glut on the market. Currently, West 

Coast ANS prices lag Gulf Coast prices by 50 cents a barrel. During the 

eighties, this was nearly $2 in loss per barrel. The glut, of course, effects not 

only ANS oil, but California production as well. 

We estimate that these two effects will cost the State of Alaska $80 million in 

1996. 

Lifting the export ban would change the West Coast from a restricted market 

to a competitive market. Since transportation costs to the West Coast are less 

than that to the Far East, just as much oil would move to the West Coast as 

does now. It is simply that the excess would go to its next best natural market, 

at a cost far less than that to the Gulf. 

Allowing ANS to rise to its natural value will actually encourage additional 

production from existing fields in Alaska and California. This, ironically, will 

have the effect of reducing our dependence on imports. 

If there ever was a consumer price benefit created by the ban, it has yet to 

show itself. Due to the market restriction created by the ban, crude oil prices 

for American West Coast refiners are the lowest in the world. None of this 

benefit, however, has been passed on to West Coast consumers. Gasoline 

prices in California are the same, or higher, than they are anywhere else in 

the country. 

With this bill the U.S. maritime crude oil trade is maintained. With this bill 

production of U.S. reserves is increased because the value of the resource is 

allowed to rise to world market prices. And, because the President retains the 

emergency authority to re-impose the ban, the nationally security is protected. 

The export ban has burdened the State of Alaska and the North Slope 

producers for every single one of the 11 billion barrels produced over the last 

18 years, at a cost of economic growth, employment and national security. 

ANS is now in its seventh year of irreversible decline. In an age of increasing 

market freedoms, it is absurd that American industry is inhibited from 

realizing full market value. 
75 

It is the view of the Knowles administration, Mr. Chairman, that the ban on 

the export of Alaskan oil has unnecessary, unfair, and unintended 

consequences. It certainly has long outlived the reasons it was put in place. 

Once again, Mr. Chairman, thank you for the opportunity to speak to the 

Committee on this bill. 

1 If it costs $1.50 a barrel to ship from Valdez to the West <;:oast, and $4 to ship from Valdez to 

the Gulf Coast, the ANS additional shipping cost to the Gulf is $2.50. Suppose Gulf Coast ANS 

prices are $15 per barrel. Then the value at Valdez is $151ess $4, or $11 . If the Trans-Alaska 

Pipeline tariff is $3, the result is a wellhead value of $11 less $3, or $8. The additional 

transportation charge of $250 has reduced the wellhead value from $8 plus $2.50, or $10.50, to 

$8. This is a 24 percent reduction. 
76 
77 

PREPARED STATEMENT 

OF 

MICHAEL SACCO 

PRESIDENT 

SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA 

(AFL-CIO) 

ON PRESERVING JOBS AND THE INDEPENDENT TANKER FLEET 

BY AUTHORIZING ALASKAN OIL EXPORTS IN U.S . -FLAG VESSELS 

BEFORE 

THE COMMITTEE ON RESOURCES 

U. S . HOUSE OF REPRESENTATIVES 

WASHINGTON, D.C. 

May 9, 1995 
78 

Mr. Chairman and Members of the Committee: 

On behalf of the Seafarers International Union of North 

America (AFL-CIO), I urge you to enact H.R. 70 to authorize 

exports of Alaskan North Slope crude oil carried in American-flag 

tankers. This vital legislation will help preserve the 

independent tanker fleet- -at no cost to American taxpayers- -and 

save the jobs of merchant mariners that otherwise will be lost 

with declining Alaskan oil production. We deeply appreciate the 

Administration's support for the proposed legislation. We look 

forward to working with you and the Administration to enact it as 

quickly a.s possible. By doing so promptly, you will provide hope 

to our people and reassure them that they will have a future in 

the maritime industry. And you will advance the overall energy 

and national security interest of our country. 

Mr. Chairman, prior to last year we had oppo.sed Alaskan oil 

exports because the oil would have been carried in foreign-flag 

vessels. Had they been authorized, those exports would have led 

to the destruction of the nation's independent tanker fleet and 

caused a catastrophic loss of jobs for our membeJ~s. Our nation 

would have suffered the loss of a militarily useful fleet 

essential to national defense. 

Last year, however, we began to see how a law passed in 1973 

was beginning to have unintended consequences. After extensive 

discussions with BP America and our contracted ship operators, we 

began to appreciate how declining North Slope production would 

prematurely lead to the scrapping of vessels in the Alaskan oil 

trade. The fleet had already begun to shrink ae; a result of 

decreased movements of oil to the Gulf Coast and other market 

factors. Clearly, with the North Slope fields entering a phase of 

sustained decline, something had to be done to preserve the fleet 

and the jobs of our members. 

In the spirit of compromise, we agreed to JOl.n with BP 

America, small independent oil producers, independent tanker 

owners, and others in support of legislation permitting Alaskan 

oil exports in American-flag tankers. And so, perhaps 

surprisin9ly, we appear before you today with Alaskan oil export 

proponents to explain why we believe enactment of the proposed 

legislation would be in the national interest. 
79 

2 

Mr. Chairman, as you know from your many years of service on 

the Merchant Marine and Fisheries Committee, our industry is in 

the midst of a depression. Over the years, I and other maritime 

leaders have testified before many committees, hoping that 

Members would come to appreciate how America's economy and 

nat~onal security depend on a strong merchant marine. Since this 

is my first appearance before your Committee, I hope you will 

allow me a moment to talk about my industry and the proud men and 

women who continue to serve their country as merchant mariners on 

vessels proudly flying the American flag. 

For too long, an essential national resource has been 

threatened with extinction . Not until the United States and its 

allies commenced Operation Desert Shield/Desert Storm did a new 

generation of Members of Congress and the American public witness 

how vital commercial sealift is to projecting force in a hostile 

world and sustaining our troops in battle. Our experience in the 

Persian Gulf highlighted the strength of the U. S.-flag commercial 

fleet . But it also showed its weakness--a shortage of vessels to 

carry out the responsibilities imposed on it during a national 

emergency. As important, our nation learned we lack the skilled 

crews needed to man all the ships necessary to provide sealift 

during emergencies. 

To help preserve the merchant fleet, we worked with the 

Administration to enact maritime reform legislation last year. 

Notwithstanding overwhelming, bipartisan support in the House, 

that legislation died in the Senate. We continue to hope Congress 

will enact maritime revitalization this year. But I am not here 

today to talk about that bill. Rather, I appear before you today 

to urge you to enact Alaskan oil export legislation that will 

help promote our national security and better prepare the nation 

for future international conflicts by preserving the independent 

tanker fleet and the men and women who crew the vessels. 

At present, much of independent tanker fleet is in lay-up or 

headed for the scrap heap. In contrast, 'in the mid-1980s my union 

alone crewed eighteen vessels. Unfortunately, when tankers sit 

idle, so do our men and women. Job opportunities in other sectors 

of the industry are no longer available. Once converted to razor 

blades, tankers no longer provide any employment opportunities--

for our members or laborers in U.S. ship repair yards either. 

Once destroyed, the vessels and their crews also will no longer 

be available in time of national emergency. 
80 

3 

With Alaskan oil exports authorized, however, 1:hese vessels 

will have employment opportunities not available today. Moreover, 

by improving production economics, exports will extend the life 

of the TAPS pipeline and the jobs of those men and w<:>men who keep 

it: in operation. That is why so many members of the labor 

movement: support: the proposed legislation. 

After making our own careful analysis, we concluded that 

enactment of the proposed legislation would preserve employment 

opportunities. We were gratified that the Departmemt of Energy 

similarly concluded that jobs would be saved if exports are 

carried in American-flag vessels as a result of a more efficient 

redeployment of the fleet and increased energy production in 

Alaska. 

As an additional benefit, exports will generate increased 

federal and state revenues. The Department of Energy projected a 

federal revenue increase of $99-180 million (depending on future 

prices) from higher royalty receipts and receipts from oil 

produced on federal land over the balance of the decade. The 

Congressional Budget Office also has scored t:he proposed 

legislation as a net revenue raiser of $55-59 million over five 

years. Neither of these estimates includes the increased tax 

revenues likely to flow from the jobs being creoated or the 

revenue losses being avoided. In contrast, when earlier 

projections were made in the early 1980s, substantial losses were 

anticipated, principally from the destruction of thE~ independent 

American- flag fleet. By saving the fleet, you will avoid the 

revenues lost from premature vessel retirements. 

ANS exports will not endanger America's energy security. In 

fact, by increasing energy production, the new policy can help 

promote our overall energy security. The world oil :situation has 

changed so fundamentally since the export restrictions were first 

enacted in 1973 that they no longer serve the purposes originally 

intended. U.S. oil use has declined, rather than risen to the 

levels projected in the early 1980s, because the U.S. economy has 

become much more efficient in its use of energy resources. 

Moreover, we now have 600 million barrels of oil in 1:he Strategic 

Petroleum Reserve, plus the Navy's reserves at Elk Hills, 

California. The OPEC cartel no longer dominates the world oil 

market. Wit.h its collapse in power, prices have fallen to their 

lowest level ever relative to other consumer product1s. 
81 

4 

ANS exports can create jobs without harming U.S . consumers. 

In 1984, the last time the export issue was considered by the 

Congress, we were of the impression that ANS exports could hurt 

consumers . But market factors have changed fundamentally . Thus, 

the Department of Energy concluded in its study that consumers 

now receive no benefit from the ban and would experience minimal 

or no price changes if it were lifted. The Department said 

consumers will not be burdened with higher gasoline prices 

because independent refiners, who enjoy "the largest gross 

refiner margins in the world," will not be able to pass on crude 

price increases. 

Mr. Chairman, in closing we wish to emphasize that we 

believe the historic purposes for reserving ANS production for 

domestic consumption have been substantially served. After 

careful consideration of the present situation, we believe the 

conditions that precipitated the enactment of the export 

restrictions two decades ago have changed sufficiently that the 

nation--and labor in particular- -would be better served by a 

change in policy. By working with the Administration and your 

colleagues in the Senate, you can now advance important national 

objectives by permitting exports in U.S. -owned and U.S. -crewed 

vessels. 

Mr. Chairman, we therefore implore your committee on behalf 

of our members to preserve jobs and our vital independent tanker 

fleet by moving H.R. 70 as quickly as possible this year. 

Together, we can enhance our national security. 
Testimony of 

Mr. Jerry V. Hoffman 

President and Chief Executive Officer 

of Berry Petroleum Company 

and 

Past President of the 

California Independent Petroleum Association 

before the 

United States House of Representatives 

Committee on Resources 

May 9, 1995 
83 

Testimony of 

Jerry V. Hoffman 

President and Chief Executive Officer 

Berry Petroleum Company 

and 

Past President of the 

California Independent Petroleum Association 

United States House of Representatives 

Committee on Resources 

May 9, 1995 

Chairman Young, Congressmen, my name is Jerry Hoffman and I am the 

President and Chief Executive Officer of Berry Petroleum Company in Taft, 

California. I am also the Chairman of the Alaska North Slope Export Committee 

of the California Independent Petroleum Association ("CIPA"), a 500 member 

non-profit group which represents independent crude oil and natural gas 

producers and other energy related businesses in California. Berry Petroleum 

Company produces between 9,000 to 10,000 barrels per day of California heavy 

crude oil, or about 1% of the State's total production, and fairly represents a 

cross section of the California independent producers. 

I am here today to address an important issue before you, the proposal to 

repeal the export ban on Alaska North Slope (ANS) crude oil. California 

independent oil producers, as well as independent oil producers throughout the 

Country, have long supported repealing this export ban. I am going to talk 

about the current condition of the California production industry and 

specifically, how it is being damaged by the West co< st oversupply of crude oil 

and the artificially depressed price of West coast cn•de oil. I am going to cite 

the Carnoy and Department of Energy studies that .:onclude ANS export is good 

energy policy. I am also going to relate to you personal stories of how the ANS 

export ban is hurting my company. 

The ban on the export of ANS was enacted 22 years ago during the oil 

embargo of the Arab-Israeli war of 1973 to protect the Country's domestic crude 

oil supply and reduce reliance on imports of foreign crude oil. While the 

measure may have been practical and necessary at that time, it has outlived its 

usefulness and become an onerous regulation. It is time for federal policy 

makers, such as yourselves, to overhaul this outdated and damaging regulation. 
84 

let me explain the problem In a nutshell. The ban on the export of ANS 

crude oil forces the Country's #1 oil producing state, Alaska, to ship crude oil 

into the Country's #3 oil producing state, California, thereby creating an 

oversupply of crude oil in California that robs the California oil industry of a free 

market In which to sell its crude oil. Even though this Country i1mported 

approximately 50% of its crude needs in 1994, the ANS export ban causes an 

oversupply of crude oil on the West Coast which translates into depressed 

prices for indigenous California and Alaska crude oil. Because of the 

oversupply, excess crude oil must be shipped to other U.S. ports, primarily to 

the Gulf region, through either the All American Pipeline, trans-shipped through 

the Panama Canal or around Cape Horn, at a transportation cost of $1.50 to 

$2.00 more per barrel than to its natural marketplace in the Far East. The result 

is a lower crude oil netback price to Alaska and, more importantly to me, the 

California producer. 

There have been numerous studies addressing lifting the ban on the 

export of ANS, including one commissioned by CIPA in December 1993 and 

prepared by Martin Carnoy, of Stanford University, and one completed in June 

1994 by the U.S. Department of Energy. Each of these studies c:oncluded that 

lifting the ban on ANS will benefit the United States, California s1nd Alaska and, 

more specifically, that the studies found that California and Alanka crude prices 

would increase. The estimates of the increase vary, but are roughly in the 

neighborhood of $1.00-$2.00 per barrel. There is more than ample proof that 

increased crude oil prices in California will result in increased production, 

exploration and California jobs. For example, during the invasion of Kuwait in 

1990, when crude oil prices increased, in four short months, the decline in 

California production halted and actually increased by 50,000 barrels per day. 

Furthermore, California has more proved undeveloped crude oil reserves than 

any other state in the lower 48. It is not a geological risk, an engineering or 

technological risk, but rather an economic risk that keeps these crude oil 

reserves from being developed and produced. 

In 1992, the average price for heavy crude oil in Californi<t was 

approximately $13 per barrel. Berry Petroleum Company invested $4.6 million in 

the development of its 21-Z lease in the McKittrick field in Kern County, 

California, which we expected would produce approximately 1,000 barrels per 

day. Since that time, in 1993 and 1994, our average price has dropped to 

approximately $11.50 per barrel and consequently, we have abandoned this 

project as uneconomic and will not restore this production until we believe we 

will receive a higher price. We have other properties in the same situation. 

California heavy oil production, by its very nature, requires high operating 

and capital costs to extract. In California, we are further burdened by higher 

than average regulatory costs. And, because of the oversupply of crude oil on 

the West Coast caused by the ANS export ban, our prices are depressed and 

well below prices in other parts of the Country. California producers are getting 

hit from both directions. 

2 
85 

To further illustrate the impact this law is having on our Country, Berry 

Petroleum Company paid $7.4 million in Federal and State income taxes in 1990, 

approximately $3.6 million in 1991 and approximately $3.5 million in 1992. 

Partially due to the low oil prices caused by the export ban, in 1993 and 1994, 

Berry did not pay income taxes and in one of those years, actually filed for a 

refund. By lifting the ban on the export of ANS crude oil, we believe the price of 

our crude oil will increase by $1.00-$2.00 per barrel. Since Berry produces three 

and a half to four million barrels per year, this increase would result in 

additional cash flow to Berry, ranging from $3.5 million to $8 million per year. If 

Berry had additional capital of this magnitude, it would reinstate the McKittrick 

property that I just described and other properties. We would invest heavily in 

further exploration and production development in California which would result 

in increased production, increased federal, state and local taxes and, most 

importantly, increased jobs. Please remember, Berry Petroleum represents just 

1% of the State's overall production. 

A study conducted by the DOE in June 1994 clearly points to the benefits 

of lifting the ban of the export of ANS crude: 

Incremental production in Alaska and California could increase by 

100,000 - 110,000 barrels per day by the end of the decade, thereby 

reducing our reliance on continually increasing foreign imports. 

Reserve additions in Alaska alone, could be as large as 200 to 400 

million barrels of oil. 

Within a short period, the net increase in U.S. employment would be 

between 11 ,000 and 16,000 jobs and by the end of the decade, 

could be as many as 25,000 jobs. 

California returns from its share of federal royalties, state and local 

taxes would increase $180 million to $230 million from now to the 

year 2000. 

Federal receipts related to royalties and sales of Elk Hills oil 

production alone would total between $99 million and $180 million. 

No significantly negative environmental implications were found. In 

fact, exporting ANS crude would probably decrease crude oil tanker 

movement off the West Coast as a result of the expected increased 

production from the States of California and Alaska. 

Opponents of lifting the ban on the export of ANS crude oil claim that it 

would result in increased petroleum products prices. This is simply not true. 

Gasoline prices are not dictated by the West Coast crude oil market, but rather 

the world crudf' oil market. Furthermore, there are no government prohibitions 

on the export or import of petroleum products as there is on crude oil. 

3 
86 

Therefore, if gasoline prices were to increase abnormally in Los Angeles, for 

example, the world economic markets would quickly react and transport 

gasoline into this market to capture those abnormal profit margins and quickly 

drive prices back down to world market levels. This is further demonstrated by 

the fact that California crude prices are depressed and, as a result, California 

refinery margins are 31% higher in California than the average of the entire 

United States. Yet, the California consumer has never benefitted from these 

lower crude prices in the form of lower gasoline prices. The higher profit 

margin has been captured at the refinery and retail level. The California 

producer cannot continue to subsidize these abnormal profits for the 

downstream refining and retail segments of the California oil industry. In the 

last ten years, California has lost 35,000 energy industry jobs and 60% of the 

independent production companies have gone out of business. 

There is widespread bipartisan local support for lifting the ban on the 

export of ANS; Governor Pete Wilson, Willie Brown, other California 

Assemblypersons and Senators and Counties, including my own Kern County, 

support lifting the ban. It is time for the United States of America to develop a 

strong naticlnal energy policy. Lifting the ban on the export of ANS crude oil is 

a first step. This action reduces our reliance upon foreign enE!rgy imports and 

strengthens our domestic oil and gas industry in both the states of California 

and Alaska. I urge you to consider the facts and the overwhelming benefits and 

approve legislation that would overturn this onerous ban and give California 

independent producers a free market to sell their crude oil. 

Thank you for your time today. 

4 
87 

PREPARED STATEMENT 

OF 

LINDA L. ADAMANY 

SENIOR VICE PRESIDENT 

BP OIL SHIPPING COMPANY, USA 

ON THE BENEFITS OF ALASKAN OIL EXPORTS 

CARRIED IN U.S. - FLAG VESSELS 

BEFORE 

THE COMMITTEE ON RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

WASHINGTON, D.C. 

May 9, 1995 
88 

Mr. Chairman and Members of the Committee: 

On behalf of my company, our 16,000 employees, and the men 

and women who crew the vessels we employ to transport Alaskan 

North Slope crude oil, I am pleased to appear before you today. 

Though few could have imagined it only a year ago, BP America, 

the maritime industry, and independent producers stand united in 

support of your bill, Mr. Chairman, that would authorize exports 

of ANS crude oil on American-flag vessels manned by U.S. crews. 

We urge Congress to enact H.R . 70 as quickly as possible to spur 

additional energy production, to help preserve the independent 

tanker fleet, to create jobs directly and indirectly linked to 

oil industry investment in Alaska, California, and other Lower 48 

states, and to increase federal and state revenues. 

Mr . 

know, we 

Chairman, as you and other members of the 

have long supported lifting the Alaskan 

Committee 

oil export 

restrictions. We have long recognized, as well, that the domestic 

maritime industry has provided a valuable service to our company . 

Until last year, however, we had not perceived how our two 

industries could work together to achieve a common legislative 

objective . In recognition of our mutual interests, we agreed to 

support legislation we firmly believe will help spur additional 

energy production and hence extend not only the life of the North 

Slope fields, but also the life of the domestic merchant marine. 

At the outset, we wish to emphasize as well how pleased we 

are that the Administration supports ANS exports carried in 

U.S.-flag vessels with American crews . We are committe d to 

wo rking with the Administration to ensure that exports are 

authorized pursuant to an appropriate licensing mechanism and 

only aft<~r completion of an appropriate assessment of the 

environmental implications of proposed exports. 

To help you understand our shared view of 

think it would be helpful to discuss how the 

situation has changed in the two decades since 

imposed the Alaskan oil export restrictions . 

the future, I 

world energy 

Congress first 

TAPS. In adopting the Trans-Alaska Pipeline Authorization 

Act in 1973, the 93rd Congress provided that ANS crude oil could 

be exported if the President determined exports were in the 

national interest, would not diminish the total. quantity or 

quality of crude o il available to the country, and were done in 

conformance with the Export Administration Act of 1969. In other 
89 

2 

words, contrary to what export opponents often claim, Congress 

did not in fact ban exports in 1973. As the legislative history 

demonstrates, Congress understood in 1973, as we hope it does 

now, that ANS exports could benefit the nation . We are now asking 

you to determine, as the 93rd Congress contemplated, that ANS 

exports would be in the national interest. In making a fresh 

judgment on the merits, we believe you will conclude that ANS 

exports carried in U.S.-flag vessels manned by U.S. crews would 

promote the national interest. 

North Slope Production. Since Congress authorized 

construction of the TAPS pipeline, the history of North Slope 

production has been one of remarkable achievement. In the past 

two decades, the oil industry has invested more than $50 billion 

(in today's dollars) in realizing the North Slope's hydrocarbon 

potential. As a result of our direct employment and purchases of 

products and services, we have generated hundreds of thousands of 

jobs in all 50 states. 

Through a combination of technical advances and these 

massive capital expenditures, we have nearly doubled the amount 

of crude oil we initially expected to recover. In 1977, we 

anticipated recovering less than 10 billion barrels of crude oil 

from a single North Slope field. Since then, with production 

underway at over a half dozen fields, we have produced 10 billion 

barrels and have a similar amount in booked and likely reserves. 

We postponed Prudhoe Bay's inevitable decline by nearly four 

years. Today, based on the State of Alaska's forecasts, the North 

Slope is producing some 600,000 barrels more per day than 

projected less than a decade ago. These achievements are 

parti cularly rema r kable given the inherent competitive 

disadvantages of the North Slope--disadvantages stemming 

primarily from harsh climatic conditions, remoteness, and federal 

restrictions on access to world crude oil markets imposed by the 

ANS export ban. BP America and our 16,000 employees are extremely 

proud to now be the largest producer of crude oil in the United 

States. 

Energy Situation in 1970s. Throughout this period in which 

we were making substantial investments in Alaska to increase 

domestic production, the United States faced energy supply 

threats. In 1973, for example, Middle East countries jointly 

boycotted the United States at the outbreak of the war. Many of 

these nations, then being sustained militarily by the Soviet 
Union, kept our allies 

interruptions. 

90 

3 

in check by threatening supply 

Thereafter, OPEC was able to ratchet up prices repeatedly, 

as demand for oil seemed essentially inelastic. The world supply 

and demand balance was seen as tightening rapidly, with energy 

demand appearing to grow geometrically. U.S. demand for oil, for 

example, was growing steadily, with imports expe!cted to reach 

13-14 million barrels per day (b/d) or 54% of consumption by 

1990. Moreover, government forecasters were predicting $54 per 

barrel crude oil by 1995. 

Concerned about gasoline lines and threats to our security, 

the Alaskan oil export restrictions were further tightened in 

1979 following the second major oil shock. Much haE! changed since 

then. 

Energy Situation Today. Conditions have improved markedly. 

The enormously flexible U.S. economy reacted to the anticipated 

shortage by rapid gains in energy efficiency . By 1990, for 

example, oil demand was less than 65% of the amount forecast in 

1978. By 1992, the ratio of energy expenditure t<) GNP was only 

82% of the 1980 level. And net imports of oil actually declined 

between 1978 and 1993, from 7.84 million b/d to 7.55 million b/d 

(in contrast to the former expectation of 13-14 million b/d by 

1990). Not until last year did imports surpass the previous 

all-time high set in 1977. According to the American Petroleum 

Institute, this record was set not because demand had increased, 

but rather "as a result of the continuing fall in U.S. crude oil 

production 

While demand pressure moderated, world energy supplies 

greatly expanded and diversified. In 1978, for example, world 

crude reserves amounted to 649 billion barrels; by 1993 they had 

reached 1,009 billion barrels, 55% greater. Scientific and 

technical advances in exploration and production are daily 

opening and developing new sources worldwide. 

Prices naturally have reflected these developments in demand 

and supply. The "oil shock" of the 1980s was a drop below $10 per 

barrel in 1986, while a sharp drop last year has only recently 

been restored. Even though Iraq is still under international 

boycott and the United States does not buy any crude from either 

Iran or Libya, the Washington Post reported in 1994 that 
91 

4 

"gasoline has never been cheaper than it has been this year, 

compared with what people pay for other goods and services." 

The United States also maintains sources of protection 

against sudden shortages. The Strategic Petroleum Reserve, for 

example, contains approximately 600 million barrels. The Navy 

maintains its reserves at Elk Hills, California. Moreover, 

sophisticated futures markets now exist, which allow forward 

buyers to hedge prices well ahead. 

Further, a pronounced shift has been made on the import side 

toward more reliable sources of supply. Even though the volume of 

imports from the Middle East has risen in recent years, we still 

import absolutely and relatively less than we did in 1978. 

Within the Middle East itself, Iran, Iraq, and Libya no longer 

provide the United States with any crude oil. Imports from Europe 

and the Western Hemisphere now make up more than half of all 

imports, with Canada and Mexico among our largest suppliers, 

providing us with nearly 2 million barrels of crude oil per day . 

Politically, the situation has improved, as well. The 

collapse of the Soviet Union has eliminated the superpower 

confrontation in the Middle East and Africa that overshadowed 

earlier oil conflicts. Moreover, the movement toward peace 

between Israel and its neighbors has reduced a constant source of 

friction that threatened world oil supplies. 

In short, the historic purposes for reserving ANS production 

for domestic consumption have been substantially served, and no 

longer appear operative. 

Energy Policy for the 1990s. Today, the future of this 

critical domestic resource is in double jeopardy. Production is 

in decline and margins that are the lifeblood of the ongoing 

investments that sustain production are being squeezed as never 

before by upward pressure on North Slope costs. 

Along with our industry partners, we have done everything we 

can to pare costs, to do more with less. We have actually reduced 

per-barrel operating costs in an atmosphere of declining 

production without sacrificing safety or environmental 

performance. 

However, 

cannot sell 

with the current export restrictions 

our crude in a competitive market. 

in place, we 

Because ANS 
92 

5 

production is surplus to West Coast demand, we are forced to 

accept prices for our crude oil at below-world market parities. 

In recent years, we have seen our netback in Alaska squeezed to 

the point that making additional investments cannot easily be 

justified. 

Much of the North Slope production we currently project for 

the year 2000 and beyond depends on investments yet to be made. 

These investments could be jeopardized if artificially depressed 

prices persist. More than ever before, with the end of the Cold 

War and so much of the world competing for billions in energy 

investment dollars, returns on investment have become the prime 

consideration as companies allocate increasingly scarce capital 

resources. 

The competitiveness of our investments in Alaska is not only 

important for our company and the rest of the industry, but also 

is vitally important to the federal government and the State of 

Alaska, if for no other reason than to preserve the hundreds of 

millions of dollars in revenue produced annually by those 

investments. Moreover, for a nation of consumers of petroleum 

products, it is essential that we find ways to spur additional 

energy production . We will do everything we can to make North 

Slope investments competitive, but to justify significant 

additional capital expenditures we need your help. 

As the domestic maritime industry and maritime labor, in 

particular, have come to appreciate, their future depends in part 

on our ability to extend the life of the North Slope fields. By 

enacting legislation to remove the current export restrictions, 

you can help create the market conditions that ~•ill raise the 

netback in Alaska and generate the incremental returns that 

ultimately will stimulate higher production for the benefit of 

all Americans. And by insisting on the use of American-flag 

vessels manned by U.S. crews to carry the oil, you can help 

preserve a domestic merchant marine vital to national security. 

Moreover, as the Department of Energy found and independent 

producers will testify, you can spur additional heavy crude oil 

production in California without hurting consumers at the pump. 

Conclusion. Mr . Chairman, we were heartened that you and 

Representatives Thomas, Rohrabacher, Doolittle, Dooley, Gallegly, 

and Archer joined on the opening day of the 104th Congress to 

introduce legislation that would permit Alaskan oil to be 

exported in U.S . -flag vessels manned by U.S. crews. Through the 
93 

6 

leadership of Senators Murkowski and Stevens, bipartisan 

legislation was introduced in the Senate as well on January 4 and 

has since been overwhelmingly reported by the Energy and Natural 

Resources Committee. As of today, 70 Members have cosponsored 

your companion House measure . Both Houses thus now have an 

historic opportunity to begin developing a rational energy policy 

for the balance of the 1990s . 

Mr. Chairman, after looking at the export issue with a fresh 

perspective , we and the maritime industry concluded that we could 

enhance our nation's energy and national security by working 

together. We encourage Congress to now do so as well. As 

partners, we can spur energy production, preserve the domestic 

merchant marine, create jobs, and raise state and federal 

revenues. We urge the Committee to report out H.R. 70 as quickly 

as possible to help us realize our shared objectives and to 

enhance our nation's energy and national security. 

91-746 0 - 95 - 4 
94 

Statement 

on 

Permitting Export of 

Domestically-Produced Crude Oil 

(Alaska Oil Export Ban) 

by 

Kent Jeffreys 

Senior Fellow 

National Center for Policy Analysis 

Before 

the 

Committee on Resources 

U.S. House of Representatives 

For Release On Delivery 

The Honorable Don Young, Chairman 

May9, 1995 

Dallas Headquarters: 12655 N. Central Ellpy., Suite 720 • Dallas, TX 75243-1739 • 214-386-6272 • Fa).: 214-386-0924 Washington Office: 727 15th St. N.W., 5th floor • Washington, OC 200Cl5 • 202-628-6671 • Fax 202-628-6474 
95 

My name is Kent Jeffreys and I am a Senior Fellow with the National 

Center for Policy Analysis which is headquartered in Dallas, Texas. The 

NCPA is a nonprofit, nonpartisan public policy organization. I am based 

in NCPA's Washington, DC office. For the past eight years I have worked 

in Washington on a range of environmental and energy policy issues for 

several public policy organizations. These groups, and many others around 

the country, are in complete agreement: the Alaskan Oil Export ban should 

be lifted. 

Alaskan Oil Export Ban: The Impact on Jobs 

When passed in 1973, the oil export ban was justified as a means to 

preserve "jobs in the US" and "keep our oil". Both justifications are 

flawed, as time has demonstrated. More jobs have been lost (in oil related 

US industries) due to the oil export ban than have been created within the 

coastal shipping sector. This is due to the fact that the ban results in higher 

costs, and lower net revenues, for Alaskan oil. Thus, there is less money 

available for hiring oil industry workers. 

In addition, because of the nature of refineries, Alaskan oil is less 

desirable on the West Coast (where there is an ample supply of heavier 

crudes) than it is in the East Asian area. This has depressed the price paid 

for the crude, even in California oil fields, because of the supply 

imbalance. The result is lower production and employment on the West 

Coast as well as Alaska. Finally, the ban results in less oil field equipment 

being ordered, again due to the economic dampening effects within the 

industry. This causes job losses across the nation. 

Non-Job Impacts of the Ban 

In a new study by Samuel A. Van Vactor (president of Economic 

Insight, Inc., Portland, Oregon) for the Cato Institute, it was estimated that 

Alaskan Oil can be shipped to Japan and Korea for about 50 cents per 

barrel. Shipping it to West Coast results in costs (in labor and lowered 

prices) of from $1 to $4 per barrel. This is on top of the $3.50 per barrel 

that it costs to move oil through the Trans-Alaskan Pipeline to the port of 

Valdez. Obviously, any additional costs loaded onto Alaskan oil production 

make it less attractive in the world oil market. Mr. Van Vactor estimates 

that the net return on a barrel of Alaskan oil is from $5 to $8 lower than 

world oil market averages. This is before calculating the impact of state 

and federal taxes and royalty payments. 
96 

Furthermore, Mr. Van Vactor estimates that several billion barrels 

of potential production on Alaska's North Slope might never be produced 

if these depressed prices imposed by the oil import ban remain in place. 

Alaska is already a high-cost oil region. It is counterproductive to raise the 

costs even higher through anachronistic trade policies. 

The U.S. runs a substantial trade deficit with Japan, yet refuses to 

sell it a product worth billions of dollars. This puts downward pressure on 

the dollar in international exchange rates. It also discourages Japanese and 

Korean investment in the oil and natural gas resources of Alaska. As with 

almost all forms of trade protectionism, the oil export ban hurts America 

more than it helps us. 

And untapped Alaskan oil reserves are likely to be vast. Even if the 

Arctic National Wildlife Refuge "1002" region remains off limits, several 

billion barrels of known or potentially economically recoverable oil exist 

in the geological basin surrounding the supergiant Prudhoe Bay field. 

Several large deposits are currently marginal from an economic 

perspective. For example, the West Sak field would be one of the largest 

producing fields in American history -- if it were in Texas. In fact, in 

terms of oil-in-place, West Sak easily rivals and may even exct:ed Prudhoe 

Bay. Yet because of Alaska's extreme climate and environmental concerns 

and the West Sak crude's chemical and physical traits, producing the field 

will be even more costly than other fields on the North Slope. Thus, any 

federal law which serves to increase the costs of producing West Sak (and 

other North Slope fields) makes it likely that billions of barrels of oil will 

simply remain in the ground forever. 

Alaskan Oil Has Provided Enormous Benefits 

Through 1993, total development costs for Alaskan oil projects 

(Cook Inlet, Trans-Alaska Pipeline, and the North Slope) were 

approximately $67 billion (in 1993 dollars). The result has be,en to add 

about 16 billion barrels of oil to domestic US production or reserves. 

However, world oil market prices have fallen in recent years and many 

development projects have been canceled or put on hold. 

The potential for additional reserves being discovered and produced 

on the North Slope remains high. But in an uncertain economi.c climate, 

every penny per barrel is important. Federal rules should not block vital 

economic development. By effectively raising the cost of Alaskan oil, the 

export ban does precisely that. 

2 
97 

Other Negative Impacts of the Oil Export Ban 

The oil export ban results in substantial U.S. oil refining and product 

distribution dislocation. (Alaskan oil is not light enough to offset heavy 

California crudes, so a poor product mix -- for the California market -- is 

the result). Recent economic analysis indicates that thousands of domestic 

oil industry jobs have been destroyed by the oil export ban (by suppressing 

the price for crude oil in California and Alaska). 

Any estimates of future oil production from the North Slope are 

speculative, but if additional reserves are found, the West Coast might have 

a hard time absorbing them. In the past, the excess supply on the West 

Coast was transshipped to the U.S. Gulf Coast, at an additional cost of 

perhaps $3 per barrel. Repeating this scenario in the future would not 

provide any net benefits to the U.S. economy. 

The Oil Export Ban is Unfair to Alaska 

The Oil Export Ban targets a single state's oil production despite the 

fact that two dozen other states have oil and gas production. This was part 

of a political compromise brokered at a time when world energy markets 

were far different from today's. Whatever the earlier justifications for this 

ban, they have faded with time and should no longer control the debate. 

Although many states suffer a negative economic impact from this ban, 

North Slope oil production is crucial to Alaska's economy. Thus, a single 

state is asked to bear the brunt of the negative impact of this 

counterproductive policy. This is unfair. 

Non-Stakeholder Viewpoint 

It stands to reason that the direct stakeholders in this issue -- the oil 

companies, transporters and refmers -- would have strong opinions one 

way or the other. However, in the opinions of public policy experts with 

whom I have talked over the years, there is unanimity. The major 

conservative, libertarian, and free market public policy groups are in 

agreement on this point: the oil export ban is economically harmful and 

should be repealed. 

3 
98 

In conclusion: 

• The Alaskan Oil Export Ban depresses the price received for all 

Alaskan oil and much of California's production as well. This results in 

lowered total production from these states. 

• The Alaskan Oil Export Ban hinders economic growth in Alaska in 

general and in several sectors of the oil industry nationwide. The ban 

costs the U.S. economy thousands of jobs. 

• The Alaskan Oil Export Ban blocks a major U.S. export item to East 

Asian trading partners. This makes no sense in light of current U.S. 

pressures on these nations to open their domestic markets to our 

exports. 

I thank the Chairman and the Committee for this opportunity to 

address such an important issue, and I look forward to your questions. 

4 
99 

STATEMENT OF PETER A. SUTTON 

VICE PRESIDENT 

TOSCO CORPORATION 

BEFORE THE 

HOUSE COMMITTEE ON RESOURCES 

HEARING ON H.R. 70 

EXPORT OF ALASKA OIL 

MAY 9, 1995 

My name is Peter A. sutton. I am Vice President of Tosco 

Corporation and am responsible for Tosco's West coast supply and 

marketing activities. I appreciate the opportunity to appear today 

in opposition to H.R. 70, which would remove the long-standing 

restrictions against exportation of Alaskan North Slope ("ANS") 

crude oil. 

I. WEST COAST REFINERS RELY HEAVILY ON AHS OIL SUPPLIES. 

ANS oil accounts for about half of the crude oil used in 

California and over 80 percent of the crude oil used in the State 

of Washington. Foreign crude oil imported to replace exported ANS 

oil would be higher-priced, from less secure and more distant 

sources, and less suitable for processing in West Coast refineries. 

Existing refining configurations, strict West Coast gasoline 

specifications, and logistical constraints result in limited 

ability to substitute foreign crude oils. 

Tosco is the largest independent refiner-purchaser of AHS 

crude oil. our California refinery in the San Francisco Bay area 

and our Washington refinery in the Puget Sound area process a total 

of approximately 180,000 barrels per day of ANS crude oil, which 

constitutes more than 10 percent of total ANS production. ANS 

crude oil supplies more than 70 percent of our feedstock 

requirements on the West Coast. 

Our company is a leading supplier to independent gasoline 

marketers and jobbers, which provide consumers with their only 

competitive alternative to the major integrated oil companies. A 

secure source of domestic, short-haul, competitively-priced ANS 

crude oil is essential to maintaining the competitive viability of 

Tosco and its independent customers. 
100 

Tasca's refineries include equipment which efficiently 

converts ANS crude oil into gasoline and other ligl:lt products 

demanded by the West Coast market. our refining equipment was 

installed at considerable expense in reliance on th•e continued 

availability of ANS oil. Any loss of supply or increase in the 

relative cost of ANS oil would increase Tasca's crude oil 

acquisition cost and reduce our operating efficiency. 

Since 1991, production of ANS oil has declined from 1.8 

million barrels per day to 1.6 million barrels per day. The State 

of Alaska forecasts that ANS production will decline further to 

approximately 1.3 million barrels per day by 1998. Thus, within 

three years, the West Coast will be a crude oil-deficient region, 

even without exports of ANS oil. 

II. ALLOWING EXPORTS WILL INCREASE THE ABILITY OF BRITISH 

PETROLEUM TO MANAGE THE SUPPLY AND PRICE OF ANS OIL. 

British Petroleum produces approximately 800,000 barrels per 

day of ANS oil, which is roughly one-half of total ANS production. 

Because the other ANS producers generally process their ANS oil in 

their own refineries, British Petroleum is the sole spot seller of 

ANS oil to independent refiners. By controlling the volume of oil 

delivered to the West Coast and Gulf Coast market:s, British 

Petroleum can effectively control the supply of ANS •Jn the West 

Coast. This gives British Petroleum considerable market: power over 

the price of ANS oil. 

Since 1991, the price of ANS oil has increased by a1lmost $3.00 

per barrel relative to the world benchmark price of West Texas 

Intermediate ("WTI") crude oil. (See Attachment 1.) The result is 

that ANS oil is currently selling on the West Coast at a price 

which is effectively at world market parity. 

However, if Congress allows unrestricted exports of ANS oil, 

the price will be bid up above world price parity because some refiners cannot readily import substitute foreign oil. These 

refiners lack deep water terminal facilities and storasre needed to 

accommodate large tankers and would have to use more costly and 

environmentally risky lightering operations. Furthermore, they may 

be unable to procure foreign crude oil which is comparable to ANS 

oil and suitable for their refinery processes. 

In light of these costs associated with importing foreign oil, 

British Petroleum would be able to extract a premium for ANS oil 

above world price parity. Thus, legislation to allow exports of 

ANS crude oil would simply strengthen the ability of a major 

foreign company to exercise its considerable market pm.rer over the 

supply and pricing of ANS oil in the West Coast market at the 

expense of independent refiners and ultimately consumers on the 

West Coast. 

- 2 -
101 

U:I. ALLOW:IJJIG AJJIS O:IL EXPORTS WOULD TKRBATEJJI I'AJI:ILY-WAGB 

KAJJfUPACTUR:IJJfG JOBS :IJJf THB DOMES'f:IC REI':IJJf:IJJfG :IJJIDUSTRY. 

Before addressing the highly speculative and unfounded claims 

that ANS oil exports would increase employment in Alaska and 

California, I want to emphasize that existing family-wage 

manufacturing jobs are being lost today in the West Coast refining 

industry. In California alone, refining employment has declined 

from 23,000 in 1990 to less than 19,000 in 1994. 

The increased price of ANS oil relative to world prices has 

been a major factor in the dramatic decline of the West Coast 

refining margins. In fact, gross refining margins on the West 

Coast have decreased by about $3.00 per barrel since 1991, which is 

roughly the same as the increase in the price of ANS oil. (See 

Attachment 2.) West Coast refining margins recently fell to their 

lowest point in 10 years. A further increase in the relative price 

of ANS oil resulting from exports would only worsen refining 

margins, leading to additional plant closures and lost jobs. 

At Tosco, our management has been forced to review all phases 

of our operation. Some of the measures taken have caused us to 

reduce personnel levels substantially in California, where Tosco 

employs 1, 000 people. If Tosco is forced to absorb a further 

increase in the price of ANS oil, we may also face the decision 

whether or not to close one or both of our West Coast refineries, 

which would mean the loss of hundreds of well-paid manufacturing 

jobs. 

:IV. ALLOW:IJJIG EXPORTS 01' AJJIS OIL W:ILL JJIOT INCREASE O:IL PRODUCTION 

OR BXPLOYMEJJf'f :IJJf ALASKA. 

The forecasts by the Department of Energy ("DOE") that 

allowing exports of ANS oil will lead to increased oil production 

and employment in Alaska are based on the totally unrealistic 

assumption that the ANS producers will invest 100 percent of their 

increased revenue in the development of Alaska reserves. This 

assumption is contrary to the well-known investment strategies of 

the ANS producing companies to shift from domestic to foreign 

exploration and development. 

Even the DOE in its study acknowledges that the ANS producers are pursuing a strategy of investment in foreign prospects, where 

the financial returns are thought to be more attractive. This 

prevailing strategy is illustrated by the attached Wall Street 

Journal article of April 24, 1995, which reports that ARCO is 

looking overseas to replace its declining ANS production. The 

article states that ARCO is making especially deep cuts in its 

capital expenditures in Alaska. Only about 12 percent of ARCO's 

$1.2 billion exploration budget appears to be earmarked for Alaska. 

(See Attachment 3.) 

- 3 -
102 

The truth is that little if any of the incn:.ased revenue derived from ANS exports is likely to be invested in Alaska, making 

illusory the production and employment gains forecast by DOE. 

Indeed, the DOE study states that British Petroleum declined to 

commit itself to any specific amount of reinvestment Ln Alaska. In 

light of recent actions by the ANS producers, the• most likely 

scenario is that British Petroleum would export 1:he increased revenue resulting from any export of ANS oil. 

In any event, it is not likely that an ANS oil price increase 

in the range of $0.50 to $1.50 would stimulate much, if any, 

increase in investment or production. Despite a $3.00 increase in 

the price of ANS oil relative to the benchmark price of WTI since 

1991, the ANS producers have continued to cut theJ.r budgets in 

Alaska and production has declined by 200,000 barrels. This 

history does not suggest that a more modest price increase would 

have any significant effect on investment or production. 

V. ALLOWING EXPORTS OF ANS OIL WILL NOT INCREASE OIL PRODUCTION 

OR EMPLOYMENT IN CALIFORNIA AND WILL ONLY HARM OTHER WESTERN 

STATES. 

The claims by DOE of increased oil production and employment 

in California resulting from ANS oil exports ~:.pend on the 

assumption that the price of California oil will tracl<: any increase 

in the price of ANS oil. Since this assumption is not valid, the 

production and employment gains forecast by DOE will not be 

realized in California. 

Tasca is also the leading independent purchaser and refiner of 

heavy crude oil produced in California. Our San Francisco Bay 

refinery processes up to 65,000 barrels per day of heavy California 

crude oil, which is more than 12 percent of total heavy California 

oil production. 

Based on our experience as a large user of both ANS oil and 

heavy California oil, Tasca can assure this Committee that removal 

of the ANS export ban will not result in the increased oilfield 

investment, production, or employment in California claimed by the 

advocates of ANS exports. The price of heavy California crude oil 

is at world parity and is driven by the price of WTI crude oil, 

foreign heavy crude oil prices, the export fuel oil market, and 

only marginally by the price of ANS oil. 

The low quality of heavy California oil makes it difficult to 

refine, and it is simply not a substitute for ANS crude oil. The 

highest valued market for heavy California oil is provided by the 

complex and efficient refineries on the West Coast, where refiners 

have invested hundreds of millions of dollars in processing 

hardware to be able to handle this low-quality crude oil and 

maximize the yield of gasoline and other light petroleum products. 

- 4 -
103 

These refineries are already operating at or near their capacity to 

process heavy California oil into gasoline and diesel. 

Although California heavy crude oil can be legally exported, 

only about one percent of heavy California oil production has 

actua .-ly been exported since exports were initially authorized more tha- .·o years ago. This confirms that Tosco and other heavy oil 

ret~ners are paying California producers a world price for their 

oil. 

. if ANS oil exports could be expected to cause an increase 

~al~fornia heavy oil prices, it is unlikely that an increase in 

:he range of $1.00 per barrel would stimulate additional 

production. History indicates that the production and supply of 

California heavy oil is not price elastic. Since 1988, production 

of California heavy oil has declined steadily from 670,000 barrels 

per day to 560,000 barrels per day, despite a price increase of 

$4.00 per barrel relative to the price of WTI oil. 

In other western states, the proposed export of ANS oil offers 

only decreased security of oil supply and increased prices for 

petroleum products. The states of Oregon, Washington, Hawaii, 

Arizona, and Nevada are all served by refineries which use ANS oil. 

For these states, export proponents make no claims of economic 

benefit to justify the higher cost of ANS oil. 

VI. H.R. 70 WOULD GIVE FOREIGN REFINERS A TRANSPORTATION COST 

ADVANTAGE OVER U.S. REFINERS. 

The proposed legislation would allow ANS oil to be exported 

for use by foreign refiners on vessels which are documented under 

u.s. law but not built in u.s. shipyards. This could include 

tankers built in low-cost subsidized foreign shipyards but 

registered in the United States. 

Domestic refiners, on the other hand, must take delivery of 

ANS oil on higher-cost "Jones Act" tankers which are both 

registered in the United states and built in u.s. shipyards. The 

proposed preferential treatment of foreign refiners would give them 

a competitive transportation cost advantage of as much as 50¢ per 

barrel. 

VII. ALLOWING ANS OIL EXPORTS WOULD TRANSFER ENERGY SECURITY 

PROTECTION FROM THE UNITED STATES TO ASIAN COUNTRIES. 

Allowing exports of ANS oil would make the West Coast more vulnerable to oil supply disruptions by removing the security of a 

dedicated, short-haul source of domestic crude oil. The logistical 

value of this supply source was demonstrated in the aftermath of 

the Northridge earthquake when California refiners relied upon ANS 

oil to fill the shortfall in deliveries of light California oil 

caused by pipeline damage. 

- 5 -
104 

Diverting ANS oil to the export market would transfer u.s. 

energy security protection to Japan, Korea, and other Asian 

countries. This would reduce U.S. energy security at a time when 

oil imports have reached record levels and when the u.s. Commerce 

Department has recently found that oil imports posE! a threat to 

national security. 

CONCLUSION 

Allowing exports of ANS oil will only serve to strengthen 

Briti sh Petroleum's already substantial market power over the 

supply and price of ANS oil, will threaten the economic viability 

of independent refiners, will ultimately lead to higher prices for 

consumers on the West Coast, and will threaten family-·wage refining 

jobs, all without offsetting benefits of increased oil production 

or employment in Alaska or California. The only beneficiaries will 

be the multi-national ANS producers and the State of Alaska, which 

will benefit at the expense of California and the other western 

states which rely on ANS oil. 

H. R. 70 would provide foreign refiners with a transportation 

cost advantage over U.S. refiners in the acquisition of ANS oil, 

and it would transfer the energy security benefits of ANS oil 

supply from the United States to Asian countries. For all of these 

reasons, the proposed legislation should not be enacted and the 

long-standing restrictions on the export of ANS oil should be 

retained. 

- 6 -
.-1 

~ 

WTI 

ATTACHMEN'r 1 

West Coast Alaskan Nortn Slope Crude and California Heav, Cruda Prh:a lncraaaa relallva to World 

Oil Prices (West Taus lnlermedlata) 

.... to.oo 

1$1 .001 --- --··· 

AN • ....,.,, 

ltz.OOI ~ - -·· IS3.001l----- ----- --- - --·- -- ....... .......... - -· --------1---__ _ l 1'4.001 1-----~ .. ,, ---- -~ .... ::::---.... _ : "''" -: :=~~ -~-~ ~~ ~~.. 

-- : -::~~ .. :-:-= -: --- ..... ,_ , __ ______ . _/ l .. ..,- -

-- ----- _______ \ __7------------ 117.001 ·1-- - T -- --- --- ----- --- -- --- - ---- ~-~~ ____ _ _ -------- --,;c,";-;;~ ----

.,.,.,_ ---- -- - -- -- -~·-· ---- ..... ., - - --- ---"',.. ~ ·--:::..~·- . --···---- -- -· ------.. -- --- -- -- =~ -- ~- ~ -- ~ts oo1 L--- -----------------=:~------::::;:::::;:-- 1991 1992 

-SJV¥oWTI 

1993 1994 

-ANS•tWTI 

YTD 1996 

SeN,..: · Notes Prices have not been adjusted for quality and location . 
....... 

~ 

$7.00 

$8.00 

$9.00 

~ 

Ill 

:5 

$5.00 

"' 

:J 

0 

$3.00 

~~.00 

sr1.oo 

1\TTI\CHMENT 2 

West Coast Typical Gross Refining Margin-San Francisco 

1907 1988 1909 \990 1991 1992 1993 1994 

Yetr 

jili-5 US~~~~:-_i~~~--Fr~r;-ci~~~~!~eQ- C~~~~~~~~--2-s;.-F;-a~cis.;-o 112- !HsPr;A~~ 

1995 

YTO 

Seti.Wc•: Attn' I Narkelscan to A.pr 2

5 VSWC ANS: 3 Sltf'l ffencl•eo Un1. Reg. IConVII!rtlionaiJ: l Sen Fn~ncl•co Dle•el 
107 

ATTACHMENT 3 

April 24, 1995 CORPORATE fOCUS 

Arco Struggles to Find New Sources of Overseas Oil 

As Supply of Alaska Crude Dwindles, Company Ponders Foreign Strategy 8y..\.:.;nPMrrol: 

Slaf/R: .. ?~;:;;!~=Jov-~ Areo by the Nu~ .. -.. , .. 

of personnel euttlaCJCs ;and ~rpniZJ.· 

tions. slashllll' iu wor1t fortt by some l.Yr and reducing costs by $400 mtllion annu- ally. The company ha$ cut capital e.1penoi· 

ruresesptCiallydet? nAW~a.-.wneretl 

has suffered a spate Qf npensive and disappointing dry 1\oles. Only about S\5\l 

million. or Jr., of its 1!195 e~ploralion 

and development budget of Sl.~ billion. is eannarlted for .-\laskan pro]ttts. That's 

tess than one fourth of wnat it plans ~o 

spend durinr the year on drillin~; over· 

LOSA."'>GEI...ES-)lar1anDowney.hnd ,-------------. 

of AtliLAdc Rk:llftricl Co:s international AeYeaM lit lnc:em~ 

eltpiorauon unu, takes immense pride in pointinr out that 1\J.s oper.~.tion has mana.gerl to double reserves and production 

overthelastffveyears. E-.·en so, ~r. Downey aclrnowled(eS. 

Area is me~ly "treading water" in lts 

annual strunle to find new sources of all to 

replace the crude it pumps out of the 

i"JUnd in -~am. an area that nu be!n the bedrtrl. of the rompany's success since the 19-:tls. 

.von owr5ea.s !orays rrntrally have !eel tonarun.J-p.s disroveries. But so far, the relaunly small-scale effortS outside 

the U.S. !all short of providing a compre- hensive, Jonr·term sttatel)' to oompmsate for the company's steadily shrinking sup· pliesofcrudefromAJa.ska'sNorthSiope. 

While rompetiton and Wall Strtet 

analysts rontlnue to speculate about a potential bold strokt by AmJ that eou.ld 

include a S2 b1Uion·plus acquisitiOn. a mas- sive-suxt.buybatipi"')Jnmorsomeother 

lnbilions 

"' rr-r-T"""'iIi 

Jllltl 

llllll 

I I I l I 

SIKJI: hrfomaM:e 

·~~~ , ... , ·u ·a 'N ·• 

.. 

,, 

,, ~ 

a 1,. . ., 11 ·u "' 

NlliftCOIIII1mlilionSI 

lon;-t•rmdllllib!lliOnsJ 

Slllrtholdm'•Quity1billi0nsl 

Employen 

SIUI 

1111.1 

124.13 

17.211 

lUI 

...... 

"'"Abundant · supplies or ~latively ine.1· pensive ott !rom Al:uka's ~ortll Slope 

·tnditionally havt mace it possiblt! for the company to run its refinmes ;u maximum 

efficiency and become Ca!ifomJJ. ·sIn ding 

psoline m:trlteter. Those Oush time! grad· uaJJy are drawin&' to a close, t!mugh. as 

production from Prudhoe Bay b~ns to tail 

offandbecomesmoree:<pensiveasa resull ofenhancedrecoveryetrorts. 

~~~::~~~~$~~~~~; ~~~~~~~~~~~~ ------------~--~--------· 

Some of Mr. Downey's fledgling proJ· e<:ts are supposed to pick up the slack. 

Starting almost from scratch in the m!d 1980s. Arco's ove~eas production has climbed to a.bout 150 million ~uivalem 

blrTels .1 year. Btfore Mr. Do111ney ~ 

eligibfeiOrtdrrnu:tyear.he~s:oset> primarily with lowtr·nsk. c:omparaliftly !ow-payback ex;lloration and develOpment and doubtts. ·· etrorts. "'You can eo bmke waiting for home 

Focus oa Smaller Fields runs" similar to Alaska's oil-rich Prudhoe 

cas~~s~~~~n~ ::~~~~~~~ ;:~ ~}~t ~~:r-~r~~d .. ~t ~~s:1 ~ fonner Soviet Union and Third World ro~~---- 'Tm not prepared to wait that 

counCiies favored by many of its industry AltO President and Chief Executivt bretmn. Instead. Arco is concentrating Mike R. Bowlin, a~. "We've done a Jot 

mostly on explorinrsmaller fields. while it belter'' tuminr a profit aequ.irinr limited 

also tries to e~nd or redevelop mature reserves in the S50 million to SlOO million production facilities in Alv"a. Vtnm1tla range, ht says, "'Ulan -n han wntn we·ve 

liJd ~- Some of these proj«U, pe out and made large acquisitions.·· 

==·~still bardy Ketches onlbe For now, Mr. Bowlin a.r-gut!~, Arco ean 

A.rt'O's onnll fo~i(!l petroWwn output alford to play a wait inc p.me eVftl if 

wasupaboutr:'oin1994.Roorhly9Q'I'.olits ·such a strategy doesn't tully ~place 

overseasproductlonaarrentlycomesrrom depletedmerves. 

two placH, Indonesia and the North Sea. Strategic Crossroads 

And half of that total Is naturaJ gas. But Ume may be running out. Mr. Beyond a few anas. A.rt'O is say· Bowlin. whO fonner1y headed Arto's over· lng little about Its strategic plans ro seas operations, has talked aboUt slowly 

identify and tap new sow-tes of oil past the shiftlnr Ule company's domestic locus to late 19905. fonirn invtstments. As be pn-pares to "We'ft bftn D'l&ldnJ a lot ol ac- a.uume the mantle this summer from 

quisitions." W. DHney says in bls home- retllin( Cbaitmill Lodwrid: M. Cook. the 

spua f'ffllrasb twanr. "'but tbey're tUty· mmpany's consemttve approach appean bitty rasc&b"' ln tht ISO mlllioa. or so · to be at a crossro&ds. Within the next year r&rlf!. Mr. Downey describes the cora· or two. accordlnr to maay analystS and pany's suatto in baseball ~ • .;, lnc:lustry uecutiva. Arco's manapment 

stressina: tbat J.reo Is coin&' for "sin(les ··ls likely to have no choice except to finally 

try swinginrfor t:be feDCtS. ~~v~.ftth!o:~e:.ti~ll:n:se~: "I ~rtainly don't want to see them ment are inexorable. The company needs · 

plun~ into somethinr just to pacify Wall at least 300 million equivalent barrels of ' Strett, ·· says Eugene Nowak ol Dean Wit- new reserves simply to replace the amount ter Reynolds Inc. But Arco "probably will it depletes rrom existinr fields yearly. make a significant acquisition over the ln 1994 Area mana~ to slightly boost nrxtfewyears''forasmuchasS3billlonto its overall world·wide merves. thanks 

=:~:adly needed reserves, Mr. Nowai Jarg-ely to Us success In drilling for faS. 

"lnveston would like to SM an intern&- Improved crude retOvery estimates from 

uonal acquisition ITIOf't tlwl a domestic =~i =~ped boOSt the reservr-

:=;--~~~~~~an= Cbifta is one ot the few countries - Brothers Inc. "They _don•t tlur to spend wflm: Arm has st.elcbrd outlts long-term 

their !ucesscashlonabuybaclt." ~~:~:W~;n~~U=~~~~ Wort Forte Cutbacks rarmarted for offshon ras exploration 

Throurh this period of transition, Wa.ll and production t1as made Aral the tartest Street has continued to lOok favorably on Western Investor in China. adds that he 

An:o. which in 1994 emed S919 mWion, or hopes to strike follow-on a(Jftments cov- SS.&J a share, on revenue of S16.6 billion. In ering oil refininr ud mart.eting. 1!193. the company earned S2M million. or With Arco's ovtra.ll production slated to 

Sl.66 a share. on Sl8.5 biUion In revtnue. d!mb sllfhtly over the next thret years, The 1993 results include a 5450 million anal)'1ts be:liRYt that man3rement should : tharJe stemminr from the reot'(3Jliz.ation ha.-e 11me to dn.llrith lon(-ran~ q~llon 

or dof'nl'stic oil and p.s ope~t!Ons. In New ol rrplaciflf PTudbot Bay reserves and 

Yort SCod: Excbanre axtiPI'ile tRdlaf mUin( tbl! mmpany tess s-eruUive ao· Friday. Atco sham wm liP 25 rents at nurtuattons In lntrmaHonal crude price. 

~ll~~ne~hthethe52=:~of~~·try. ·~ :Ws~C::!; =~~~J!~ Arco already has wntbered a • series , ' leaders will address thOse Wues. 
108 

STATEMENT OF NOLAN W. HANCOCK 

ON BEHALF OF THE 

OIL, CHEMICAL AND ATOMIC WORKERS 

INTERNATIONAL UNION 

CONCERNING H.R. 70, THE EXPORT OF ALASIKA OIL 

BEFORE THE 

HOUSE COMMITTEE ON RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

MAY 9,1995 

Mr. Chairman, Members of the Committee, my name1 is Nolan W. 

Hancock. I am the Citizenship-Legislative Director for the Oil, Chemical and 

Atomic Workers International Union (OCAW). 

Our union represents approximately 100,000 workers employed 

nationwide in the oil refining industry, chemical industrial plants, pharmaceutical 

production plants, weUdry corn milling industries, and we represent several 

thousand workers in all phases of the nuclear industry. In particular, OCAW 

represents some eight (8) thousand oil refinery workers on the West Coast and 

many thousands more across this country. It is these workers whose goodpaying jobs could be lost as a result of this legislation. Therefon3, I am pleased 

to have this opportunity to appear and speak out in opposition to H.R. 70, which 

would remove the current statutory restrictions against the export of Alaska 

North Slope ("ANS") crude oil. 

By dedicating ANS crude oil to the U.S. market, the long-standing 

statutory export restriction protects the nation's energy security while protecting 
109 

2 

consumers and preserving manufacturing jobs in the petroleum refining industry. 

This protection is becoming increasingly important now that ANS production has 

peaked and the supply of this important resource is declining. 

With competition from low-cost foreign refineries and rising crude oil 

costs, the West Coast refining industry is facing its most difficult operating 

conditions in a decade. Several refineries have been forced to close and others 

are reporting operating losses. In California alone, employment in the refining 

industry has declined from 23,000 in 1990 to less than 19,000 in 1994. 

If West Coast refiners lose their supply of preferred ANS feedstocks, the 

higher cost of using imported foreign oil would further undermine their 

competitiveness which could easily lead to further refining job losses. Diversion 

of ANS crude oil to foreign markets would also complicate the ability of West 

Coast refiners to comply with new reformulated gasoline standards for the 

improvement of air quality. 

I want to remind this Committee that the West Coast contains one of the 

most modern, complex, and sophisticated refining industries in the world. This 

nation simply cannot afford further harm to this important part of our 

manufacturing base. 

Our union is particularly concerned over the risk that exported ANS crude 

oil would be replaced by gasoline and other refined products from foreign 

refineries. Foreign refiners already enjoy a competitive advantage over 

domestic refiners because they are not subject to strict U.S. environmental and 
110 

3 

safety standards. If lower-cost foreign refiners are allowed to replace exported 

ANS oil with finished refined products, this would constitute a direct 

displacement of U.S. refining capacity and U.S. refining jobs. 

In conclusion, Mr. Chairman, we believe that allowing expe>rts of ANS oil 

would be a grave economic mistake. We believe that Congress should be 

considering measures to strengthen our manufacturing base and to enable U.S. 

workers to add value to our natural resource. We strongly oppose measures -

such as the proposed export of ANS oil - which would allow a vital domestic 

natural resource to be exported for processing by foreign maniJfacturers and 

foreign workers. 
111 

Slti[lbtr[{c:en; Suite 204 

Ccunci/ of' 901 N. W115hington Street 

A.merfca Alexandria, Virginia 22314 

Tel: 703-548-SHIP (7447) Fax: 703-518.()276 

Statement By 

Thomas P. Jones, Jr., Chairman 

Shipbuilders Council of America 

Before the 

Committee on Resources 

United States House of Representatives 

Regarding the 

Export of Alaskan Oil 

H.R. 70 

1334 Longworth House Office Building 

Washington, DC 20515 

May 9, 1995 

71Ie national trade associaTion for U.S. shipbuilder.r, ship repairers. anti shipyard suppliers. 

Founded in 1920 
112 

Mr. Chairman, members of the Committee, I am Thomas P. Jones, Jr. Vice 

President of Atlantic Marine Holding Company of Jacksonville, Florida and 

Chairman of the Board of Directors of the Shipbuilders Council of America. The 

Council is the national trade association representing private shipbuilding and ship 

repair yards, marine suppliers and naval architects. A list of our membership is 

attached. I am here today representing the Shipbuilders Council of America whose 

members are builders and repairers of Jones Act tonnage. The issue of Alaskan 

oil export is of vital importance to shipbuilding and ship repair yards in this 

country and I appreciate the opportunity to appear before you today. 

Lifting the ban on the export of Alaskan oil at a time when our biggest 

customer, the U.S. Navy, is dramatically downsizing would cripple America's 

shipbuilding and ship repair industry. Therefore the Shipbuild1!rs Council of 

America categorically opposes lifting the ban on the export of Alaskan oil. 

One of the first proposals put forward for export carriage was the use of 

Jones Act-qualified tankers; U.S.-built, owned and crewed ships eligible for trade 

between United States ports. The Council opposed utilization of U.S.-built ships 

because we believed it would violate the GATT agreement and the agreement to 

end shipbuilding subsidies which was finalized last year under the Organization for 

Economic Cooperation and Development (OECD). Further, we were concerned 
113 

that use of Jones Act ships in this export trade could lead, through GATI or 

OECD action, to loss of the Jones Act. As it is, we believe that the existing 

proposal to limit this carriage to U.S.-flag, U.S.-crewed ships will also face GATI 

and bi-lateral treaty challenges. We further believe that the seagoing unions which 

actively support this proposal will eventually see their job opportunities in this 

trade exported overseas. 

In fact, the Danish Ambassador, the Honorable Peter Dyvig, has written to 

certain members of the Congress regarding export reservation to U.S.-flag ships 

of Alaskan oil. Ambassador Dyvig points out in his letter that "such provisions 

are deeply objectionable: they are discriminatory; and they constitute a threat 

to the system of international free trade of which the United States has long 

been a protagonist and beneficiary. Furthermore, these provisions would 

contravene the U.S. international commitments and obligations and depart 

from normal commercial practice. 

These provisions are also contrary to the OECD's Code of Liberalization 

of Current Invisible Operations and the OECD's Common Principles of 

Shipping Policy. 

These provisions also represent a material and significant breach of U.S. 

obligations as entered into in bilateral treaties with a number of Governments. 

These treaties require that the vessels of bilateral partners receive national 

treatment in the carriage of all cargoes. 

Export of Alaskan Oil Page 2 
114 

If enacted, the provisions would also contradict paragraph 7 of the 

GATS Ministerial Decision of Negotiations on Maritime Transport Services. 

This stated that participants in the NGMTS shall not apply any measure 

affecting trade in maritime transport services except in response to measures 

applied by other countries and with a view to maintaining or improving the 

freedom of provision of maritime transport services." 

The Ambassador stated that the "grave concerns" expressed above are shared 

by the Governments of Belgium, Denmark, Finland, France, Germany, Greece, 

Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden, the United 

Kingdom and the Commission of the European Communities. 

I should point out that while the Ambassador's letter specitically addresses 

the House bill, H.R. 70, the Danish Embassy states that S. 395, a similar bill in 

the Senate, is a matter of equal concern since it contains the same provisions for 

export. 

More recently, Mr. Roger Clarke, Chairman of the Consultative Shipping 

Group (CSG) composed of 14 nations involved in internationa:l trade with the 

United States, stated that "countries are very angry and concerned that their treaty 

rights will be violated." According to a Trade Winds report of April 21, 1995 

nine of the fourteen nations in the CSG have bi-lateral shipping agreements with 

the United States. 

Despite the opinion of Ambassador Mickey Kantor, the United States Trade 

Export of Alaskan Oil Page 3 
115 

Representative, that this concept does not create any violation of existing 

agreements, our trading partners clearly view it as a violation of GATT and 

existing bi-lateral treaties. 

As to shipbuilding and ship repair, we believe that if the ban is not lifted, 

there is a market in the next five years for the construction of between twelve and 

fifteen 120,000 ton crude carrier equivalents to replace tonnage being taken out of 

service by the requirements of the Oil Pollution Act of 1990 (OPA 90). With the 

massive reduction of U.S. Navy shipbuilding contracts, this market represents an 

important element in the very survival of a substantial segment of the U.S. 

shipbuilding industry. 

While the loss of shipbuilding opportunities would gravely effect the 

nationwide industry, loss of repair jobs would have particular impact on the West 

Coast shipyards. For instance, the Port of Portland, Oregon would be decimated 

by enactment of this bill. Five hundred to eight huncred jobs would be lost in 

Portland alone. The city would be faced with no way to pay off an $84 million 

bond issue which backed the expansion of ship repair facilities in the port. That 

bond issue was passed in 1976 specifically for the purpose of repairing ships in the 

Alaskan trade and in the belief that the ban on exports, agreed to at the inception 

of the Alaskan oil trade, was valid for as long as the oil lasted. We believe that 

the eventual loss in both repair and new construction shipyards across the nation 

could be 8,000 to 10,000 jobs if this bill is passed. 

Export of Alaskan Oil Page 4 
116 

The threat to the Jones Act posed by this bill is very real. Thousands of 

American jobs in ship, boat and barge construction and repair yards are at risk, 

as are thousands more seafaring union and non-union jobs. The recently 

completed OECD shipbuilding subsidy agreement leaves the Jones Act as the only 

long term assistance program for U.S. shipyards. We need Jones Act tanker 

construction to build a base from which to compete in the international 

marketplace. If the Jones Act falls and OPA 90 is significantly weakened, U.S. 

shipbuilding and ship repair will be devastated. 

We believe that if all Alaskan oil were exported, U.S. oil imports would rise 

from the present level of about 52 percent to over 60 percent. Clearly, this is not 

desirable and we support the recent findings of the Department of Commerce in 

this matter. The recent increase in the price of oil based on the Administration's 

position regarding trade with Iran is an indication of the instability of the 

international oil marketplace. By any standard, U.S. interests a:re not served by 

an avoidable increase in our national dependence on foreign oil. 

Mr. Chairman, that concludes my remarks. I would like to thank you and 

the Committee for the opportunity to appear before you today. 

Export of Alaskan Oil Page 5 
Suite 204 

901 N. Washington Street 

Alexandria, Virginia 22314 

117 

Sfrip!~:u:l!dcrs 

Counc!E of 

Am~rfca Tel: 703-548-SHIP (7447) Fax: 703-518-0276 

SHIPYARD MEMBERS 

The American Ship Building Company 

Tampa Shipyards, Inc. 

6001 South West Shore Blvd. 

Tampa, FL 33616 

Atlantic Marine, Inc. 

8500 Heckscher Drive 

Jacksonville, FL 32226 

Bay Shipbuilding Company 

605 North Third Avenue 

Sturgeon Bay, WI 54235 

Bender Shipbuilding & 

Repair Company, Inc. 

Post Office Box 42 

265 S. Water Street 

Mobile, AL 36601 

Bethlehem Steel Corporation 

Bethlehem, PA 18016 

Port Arthur, TX 

Sparrows Point, MD 

Bollinger Machine Shop & 

Shipyard, Inc. 

Post Office Box 250 

Lockport, LA 70374 

Cascade General, Inc. 

Post Office Box 4367 

Portland, OR 97208 

Edison Chouest Offshore 

North American Shipbuilding, Inc. 

East I 18th Street 

Galliano, LA 70354 

General Ship Corporation 

400 Border Street 

East Boston, MA 02128 

Halter Marine, Inc. 

13085 Industrial Seaway Road 

Gulfport, MS 39505 

The Jonathan Corporation 

Post Office Box 1839 

Norfolk, VA 23501 

Marinette Marine Corporation 

Ely Street 

Marinette, Wl54143 

McDermott Incorporated 

Post Office Box 60035 

I 0 10 Common Street 

New Orleans, LA 70160 

Metro Machine Corporation 

Box 1860 

Norfolk, VA 23501 

Norfolk Shipbuilding & 

Drydock Corporation 

Post Office Box 2100 

Norfolk, VA 23501 

Peterson Builders, Inc. 

I 0 I Pennsylvania Street 

Post Office Box 47 

Sturgeon Bay, WI 54235 

17u' nMiunaltrade as.wcimion fur U.S. shiplmildns, ship repairers, am/ shipyard suppliers. 

Founded in 1920 

May 1995 
Southwest Marine, Inc. 

Foot of Sampson Street 

Post Office Box 13308 

San Diego, CA 92113 

San Francisco & San Pedro, CA 

118 

ALLIED INDUSTRIES MEMBERS 

Bird-Johnson Company 

110 Norfolk Street 

Walpole, MA 02081 

Dresser Pump Division 

Dresser Industries, Inc. 

401 Worthington Avenue 

Harrison, NJ 07029 

Fairbanks Morse Engine Division 

1730 M Street, NW 

Washington, DC 20036 

General Electric Company 

1331 Pennsylvania Avenue, NW 

Washington, DC 20004 

Hopeman Brothers, Inc. 

Post Office Box 820 

Waynesboro, VA 22980 

Jamestown Metal Marine Sales, Inc. 

4710 Northwest Second Avenue 

Boca Raton, FL 33431 

Jered Brown Brothers, Inc. 

1608 Newcastle Street- Post Office Box 904 

Brunswick, GA 31521 

Reliance Electric Company 

24800 Tungsten Road 

Cleveland, OH 44117 

Teleflex Incorporated 

205 Church Road 

North Wales, PA 19454 

Unisys Government Systems Group 

820 I Greensboro Drive 

Suite 1000 

McLean, VA 22102 

Wartsila Diesel, Inc. 

201 Defense Highway 

Annapolis, MD 21401 

Westinghouse Electric Corporation 

Hendy Avenue 

Sunnyvale, CA 94088 

York International Corporation 

631 South Richland Avenu~ 

York, PA 17405 

SC~ Membership Page 2 
Bastianelli, Brown & Touhey 

2828 Pennsylvania Avenue, NW 

Washington, DC 20007 

Fort & Schiefer 

1401 New York Avenue, NW 

Washington, DC 20005 

Kvaerner Masa Marine, Inc. 

Power Technology Center 

201 Defense Highway - Suite 202 

Annapolis, MD 21401 

119 

AFFILIATE MEMBERS 

McNabb Expositions 

34 Spruce Street 

Rockport, ME 04856 

TIS, Inc. 

813 Forrest Drive- Suite A 

Newport News, VA 23606-3403 

NAVAL ARCHITECT MEMBERS 

Designers & Planners, Inc. 

2120 Washington Boulevard 

Arlington, VA 22204 

John J. McMullen Associates, Inc. 

One World Trade Center 

New York, NY 10048 

South Tidewater Association 

of Ship Repairers, Inc. 

Post Office Box 2341 

Norfolk, VA 23501-2341 

Rosenblatt & Son, Inc. 

350 Broadway 

New York, NY 10013 

ASSOCIATION MEMBER 

SCA Membership Page 3 
~) Port of Portland 

Box 3529. Portland. Oregon 97208 

5031231·5000 

120 

TESTIMONY FOR THE HOUSE COMMITTEE 

ON RESOURCES 

TUESDAY, MAY 9, 1995 

Tom Decker, Manager 

Federal Government Relations, The Port of Portland 

Portland, Oregon 

My name is Tom Decker, Manager of Federal Government Relations for the Port of 

Portland. The Port of Portland appreciates your invitation today to discuss H.R. 70, the 

provisions intended to lift the Alaskan North Slope crude oil export ban. The Port of 

Portland owns and operates marine terminals, airports, and the Portland Ship Yard 

(PSY)--one of the few ship yards in the nation operated by a public port. 

Mr. Chairman and members of the committee, the Port of Portland has again this year 

carefully weighed the pros and cons of lifting the ban on Alaskan oil exports and we 

remain opposed. 

Others represented on a panel before the committee are more competent than I to speak 

about the national benefits of the longstanding Alaska oil export ban for our national 

security, for American consumers, for the domestic refinery industry, and many other U.S. 

interests. The Port of Portland fully supports the continuation of the ban in pursuit of 

these objectives. However, I would like to focus on the impact of legislation proposed by 

the committee Chairman would have on U.S. ship yards and their workers. The Port's 

judgment is based upon our experience as the owners and managers of the leading 

Alaska oil tanker repair and overhaul facility in the United States. 

r:·~Jrl o1 F'onland oih:es located 1n Portl;,mC . 01~qC>n L! .S A 

Ch1cago llhno1s : VVa:shmgl<.m. DC Hong Kong: Seoul l,liPt>' Tt.. vo 
121 

Would lifting the ban benefit ship yards and their workers? Yes, but it would benefit only 

Asian ship yards. Removing the ban would hurt, perhaps even cripple, some U.S. ship 

yards--the PSY foremost among them. 

The 1973 Congressional decision to ban exports of Alaskan North Slope oil balanced the 

interests of Alaska, the oil companies, the environment, U.S. consumers, U.S. seafaring 

unions, U.S. refineries, and U.S. ship yards. The decision to keep this resource in the 

U.S. was no less than an explicit statutory guarantee that U.S. repaired vessels would be 

carrying U.S. crude oil from Alaska to West Coast and East Coast oil refineries. 

Relying on this commitment, voters in metropolitan Portland, Oregon, in 1976 undertook a 

major investment pledging the credit of their real property and voted to back an 

$84 million ship yard expansion program. This ship yard expansion program, among 

other things, included acquisition of the largest floating dry dock in the Americas to handle 

the Alaskan North Slope Very Large Crude Carriers (VLCCs). 

Here was an American hometown not asking for a Federal handout, but willing to put up 

its own credit and dollars to invest in a facility critical to the method sanctioned in statute 

for transporting Alaskan crude to U.S. refineries. 

Mr. Chairman, $84 million is a lot of money to property taxpayers in Portland, Oregon. 

Courage and a lot of faith in the commitment by Congress were required by Portlanders 

to vote to back this long-term investment. It was expected to take at least 30 years to pay 

off the dry dock, which was expected to have a life of at least 50 years. 
122 

The voters' confidence has been rewarded until now. Between 500 and 800 family wage 

jobs have been directly supported by facilities built with the 1976 bond issue. 

Subcontractors and related industries have generated in still more high wage jobs. 

All told, repairs utilizing Dry Dock 4 from March 1979 to August 1994 getnerated 

$1,447,573,508 (1994 dollars) in revenue. Over time, this repair work produced 17,134 

ship repair jobs with personal earnings of $567,124,301. Total direct and induced jobs 

equaled 23,661 for Oregon and Southwest Washington. 

At the same time, the State of Alaska and the oil companies have had the benefit of a first 

class repair facility easily accessible from the tankers' normal routes. It has been a 

mutually beneficial relationship. And the contractors at the yard have developed 

important relationships with their customers based on timely and quality repairs. PSY's 

top five customers over the past several years have been SeaRiver Maritime (Exxon), 

Chevron, BP Oil, Arco Marine, and West Coast Shipping. Our contractors don't win every 

bid, as there is robust competition on the West Coast of the U.S. Still, the record of 

repairs won by the yard shows that PSY contractors can compete well in a tough 

business environment. 

Lifting the ban would make a mockery of Portland's reliance on the guarantee Congress 

made. More than 60 percent of Portland's current ship repair work comes from Alaskan 

North Slope VLCCs. Every domestic ship repair company we are in contact with 

concludes, as we do, that lifting the ban would mean the great bulk of that work would 

then be done in Asian ship yards. Even oil companies that continue shipping to U.S. 

West Coast refineries will be able to schedule a revenue generating trip to Asian ports for 

any vessel scheduled for major repair. 
123 

Near or in some of those Asian ports 'lre Asian ship yards where the repair work can be 

done at less cost than in the U.S., because they have lower environmental protection 

standards, because they don't pay union or even U.S. minimum wages, because they 

don't provide U.S. standard benefits, ~nd because worker safety is given less attention 

than in U.S. ship yards. 

It is not just Portland's ship yard that would be devastated by the proposed reversal of 

policy. Export of Alaskan North Slope oil would decimate the entire segment of the U.S. 

shipbuilding and repair industry which depends on U.S. oil tanker construction, repair, and 

maintenance. In a report issued last year by Gillette Wilson, Economist the estimate of 

total jobs subject to being lost is 9,500. 

Some argue the market for repair of Alaskan North Slope VLCCs may dwindle over the 

next ten years, in any event, as the North Slope's oil approaches depletion. We 

acknowledge this. And PSY has been anticipating these coming changes by seeking new 

ship repair niches to serve. We are confident we can adapt along with the marketplace to 

these gradual changes. We cannot survive an overnight Congressional reversal of 

direction that would cause our major market to dry up. 

So, who wins if the ban is lifted? Not the U.S. gasoline and oil consumers, who will see 

higher prices. Not the U.S. ship yard or refining industries, which will see lost business. 

The winners will be Asian ship yards and their workers. The winners will also be British 

Petroleum (BP}, which will be able to exert greater control over U.S. west coast oil 

supplies and, thus, command higher crude prices in Asian markets. The final winner is 

the State of Alaska, which will receive accordingly higher royalties. 
124 

We do not lightly stand in the way of such good fortune for BP and Alaska. After all, BP 

has been a very good customer at PSY. But we believe they should have to abide by the 

difficult compromise worked out in 1973 which allowed them to tap and generate wealth 

from North Slope oil in the first place in return for a ban on export of that oil. 

Surely no one can doubt that North Slope drilling and the Alaskan pipeline would have 

been barred if advocates had revealed at the time that they intended the export ban to be 

only temporary. 

Thank you, Mr. Chairman. I would be happy to respond to any questions you or other 

members of the Committee may have. 

04128195 

EX:E95162.DOC 
125 

STATEMENT FOR TilE RECORD BY 

TilE AMERICAN MARmME CONGRESS AND 

TilE MARINE ENGINEERS' BENEFICIAL ASSOCIATION 

PRESENTED TO 

TilE HOUSE COMMITTEE ON RESOURCES 

MAY 8, 1995 

This statement in support of H.R. 70 is submitted on behalf of the American 

Maritime Congress, an organization representing U.S.-flag ship operating companies in 

the domestic and international trades, and the Marine Engineers' Beneficial Association, 

a maritime union representing licensed engineers and deck officers who are employed 

aboard U.S.-flag vessels. Together we urge support for H.R. 70 that would permit 

exports of Alaska North Slope crude oil and that would require all exported oil be 

carried on American-flag tankers. Swift enactment of this legislation will help preserve 

the U.S.-flag tanker fleet and create jobs for American merchant mariners. 

Since the Trans-Alaska Pipeline Act was enacted in 1973, the oil situation has 

changed fundamentally. U.S. oil supplies are ample; consumption is actually lower; the 

Strategic Petroleum Reserve has been filled with more than 600 million barrels of oil; 

and U.S. oil sources have become more diversified. With the end of the Cold War, the 

victory over Saddam Hussein, and the Middle East peace agreement, the United States 

now has access to new areas of supply. Moreover, if such exports are permitted, the 

President will still retain broad authority to keep such oil in the United States in the 

event of an emergency. 

For the U.S.-flag maritime industry, Alaska oil exports would mean more vessels 

operating under the U.S.-flag, more jobs aboard U.S.-flag tankers, and more vessels 

constructed and repaired in American shipyards. A key provision of H.R. 70 will provide 

that any oil exported must be carried on U.S.-flag tankers. In short, the vessels that will 

carry this oil will be American-owned, American-crewed, and American-flag. 

91-746 0 - 95 - 5 
126 

2 

Recently, with declining North Slope production and increased use of the pipeline 

from Southern California to Texas, U.S.-flag tanker carriage of Alaska oil has dropped 

steadily. North Slope oil exports will reverse this decline because more Alaska oil will 

move by sea and because there will be more oil to move, with increased Alaska 

production stimulated by exports. It will, in fact, help revitalize the American-flag tanker 

fleet which has been declining -- not only by providing new cargoes but by stimulating 

modern tonnage constructed as a result of the double-hull requirements of the Oil 

Pollution Act of 1990. This will help preserve a strong, modernized domestic oil 

transportation system, entirely under American control and available to serve our nation 

in an emergency, and it will preserve and enhance America's maritime jobs. 

Today, with U.S. oil production declining and with the U.S. merchant marine 

tanker fleet and the jobs it generates also shrinking, it is important to act now to 

strengthen both industries. Lifting the existing Alaska North Slope oil export ban is an 

action that can make a significant difference to both oil production and to America's 

maritime industries. On behalf of the U.S.-flag maritime industry, we wish to express our 

strong support for H.R. 70, to permit the export of Alaska North Slope crude oil on 

U.S.-flag vessels. 
1~ 

HEARING BY THE BOUSE RESOURCES COKKITTEB 

ON TBB EXPORT OF ALASXAH OIL AND UHITED STATES 

FLAG VESSEL TRANSPORTATION REQUIREMENTS 

STATEMENT OF TBB COUHCIL OF EUROPBAH ' JAPANESE 

NATIONAL SHifOWNERS 1 ASSOCIATIONS !CENSAl 

The Council of European & Japanese National Shipowners' 

Associations (CENSA) is pleased to submit comments in connection 

with the hearing on May 9, 1995 on H.R. 70, a bill to lift the 

export ban on Alaskan oil and to require transportation of that 

oil in United States flag vessels. 

CENSA is comprised of the National Shipowners• 

Associations of Belgium, Denmark, Finland, France, Germany, 

Greece, Italy, Japan, the Netherlands, Norway, Sweden and the 

United Kingdom, plus individual carriers from most of those 

countries. These countries and their shipowners represent a 

large majority of the trading partners of the United States in 

the liner, bulk, and tanker trades. 

CENSA does not presume to join the debate over whether 

the United States should or should not export Alaskan crude oil. 

Should the United States decide to lift the existing export ban, 

however, CENSA strongly urges that the current provision in H.R. 

70 requiring that U.S. flag vessels carry that oil be deleted. A 

U.S. flag requirement would violate a number of bilateral and 

multilateral trade agreements to which the United states is a 

party, would quite literally invite retaliation in the form of 

similar restrictions by other governments favoring their own 
128 

- 2 -

fleets, and would reverse a longstanding United States position 

supporting nondiscriminatory access to international commercial 

cargoes. 

A DOMESTIC FLAG REQUIREMENT WOULD VIOLATE 

UNITED STATES INTERNATIONAL TRADE COMMITMENTS 

Among the international agreements that would be 

violated by a U.S. flag requirement for transport of Alaskan oil 

are the following: 

(1) Negotiating Group on Maritime Transport Service 

C"NGMTS"l Standstill Agreement 

In 1994, the signatories to the General Agreement on 

Trade in Services ("GATS"), including the United States, formed 

the NGMTS in order to pursue "elimination of restrictions" on 

maritime services. The participants adopted a Decision on 

Negotiations on Maritime Transport Services setting forth the 

purposes of and procedures governing the Negotiating Group. 

Paragraph 7 of that Decision, referred to as the "standstill 

agreement," states: 

commencing immediately and continuing until 

the implementation date to be determined 

under paragraph 4, it is understood that 

participants shall not apply any measure 

affecting trade in maritime transport 

services except in response to measures 

applied by other countries and with a view 1:o 

maintaining or improving the freedom of 

provision of maritime transport services. nor 

in such a manner as would improve their 

negotiating position and leverage. (emphasis 

added) 
129 

- 3 -

A statutory provision limiting international commercial 

cargo to u.s. flag carriers clearly would run counter to the 

stated purpose of "maintaining or improving the freedom of 

provision of maritime transport services." Furthermore, taking 

such action immediately after adopting the standstill agreement 

would undermine the international negotiating process that the 

NGMTS was convened to undertake. Such action is not consistent 

with the United States' leadership role in these important 

negotiations. 

United States Trade Representative Michael Kantor, in a 

March 9, 1995 letter to Senator J. Bennett Johnston, explicitly 

recognized that enactment of the proposed legislation could have 

serious consequences for further negotiations on international 

shipping agreements: 

There are, of course, potential implications 

for violating the peace clause by adopting 

new restrictive measures during the course of 

the negotiations. These implications could 

include changes in the willingness of other 

parties to negotiate seriously to remove 

maritime restrictions and might lead to 

certain parties simply abandoning the 

negotiating table. 

While recognizing the serious international 

implications of the proposed cargo reservation law, Ambassador 

Kantor nevertheless concludes that the enactment of the provision 

would "not present legal problems for us under the WTO." The 

rationale for this conclusion is not that the cargo reservation 

provision would not violate the standstill agreement; Ambassador 
130 

- 4 -

Kantor implicitly acknowledges that it would. Instead, his 

conclusion rests on the fact that the World Trade Organization 

does not have a mechanism by which it can force the United States 

to repeal the offending provision. In other words, Aniliassador 

Kantor's position appears to be that the United States "legally" 

may do anything that the WTO cannot directly force it to undo. 

This conclusion is misleading in its narrowness and is 

squarely at odds with settled international law. Although 

Ambassador Kantor is correct that the WTO cannot force the United 

states to repeal a domestic statute, it does not follow that the 

cargo reservation proposal would be consistent with the 

standstill agreement. First, it is exceedingly rare for an 

international agreement to authorize an international body to 

repeal a law of a member state without the concurrence of that 

state. The absence of such a power in the WTO is therefore 

entirely meaningless. Second, the WTO has other remedies 

available to it, among them the authorization of retaliation by 

other countries. Third, international agreements are premised on 

the concept of cooperation, not coercion. For example, the 

International Court of Justice has jurisdiction only over those 

state parties that consent to its jurisdiction. See J>rticle 36 

of the Statute of the International Court of Justice. Thus, the 

fact that an international organization does not have the power 

to overrule the legislature of a member country does not mean, as 

Ambassador Kantor suggests, that any legislative action taken by 
131 

- 5 -

a member country is automatically acceptable under international 

agreements. 

In addition to violating the general policies of the 

standstill agreement, the proposed u.s. flag requirement would 

also contravene the more specific undertaking not to take actions 

that would improve a country's negotiating position. Ambassador 

Kantor also addresses this issue in his letter, stating that, in 

his view, "it would be very difficult for foreign parties to make 

a credible ·case that the U.S. has 'improved its negotiating 

position'" on the basis of a U.S. flag requirement. This opinion 

is based on the factual, not legal, assumption that non-u.s. flag 

tankers would, as a result of the proposed legislation, have 

greater opportunities to carry imports to California, and thus 

would not be harmed. This assumption is incorrect for a number 

of reasons. 

First, speculation as to the potential development of 

alternative markets does nothing to change the fundamental fact 

that the proposed United States domestic flag requirement, if 

enacted, would become a "bargaining chip" in any future 

negotiations involving access to international commercial 

cargoes. The damage would be done from a policy perspective even 

if localized mitigating opportunities were to develop. Second, 

predictions of increased California imports are entirely 

speculative, and do not take into account the possibility of 
132 

- 6 -

increased domestic production -- one of the factors most often 

cited in support of exporting Alaska oil. 

The NGMTS standstill agreement is a recent and very 

explicit commitment by the United States to preserve and 

encourage free access to international commercial car9oes. 

Ambassador Kantor trivializes the commitment made by t:he United 

States by characterizing it as a "political commitment:," 

presumably in contrast to a "legal" commitment. In the context 

of an international system based on cooperation rather than 

coercion, this distinction is a cynical one. For the United 

States to take the position that it casually may break its 

international promises merely by classifying them as "political" 

would seriously diminish its credibility in the community of 

nations. 

(2) Bilateral Treaties of Friendship, Commerce and 

Navigation ("FCN Treaties") 

In addition to violating the recent and clear 

undertakings of the NGMTS standstill agreement, the U.S. flag 

reservation would violate bilateral agreements between the United 

States and virtually all of its major trading partners.Y A 

1.1 See, ~. Treaty of Friendship, Establishment and 

Navigation between the United States and Belgium (196J.); United 

StatesjDenmark Treaty of Friendship, Commerce and Navigation 

(1961); United States/Finland Treaty of Friendship, Commerce and 

Consular Rights (1934); United States/Germany Treaty of 

Friendship, Commerce and Navigation (1954); United States/Italy 

Treaty of Friendship, Commerce and Navigation (1949); United 

StatesjJapan Treaty of Friendship, Commerce and Navigation 

(continued ... ) 
133 

- 7 -

representative provision in such treaties can be found at Article 

13 of the United statesjBelgium Treaty of Friendship, 

Establishment and Navigation: 

1) vessels of either Contracting Party 

shall have liberty, on equal terms with 

vessels of the other Party and on equal 

terms with vessels of any third country, 

to come with their cargoes to all ports, 

places and waters of such other Party 

open to foreign commerce and navigation. 

Such vessels and cargoes shall in the 

ports. places and waters of such other 

Party be accorded in all respects 

national treatment and most-favorednation treatment. 

2) Vessels of either Party on route to or from the territories of the other Party 

shall be accorded national treatment and 

most-favored-nation treatment with 

respect to the right to carry all cargo 

that may be carried by vessel. (emphasis 

added) 

Under this and similar provisions in other treaties, 

the United states has pledged its resolve to maintain a free, 

open, and competitive system of international maritime 

transportation, affording to the vessels of its partner countries 

rights to access cargo that are equal to the rights enjoyed by 

u.s. flag vessels. There can be no doubt that the proposed cargo 

reservation law would violate these treaties. At an April 5, 

lf ( ... continued) 

(1953); United States/Norway Treaty of Friendship, Commerce and 

Consular Rights (1932). 
134 

- 8 -

1995 open meeting of the Consultative Shipping GroupZ1 with the 

u.s. Department of Transportation, representatives of •eight 

countries explicitly stated that they would consider the u.s. 

flag reservation to violate their bilateral Treaties of 

Friendship, Commerce and Navigation with the United States. 

Those countries are: Belgium, Denmark, Finland, Germany, Greece, 

the Netherlands, Norway, and Japan. Such statements by major 

trading partners, and their implications for international trade 

and the United States economy, cannot be disregarded without 

peril to the position of the United States as a leader of efforts 

to remove restrictions on and expand free trade. 

( 3) General Agreement on Tariffs and Trade C "GATT" l • 

Article XI 

Article XI of the GATT begins: 

No prohibitions or restrictions other than 

duties, taxes, or other charges, whether made 

effective through quotas, import or export 

licenses or other measures, shall be 

instituted or maintained by any contracting 

party on the importation of any product of 

the territory of any other contracting party 

or on the exportation or sale for export of 

any product destined for the territory of any 

other contracting party. (emphasis added) 

A plain reading of this fundamental GATT provision, to 

which the United States has subscribed since 1947, indicates that 

11 The consultative Shipping Group is comprised of the 

Governments of Belgium, Denmark, Finland, France, Germany, 

Greece, Italy, Japan, The Netherlands, Norway, Portugal, Spain, 

Sweden, and the United Kingdom, and the Commission of European 

Communities. 
135 

- 9 -

a requirement that a foreign importer must hire a U.S flag vessel 

to deliver oil purchased from Alaska is a prohibited restriction 

on the export of that product. 

(4) 1987 Organization for Economic Co-Operation and 

Development C"OECD"l Council Recommendation 

Concerning Common Principles of Shipping Policies 

on February 13, 1987, the OECD council, in which the 

United States is a participant, adopted a Recommendation of the 

council concerning shipping policy (the "Common Principles"). 

There the Council stated that it: 

II. AGREES that, in pursuance of, andjor in 

addition to,-1 the obligations under the 

Code, no Government of a Member country 

should introduce new andjor additional 

measures restricting competitive access to 

international trade and cargoes. (footnote 

added) 

The Recommendation went on to state: 

Principle 8 -- Freedom of Shipping in the Bulk Trades: 

OECD Member countries reaffirm their 

commitment to a free and fair competitive 

environment in the dry and liquid bulk 

trades. They are convinced that cargo 

sharing in the bulk trades leads to substantial increases in transportation costs 

and has a serious effect on the trading 

interests of all countries. 

J.j Because this agreement is "in addition to" obligations under 

the Code of Liberalisation of Current Invisible Operations 

("Code"), the United States note in derogation of the maritime 

transportation provisions of the Code is inoperative with respect 

to the Common Principles. In short, while the United States has 

maintained its existing position vis-a-vis the Code, it has also 

undertaken not to take further steps restricting free access to 

international commercial cargoes. 
136 

- 10 -

Here again, throuqh another international body, the 

United States has expressed its commitment not to further 

restrict competition for and access to international carqoes. 

The proposed leqislation would seriously undermine that 

commitment. 

A UNITED STATES PLAG REQUIREMENT WOULD BE 

INCONSISTENT WITH EXISTING UNITED STATES LAWS 

PROHIBITING CARGO RESERVATION BY OTHER COUNTRIES 

In addition to the multilateral and bilateral 

aqreements prohibiting reservation of international c:ommercial 

cargo to national flag carriers, there are United Sta.tes statutes 

that also reflect the stronq u.s. policy aqainst cargo 

reservation for commercial cargoes. These laws are different 

from those discussed above in that they apply to situations in 

which the united states may wish to take action against cargo 

preference requirements of other countries, rather than to 

instances of U.S. flag preferences. Nevertheless, the existence 

of these laws reflects the long-held policy by the United States 

Congress that freedom of access to commercial cargoes is a 

cornerstone of healthy international trade. 

The most explicit of these domestic laws is section 

19(1) (b) of the Merchant Marine Act of 1920, 46 u.s.c. app. § 

876, which directs the Federal Maritime Commission: 

To make rules and regulations affecting 

shipping in the foreign trade not in conflict 

with law in order to adjust or meet general or special conditions unfavorable to shipping 

in the foreign trade, . . . . 
137 

- 11 -

The Federal Maritime Commission has promulgated rules, 

now codified at 46 C.F.R. § 585.301, describing what activities 

would be considered "conditions unfavorable to shipping in the 

foreign trade." section (b) of 46 C.F.R. § 585.301 states that 

conditions are unfavorable (and thus subject to severe sanctions 

under section 19(9) of the Act) if such conditions: 

Reserve substantial cargoes to the national 

!lAg or other vessels and fail to provide, on reasonable terms, for effective and equal access to such cargo by vessels in the 

foreign trade of the United states. (emphasis 

added) 

Congress reaffirmed its concern with restrictions on 

access to cargo when it passed the Shipping Act of 1984. That 

law contains section 13(b) (5), 46 u.s.c . app. §1712(b) (5), which 

states: 

If, after notice and hearing, the Commission 

finds that the action of a common carrier, 

acting alone or in concert with any person, or a foreign government has unduly impaired access of a vessel documented under the laws 

of the United States to ocean trade between 

foreign ports, the Commission shall take 

action that it finds appropriate, including 

the imposition of any of the penalties 

authorized under paragraphs (1), (2), and (3) 

of this subsection. (emphasis added) 

Taken together, these statutory and regulatory 

provisions indicate a strong concern by the United States 

Congress that international shipping remain free from artificial 

restraints on the ability of carriers to compete for commercial 

cargoes. For the United States to now pass a statute requiring 

precisely what it has explicitly forbidden other countries to do 
138 

- 12 -

would undermine both the effectiveness of its existing laws and 

its leadership position in efforts to encourage international 

cooperation. 

THE POTENTIAL COSTS TO THE U.S. CONSUMER OF OTHER 

COUNTRIES ADOPTING "ME-TOO" DOMESTIC FLAG REQUIREMENTS 

FOR OIL AND OTHER RAW MATERIAL EXPORTS TO THE U.S. 

FAR EXCEED ANY POTENTIAL BENEFITS TO THE 

U.S. FLAG TANKER FLEET OF ALASKAN OIL EXPORT RESERVATION 

Adoption of the proposed U.S. flag restrictions would 

invite other countries to adopt similar measures, the costs of 

which would be borne by U.S. consumers and businesses. 

In testimony before the Senate Energy Committee 

regarding S.395, Mr. William H. White, Deputy Secretary of 

Energy, said the following: 

There has been concern expressed that 

requiring U.s. flag vessels to carry export:s 

of ANS crude would set a dangerous precedent 

with respect to extending cargo preference in 

shipping trade. The Administration views the 

requirements of flag-preference for ANS as 

unique, since there is the very real danger 

of lost seaman's jobs resulting from the 

displacement of shipments carried in the 

coastwise trade. This action should not be 

viewed as opening further possibilities for 

cargo preference, which this Administration 

strongly opposes. 

This portion of Mr. White's testimony serves as a succinct 

synopsis of the political balancing between focused domestic 

interests and broader international policies inherent in the 

proposed legislation. However, it also fundamentally 
139 

- 13 -

misperceives the nature and scope of the danger presented by the 

proposed cargo preference provision. 

The testimony assumes that the United States has 

control over the extent of future cargo preference laws for which 

the current proposal may be a catalyst. That assumption is 

simply wrong. The real danger of the proposal is not that it 

will start the United States down a slippery slope of reserving 

ever greater amounts of commercial export cargo to U.S. flag 

vessels, although that is a real and decidedly negative 

possibility. Rather, the most pressing danger -- to both the 

U.S. and world economies -- is that other exporting countries 

will also adopt unilateral measures requiring that their basic 

commodities sold to the United States -- oil and non-oil -- be 

carried on vessels flying their flag. 

The possibility of foreign imitation is not merely 

theoretical. There are many countries upon which the United 

States depends for basic raw materials that have domestic flag 

fleets for which cargo reservation laws would be tempting and a 

tremendous boon. For example, there are OPEC countries supplying 

U.S. oil imports that possess existing domestic flag tanker 

fleets, currently competing in the open market, that would 

benefit enormously from a similar reservation to them of all 

shipments to the u.s., with of course a marked increase in 

freight rates and consequent costs to the U.S . consumer. Other 

developing countries have a record of cargo reservation practices 
140 

- 14 -

which are then in effect "sold" to importing countries, again to 

the ultimate cost of the end user. Brazil is a major exporter of 

iron ore to the United States (5.2 million tons in 1991). 

Brazilian shipowners have sponsored legislation proposed by 

Congressman Salomao that would reserve large quantities of 

Brazilian exports to Brazilian flag vessels. u.s. flag 

reservation of Alaskan oil exports would be welcomed by those 

Brazilian interests and others as a clear precedent and 

justification for their own flag reservation, with direct 

detrimental cost and service consequences for u.s. industry. 

In each of these instances, the imposition of cargo 

preference laws by u.s. trading partners would create 

transportation monopolies for the benefit of the exporting 

nation's domestic fleet. The price increases caused by these 

monopolies would be paid for by the United States consumers and 

businesses that buy the imported goods. Particularly in light of 

the fact that the United States imports over fifty pe ~cent of its 

oil supply, such transportation monopolies created by other 

countries' reservation laws would have inflationary impacts 

throughout the u.s. economy, adding costs without adding to 

productivity, and sending dollars outside of the United States. 

These costs, while difficult to predict, are real and 

substantial, and would certainly outweigh any short-term economic 

gain that may be realized by protecting the u.s. flag independent 

tanker fleet from global competition .. 
141 

- 15 -

These effects cannot be unilaterally controlled by the 

United States, and no matter what words of caution or limitation 

the United States may utter as it frees the genie of 

protectionism from the bottle, that genie, once released, will 

operate beyond its master's control. To pretend, as the above 

quoted testimony does, that a fundamental rule governing free 

trade can be unilaterally reversed without causing serious 

disruption, is both short-sighted and mistaken. 

CONCLUSION 

The United States has for many years provided valuable 

leadership in the international community by consistently 

encouraging free and open trading policies and competitive access 

to international commercial maritime cargoes. CENSA respectfully 

urges the Committee to recognize the importance of continuing 

that leadership role. The Committee should examine thoroughly 

the damaging precedent that would be set if the United States 

were to reverse its longstanding policy, and should assess 

realistically the costs of the u.s. flag provision to United 

States consumers and to the efficiency of world markets. This 

examination and assessment require that the U.S. flag requirement 

be deleted from the bill. 

91-746 0 - 95 - 6 
142 

- 16 -

CENSA appreciates this opportunity to share its views 

on this important issue. 

Ey: 

Respec~fully sutmi~~aC, 

c::u:-:cil cf Ei..l=::pean & .;a.;:a::ese 

Na~icnal Shipcw~e=s' As cc~ ~i=r.s 

2-s~ !'eta:-

washingt::n 

.... ~--=-~~=== IG. Sar.C::lunc 

Represe:;.tati •re 

~ 
143 

INDEPENDENT PETROLEUM AsSOCIATION OF AMERICA 

~-.. s: ~ 1101 SIXTEENTH ST., N. W. 

f( . • '. .· .~ WASHINGTON, D. C. 20036 ~ ~ (202) 857-4722 

·~ ... ,. DENISE A. BoDE 

PRESIDENT 

(202) 857-4722 

FAX (202) 857·4799 

The Honorable Don Young 

Chairman 

House Committee on Resources 

U.S. House of Representatives 

Washington, D.C. 20 

Dear Pti.MI~ v 

May 9, 1995 

I am writing on behalf of the Independent Petroleum Association of America 

(IPAA) in support ofH.R. 70, legislation to repeal the ban on the export of Alaska 

North Slope crude oil. IPAA, which represents 5,300 crude oil and natural gas 

producers in the United States, fully supports this important legislation. We request 

that the attached statement be placed in the hearing record. 

Lifting the ban on ANS crude oil is an important step toward addressing 

American's deteriorating energy security. In addition to increasing U.S. crude oil 

production, ending the export ban will significantly increase jobs in the domestic oil 

and gas industry. Lifting the ban on ANS crude oil will also dramatically increase tax 

and royalty revenues for local, state and federal governments over the long term. It 

will even help improve our country's staggering trade deficit. 

America's independent producers are united in their wholehearted support for 

repealing the ban on ANS exports because of the long-term, positive impact that will 

ripple throughout the domestic oil and gas industry. In our view, this is not a regional 

issue. It is a matter of national security and energy security, and we applaud the 

leadership in Congress that is seeking a repeal of the 22-year old ban. 

Thank you again for your hard work on behalf of independent producers. We 

believe that H.R. 70 is an significant step in repairing the weakened domestic oil and 

natural gas industry, and we offer our full support of this important legislation. 

DAB/caw 

enclosure 

Sincerely, 

~tl.~ Denise A. Bode 
144 

INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA 

1101 SIXTEENTH STREET, N .W. 

WASHINGTON, D .C. 20036 

(202) 857-4722 

FAX (202) 857-4799 

Statement of the 

Independent Petroleum Association of America 

before the 

United States House of Representatives 

Committee on Resources 

on the 

Repeal of the Ban 

on the Export of Alaska North Slope Crude Oil 

May 9, 1995 

This constitutes the statement of the Independent Petroleum Association of 

America (IPAA) on the repeal of the ban on the export on Alaska North Slope crude 

oil. IPAA represents approximately 5,500 independent crude oil and natural gas 

producers in all 33 states with oil and natural gas production. We appreciate the 

opportunity to submit for the record our position in support of ending the 22-year ban 

on exporting Alaska North Slope (ANS) crude oil. 

The IPAA is pleased to join officials from the state governments of Alaska, a 

coalition of domestic independent and major crude oil producers, tanker operators, and 

labor representatives in support of H.R. 70. Independent produC40,rs favor lifting the 

ban on ANS exports because doing so is good economic policy and good energy policy. 

Moreover, putting an end to the ban is an important step toward addressing the critical 

issue of our nation's deteriorating energy security, while not compromising our national 

security. 

The IPAA's Crude Oil Policy Committee began a review of the impacts of the 

export ban three years ago, and most recently examined the impacts of the ban at its 

May 1994 meeting. Our early conclusions have been confirmed by the Department of 

Energy study, Exponing Alaskan Nonh Slope Crude Oil--Benefits ami Costs. DOE 

concluded that the export of Alaskan oil would yield substantial e~onomic and energy 

benefits to California and Alaska, as well as the entire country. 

There are several convincing arguments for lifting the ban. 
145 

Free Markets 

The current ban on ANS exports clearly infringes on the free market policies of 

the United States. From its founding in 1929, IPAA has advocated tariffs or import 

fees to protect domestic production from cheap oil imports. However, time and again, 

our requests have been turned aside by one administration after another. We have been 

told by Republican and Democratic administrations that we have to live under free 

market principals. We are trying to do that, but this export ban is contrary to the very 

free market principals our government tells us we must live with. 

The operation of free markets can and should dictate where ANS oil is sold. 

Most of it will continue to go right where it is going now -- to the West Coast of the 

United States. The only difference will be that oil production in California and Alaska 

won't be depressed, resulting in increased unemployment, business closures, and the 

waste of natural cP..sources. Exporting ANS crude oil will help improve the ability of 

U.S. producers to compete in the international crude oil markets, which are dominated 

by government-run oil companies and a few very large corporations. 

Impact on the Economy 

The han on ANS exports has undermined the competitiveness or U.S. 

independent producers, especially in California. The ban has depressed the 

wellhead price of onshore, mostly heavy crude oil production in California, which 

already discounted in the U.S. market, leading some producers to seek and obtain 

export licenses for limited quantities of heavy oil. 

The impact of the ban is clear. Alaska and California are the largest and third 

largest producers of crude oil in the U.S. Their combined output exceeds regional 

demand. The issue is further complicated by the fact that the quality of California 

crude tends to be heavy and must be blended with lighter crudes for use in the region's 

refineries. When world oil prices are low, as they are today, transporting the excess 

crude oil to other regions of the country is simply not competitive with imports into 

those regions. The result is that a glut is created on the West Coast market that further 

drives the price of oil produced in Alaska and California below the world price. These 

glut-induced, depressed prices have contributed to the devastation of the California oil 

and gas industry. Since 1985 over 32,000 jobs have been lost in California's producing 

industry, and exploration activities have come to a near halt. 

The ban on ANS crude handicaps independent producers in the capital 

markets as well. U.S. crude oil production competes worldwide for capital. 

American crude oil producers generally have difficulty attracting outside investment 

capital. We depend to a great extent on capital generated inside our industry for reinvestment in oil and natural gas production projects. As a result of the ban and the 

artificially low prices it has created, California's independent producers are even more 

greatly disadvantaged in the competition for investment capital. 
146 

The ANS export ban is stifling technological development and maximum 

resource utilization. California's vast heavy oil reserves are increasingly dependent 

on capital-intensive advanced recovery technology. With heavy oil wellhead prices 

below their free market value, valuable enhanced production projects art: simply not 

economic, and technology that has the potential to increase California onshore 

production is not being tested and commercially demonstrated. 

Lifting the ban would provide economic and energy gains for the U.S., 

especially in Alaska and California. The DOE study concluded that the export of 

Alaskan oil would yield clear benefits to the country. These benefits would be 

achieved without adverse impact to the environment, and with no increases in the price 

of gasoline. The study concluded that the Federal government would realize increased 

royalty revenues, and Alaska and California would see the creation of thousands of new 

jobs, a stimulus in onshore production, and an increase in state revenues. 

The DOE study forecasts underscore and quantify the conclusions IPAA's 

Crude Oil Policy Committee reached more than three years ago, predictlng a net 

increase in U.S. employment up to 25,000 jobs by the end of the decade~, an increase in 

federal royalties and in state and local oil-related revenues. In addition, Since 1988 

Alaskan production, which has declined by 25 percent to 1.5 million baJTels of oil per 

day (MMb/d) since 1988, should improve, along with prospects for additional Alaskan 

development and exploration. Lifting of the ban would also allow the TransAlaska 

Pipeline System (TAPS) to be better utilized. 

National Security and the Need for Congressional Leadership 

Every step our nation can take to improve domestic oil production is crucial, 

especially now. Just last month, the Department of Commerce reported that oil 

imports threaten to impair U.S. national security. It is vital that policymakers examine 

domestic energy law and make changes where those laws contribute to our nation's 

import dependence. 

The ANS export restriction is a vestige of the failed energy policies of the past. 

It was enacted less than a month after the commencement of the 1973 Arab-Israeli War 

and the first Arab oil boycott. In 1973, many people believed that the export ban 

would enhance our nation's energy security. They were wrong. It is clear that the 

export ban has contributed to making America more dependent on foreign oil. 

U.S. energy security has continued to deteriorate, and government policies have 

contributed substantially to the domestic industry's problems through pervasive and 

costly regulatory problems of questionable merit. Since 1986, U.S. crude oil prices 

have averaged in the mid-to-upper teens, a price level that under cuts the ability of 

domestic producers to invest in oil and natural gas development projects here in the 

United States. 
147 

Oil output in the lower-48 states has declined by about 25 percent in the last 

decade, from 8.9 MMb/d to 6.6 MMb/d, while consumption has grown from 15.7 

MMb/d to 17.7 MMb/d. This growing gap between consumption and production that 

has been filled by oil imports, which have risen from 5.4 MMb/d in 1984 to 8.9 

MMb/d for 1994. An ever-increasing share of these imports come from the Persian 

Gulf nations, where the Department of Commerce recently predicted that economic and 

political factors will result in an oil supply disruption in the near term. 

Last year the amount of oil that the U.S. imported reached an all-time high, 

over 50 percent of demand, while domestic production fell to a 40-year low. In March 

1994, IPAA and a nationwide coalition of producers petitioned the Department of 

Commerce under section 232 of the Trade Expansion Act, calling for an investigation 

into the impact of crude oil imports on U.S. national security. The investigation was 

conducted following a drop in world oil prices that forced producers to shut-in wells 

and lay off thousands of employees. The multi-agency investigation concluded that oil 

imports threaten to impair U.S. national security. 

While President Clinton accepted the Department of Commerce's finding, he 

proposed no specific new action, even though the administration had conducted studies 

before that investigation that support specific actions like preserving marginal well 

production, modifying the Oil Pollution Act of 1990, and lifting the ban on ANS 

exports. We are encouraged by commitments made since then by administration 

officials to have recommendations on several initiatives within the next few months. 

Still, our experience over the past two years makes clear the need for 

congressional leadership on energy policy initiatives. We are hopeful that this hearing, 

for example, will compel the Clinton Administration to finally pronounce a policy 

position on lifting the ban. 

Several other decisions on energy policy, promised in the administration's 

Domestic Natural Gas and Oil Initiative, have yet to be announced, despite what 

appeared to be clear deadlines in that document. We have concluded that only 

congressional leadership, like today's hearing, will compel the White House to act. 

Our plea to this committee is to keep the pressure on, keep moving forward on your 

energy policy agenda, and convert your ideas into legislative action. It is a matter of 

national security. 

IPAA believes that lifting the ban on ANS exports will allow the U.S. to take 

its first step toward enhancing its national energy security. 
148 

Conclusion 

The IPAA is gravely co~cerned about the national security impact of U.S. 

energy policies. We agree with the Department of Energy's conclusion that the ban on 

ANS exports can be lifted without injury to the U.S. national security or energy 

security. 

In addition, America's independent producers support lifting the ban on ANS 

exports because it makes good economic sense: 

• It will increase oil production in this country -- in Alaska and in California; 

• It will increase jobs -- in the oil industry, in the shipping business, and in 

the dozens of service firms; 

• It will increase tax and royalty revenues for state, local and federal 

governments; and 

• It will improve the U.S. trade deficit. 

Although the negative economic impacts of the export ban are most keenly felt 

by California independent producers, America's independent producers are united in 

their wholehearted support lifting the ANS export ban. In our view, this is not a 

regional issue. It is a matter of national security and energy security that Congress 

should address this year. 

The IPAA is pleased to support H.R. 70. 
149 

Statement ofU.S.Oil & Refining Co. 

Before the House Resources Committee 

Hearing on Alaska North Slope Exports 

HR70 

May 9, 1995 

U. S. Oil & Refining Co. appreciates this opportunity to provide testimony for the record 

concerning the committee's analysis of the impact oflifting the ANS Crude Oil Export Ban. We 

are pleased that you are willing to consider the views of West Coast refiners and consumers on 

this issue. 

Other interested parties will address the negative impact that ANS exports would have on our 

environment, our ship building industry, our national security and our international trade relations. 

We will restrict our comments to the impact ANS exports would have on the West Coast refining 

industry and the consumers we supply. 

U.S. Oil & Refining Co. is one of three independent refiners in the Puget Sound. We have served 

the Pacific Northwest civilian and military markets for over 35 years with a full range of products 

including gasoline, diesel, jet fuel, bunker fuel oil and asphalt. Like most other West Coast 

refiners, U.S. Oil has, over the last I 5 years, modified its refinery equipment to process primarily 

Alaskan North Slope crude oil. It now accounts for over ninety percent of our refinery raw 

materials. 

The major ANS crude oil producers and the State of Alaska have been the principal proponents of 

the exportation of ANS in their own self interests because of the additional income it would 

generate. If ANS is exported, the West Coast ANS supply will decrease and the price will 

increase. The amount of the price increase is subject to debate, but the DOE has estimated that it 

would be between $0.50/bbl and $1 .60/bbl, or one cent to three cents per gallon. On a dollar 

basis that's 300 million to I billion dollars annually. This is the amount that the ANS producers 

and the State of Alaska stand to make if exports are allowed. These dollars will come directly out 

of the pockets of American consumers. 

As opposed to what the DOE has asserted, this additional refining raw material cost will either be 

immediately passed on to the consumer or it will be passed on to the consumer after enough 
150 

additional refining capacity goes out of business to allow the remaining refineries to increase 

prices and stay viable. The following graph shows the historical relationship between West Coast 

wholesale gasoline prices and ANS crude oil prices. The direct relationship is logical and 

undeniable. 

WEST COAST GASOLINE VS CRUDE OIL PRICES 

I GA SOl iN E - <\ ~1 :> C. RUDE" 0~ 

Since 1983 , fifteen of the original fifty-seven rellneries on the West Coast have gone out of 

business due to poor refining margins. As opposed to what the DOE stated in their report , this is 

not a business that can absorb additional costs. In the past, the petroleum products produced by 

these shutdown rellneries have been replaced by foreign imports. In effect we have been 

exporting our manufacturing capacity and jobs and importing the additional products required to 

expand our economy. This export of U S manufacturing capacity will only be exacerbated by 

exporting ANS crude oil to Far East refineries. We need to increase the competitiveness of our 

U S. refineries, not burden them with additional raw material costs. 

We would like to bring to your attention one additional point. The DOE and the California 

Independent Producers assert that a higher ANS price will result in an equivalent price increase in 

California heavy crude oil which, will in turn result in higher California crude oil production rates 

and increased employment in California. This claim cannot be substantiated with historical 

California production data. ANS pricing has a very minor impact on California heavy crude oil 

pricing. Even discounting this fact, the following graph of total California crude oil production 

and California heavy crude oil price shows that large fluctuations in price (much larger than the 

increase expected from ANS exports) have failed to impact production rates. 
151 

I CALIFORNIA CRUDE OIL PRODUCTION VS PRICE I 

31 r------------------------------------------

-' ID 

ID 

iiJ 

29 

27 

25 

~ 23 

II' 21 

~ 19 

5 17 >-

~ 15 

"' i5 13 

11 

9 

......... , .... · ... 

Jan-90 Jan-91 

Jul-90 

. PROOUCTKlN .PRICE 

Jan-92 Jan-93 Jan-94 Jan-95 

Jul-91 Jul-92 Jul-93 Jul-94 

!IONTH 

We urge you to consider this issue carefully and with the majority of Americans' best interests in 

mind It is our sincere belief that the ban on ANS exports has benefited the U.S economy and 

provided Americans with the security of refining I 00'\0 of this valuable natural resource. We 

encourage you to recommend the continuation of the ban on the export of Alaskan North Slope 

crude oil Thank you for your time 
152 

Ultra mar ------··-·--·-·---

Ultramar Inc. P_Q_ Box 93102 

L011g Beach. CA 90809·310? 

(310) 437 -67% EXPORT OF ANS CRUDE OIL 

ISSUE Congress currently is considering legislation that would allow the unrestricted 

export of Alaska North Slope (ANS) crude oil. Under existing legislation, ANS crude can 

only be produced for domestic use. The West Coast historically has been the market of 

choice for ANS producers, with the Gulf Coast being the secondary market. 

BACKGROUND Ultramar Inc. is one of the largest independent petroleum 

refining/marketing companies on the West Coast. As an independent, Ultramar does not 

produce its own crude oil but, instead, must purchase its crude supplies through third 

parties. 

The Company operates a state-of-the-art, high conversion refinery in the Los Angeles 

area, as well as over 300 retail service stations in California, Arizona and Nevada. 

Ultramar manufactures approximately a tenth of the gasoline produced in Southern 

California. However, this represents almost 20% of the product available to independent 

gasoline marketers in the region. These independent marketers typically sell their 

gasoline for less than the major, integrated oil companies do, which keeps prices lower 

for the driving public. 

Because of the expense and uncertain availability of foreign sources of erude oil, Ultramar 

depends almost entirely on domestic supplies, including ANS. Ultramar's Los Angeles 

refinery processes approximately 70,000 barrels of crude oil per day, of which up to 30% 

is ANS or equivalent. The rest is California sour, heavy crude. Ultra mar has modified 

its refinery to accommodate greater proportions of heavy crude, but lillhter, ANS-quality 

crude will always be required. The most likely sources of replacement crude are South 

America and the Middle East, both of which present significant transportation cost 

increases, as well as politically driven supply uncertainties. 

IMPACTS A major argument of export proponents is that, because the price of 

California crude oil is tied to the price of ANS, the higher value of ANS in the world 

market will, in turn, spur greater production of California crude oil, cre<tting thousands of 

new jobs. Assuming that proponents of lifting the ban are correct in their assertion, 

Ultramar faces the double bind of having the cost of both of its major crude supplies 

increase. With refining margins at their lowest level in over ten years, Ultramar can ill 

afford to absorb the additional cost of crude. Consumers will pay rnore at the pump 

because refiners will be forced to replace domestic ANS crude with more expensive 

foreign oil. 

POSITION Ultramar Inc. is opposed to the unrestricted export of Alaska North Slope 

(ANS) crude oil. Allowing ANS crude to be exported subjects Ultramar and its wholesale 

and retail customers to greater supply and price uncertainty. 

.. A Member of the U!tramar Group of Companies 

== BEAC€~N 11'1 Quality and Service 
1~ 

STATEMENT OF PHILIP J. LOREE, CHAIRMAN 

FEDERATION OF AMERICAN CONTROLLED SHIPPING (FACS) 

SUBMITTED FOR THE RECORD OF HEARING OF THE 

HOUSE RESOURCES COMMITTEE 

ON H.R. 70 

MAY 9, 1995 

My name is Philip J. Loree. I am Chairman of the Federation 

of American Controlled Shipping (FACS) which is a maritime trade 

organization headquartered in New York. The membership of FACS 

comprises American based companies with an economic stake in 

owning, operating, managing, chartering, financing, or otherwise 

utilizing open registry vessels, and which share a common interest 

in preserving competitive open market~ in international shipping. 

At the same time, some member companies own, operate, manage, 

charter, finance or otherwise utilize u.s. flag vessels, which 

operate primarily in the protected domestic trades. 

Over the past thirty-six years our organization has 

consistently opposed efforts in this country and elsewhere to 

erect -- by governmental fiat -- artificial barriers to the free 

movement of vessels in international shipping. Thus, we are 

opposed to H.R. 70 to the extent that it would require any 

exports of ANS crude oil to be carried by U.S. flag tankers. 

Such a cargo preference requirement is objectionable for many 

reasons, but primarily because it would represent the first 

instance in which the United States, long the champion of free and 
1M 

open international shipping trade s for privately owned commercial 

cargoes, turned its back on its international commitments and 

i nstead resorted to maritime protection i sm. Such a 180 degrees 

change in course for the world's largest user of international 

shipping services is part i cularly incomprehensible given the 

f o llowing considerations: 

* ANS cargo preference would violate bilateral commitments to 

provide nat ional treatme nt in more than 40 Treaties of 

Friendship, Commerce and Navigation with our trading 

partners, s ome of wh i ch have strongly stated their objections 

at the appropriate diplomat~c levels and would be entitled to 

seek recourse in the future before the International Court of 

Justice. 

* ANS cargo preference would make a mockery of morally binding 

multilateral commitments the U.S. Government has undertaken 

in good fa i th i n the Org an i zation of Economic Cooperation and 

Development and the Wo r ld Trade Organization/ Ge neral 

Agreement on Trade in Services. 

* ANS cargo preference would be antithetical to the 

objective of various federal statutes which authorize 

retaliatory measures against foreign countries which seek to 

promote their national flag vess~ls and maritime interests by 

protectionist and discriminatory actions. 

2 
155 

* ANS cargo preference would flash a green light to those Third 

World countries wishing to renew their claims to "cargo 

generator rights" for their exports (a euphemistic phrase 

meaning cargo preference to promote their national flag 

vessels) which the u.s. Government was instrumental in 

sidetracking during the early 1980's. 

* ANS cargo preference would leave the door open for domestic 

proponents of cargo preference to seek once again the 

imposition of cargo preference on other privately owned 

commercial cargoes (including agricultural exports) and thus 

to overcome the defeats they suffered during the 1970's by 

reason of votes in the Senate and House and by reason of a 

Presidential veto. 

The commitments and time-honored policy of the United States 

in favor of maintaining free and open shipping markets for 

privately owned commercial cargoes in international trade are not 

the result of some idealistic notion of free trade. Instead, they 

have been based on the reality that American exporters and 

importers account for roughly one-third of the world's maritime 

trade, and that their competitiveness in the global marketplace is 

dependent on their continued ability to select whatever vessels 

they need on the bases of price, service and availability, and 

without regard to any government imposed mandates based on flag, 

3 
1~ 

country of build, ownership, etc. Today, the unfettered right to 

choose vessels without regard to flag or other government imposed 

restriction exists for American cargo owners in the U.S. 

international trades. It exists because of the commitments and 

policies of the United States and its trading partners to resist 

any efforts by governments to promote their national flag 

interests by resort to cargo preference or other forms of 

protectionism. 

Ships exist to serve trade, and not vice versa. u.s. flag 

ships do not have some kind of vested interest in carrying ANS 

crude oil outside the so-called Jones Act trades. In 1973, with 

the oil crisis still fresh in its mind, Congress authorized the 

building of the Trans-Alaskan Pipeline but banned exports of ANS 

crude, supposedly to lessen u.s. dependence on foreign oil. 

Notably Congress, in 1973 and in later reenactments of the export 

ban, never legislated that tankers carrying ANS crude must be U.S. 

registered. However, because of the Jones Act, shipments of ANS 

crude to other states and territories of the United Stales had to 

be transported in tankers that were U.S. registered, built and 

owned, but with a notable exception. The Virgin Islands is 

specifically excluded from Jones Act coverage, and thus for many 

years ANS crude oil regularly has been shipped to the St. Croix 

refinery on foreign flag tankers. For example, 31\ of tankerborne 

ANS crude, measured in ton-miles, was transported by foreign flag 

tankers during 1993. 

4 
157 

Also, it needs to be emphasized that the concern voiced by 

the Deputy Secretary of Energy about preservation of seafaring 

jobs (which presumably would not total more than a few hundred if 

the export ban were lifted) could be achieved without any resort 

to government mandated cargo preference. The private sector 

parties most interested in cargo preference (BP North America, the 

tankers owners and their unions) are entirely free to agree 

contractually among themselves to support lifting the ban in 

return for BP North America's binding commitment to use u.s. flag 

tankers to export its ANS crude. This practical solution was 

endorsed by an editorial in the March 14, 1995 issue of THE 

JOURNAL OF COMMERCE, the u.s. newspaper with special maritime 

expertise: 

"Indeed, this newspaper supported the same bill last year, 

although we now believe there's a better option. British 

Petroleum, a major player in Alaska and the largest potential 

exporter, could negotiate a binding contract with the 

shipping companies, agreeing to use their union-crewed 

vessels for exports in return for their support in repealing 

the law. Such an arrangement would preserve work for u.s. 

companies and crews and leave British Petroleum no worse off, 

since it is already willing to accept higher-cost u.s. ships 

for the privilege of exporting its oil. 

5 
1~ 

"A private contract would be more in keeping with standard 

business deals between companies, their customers and their 

unions. And it would spare Washington from a charge of 

hypocrisy: supporting free trade agreements around the world 

but, for the first time, reserving a privately traded ocean 

cargo for its national fleet. 

"The Alaskan oil export ban is an aberration in U.S. trade 

and energy policy, and it should be repealed. But Congress 

should not replace it with a law that sets an equa lly 

dangerous precedent for u.s. commercial policy.• 

In conclusion, it is urged that for the above reasons your 

Committee reject the proposed ANS cargo preference provision in 

H.R. 70 and instead encourage its proponents in the private 

sector to resolve the issue on a commercial basis. 

6 
159 

Testimony of 

Douglao P. Wheeler 

Secretary for Resources 

The Re&ourcea Agency of California 

Committee on Reoources 

U.S. Houae o! Representatives 

May !l, 1995 

Chairman Young and distin~lished members or the Committee, 

my name is Douglas Wheeler and I am the Secretary !or lesources 

tor the State o! Calitornia. I am here today representing Gove:mor Pete Wilson and the peopl!! of California to address the 

very important 1ssuP.a related to the diatribution of Alaskan 

North Slope (ANSl crude oil . 

The continued economic recove~y ot California is critical to a strong national economy. In ;pita of recent earthquakes, fires, !looda, and defense-industry cutbaclu, m~~.ny sectors of the 

State 1 11 economy a.re not only recover:ing, but showing strong growth. Unfortunately, one of our largest industries. the 

upstream petroleum industry, continues to suffer du~ to a depreesacl market. This is created, iu part , by an oversupply of 

diacount.ed crude oil l:leing imported from the Alaskan North Slope . California's oil and gas in4ustry and its related service 

industries have sut!ered thousands of joo losses in the past decade and production has dropped significantly. 

In the early 1970&, when the Trans-Alaakan Pipeline System 

wu approved and compromise legislation bannin~ the export of ANS 

c:rucle pass~d. and in the early 19808, the affects of Alaskan 

import& on the West Coast petroleum industry wue masluad by Ar:ab 

oil embargoes and result~lt escalating oil pric~s. However, 

after worldwide crude-oil prices collapsed in tho mid-1980s a.s supply ancl demand shifts took place, the full impact of ANS 

imports became very apparent in california . Now, with the 

emphasis on the huge heavy-oil reaerves and their more costlY 

production requirements, the price received tor California'• oil 

becomes more important as lifting costa increase. 

Not only have the depre1sed wellhead pricQs a.rtected the oil produ~ers, both California and the Federal Covernment have 

experienood significant reduction; in tax and royalty income. 

State and local tax receipts from oil properties have declined 

significantly, and revenues from federal leasaa in California. 

both on•hore and off•hore, have declined due to the artificially low prices caused by ANS imp.ortll to the West Coaat . 
160 

Recognizing the importance of this issue anc! the fact that 

they ooth aupport tree trade, Governor Wilson sent a letter to 

Prelic1e.nt Clinton in March 1994 that called for the lifting of 

the export ban. The Governor further stated that thi• action 

would be consistent with the philoaophy of the North American 

Free Trade Agreement . 

This action waa !ullowed in June 1994 with a resolution 

pae•ed by the Interstate Oil and Gas Compact Commission, Which 

represents the governors of the twenty-nine producing atate-. 

that urged Consraea and the President to expeditiously lift the 

ANS export ~an . Furthermore, in September 1994, Governor Hilson , GOVernor Walter Hic~el of Alaaka, and Governor Kdwin idwards or 

Louisiana c:oligned a letter to th• U.S. Senate euppo:rting the 

lifting of the export ban. 

Crude oil pricing and 1nduatry-related employment will 

improve eigni!icantly only when there ia long-term market 

ltability. A permanent change in the export policy would have a 

positive impact on oil pricee in California by llelptn; to 

minimize the negative affect• of a fluctuating marke1;. 

With annual oil and gas production valued at over fiv@ 

billion dollars and our gre~t reliance on petroleum for 

california's energy needs, 1t ia eoaential to the State's 

vitalitY that we maintain a healthy domestic industry . A divar•ion o! Alask~n oil from CaliCorn1a would improve significantly the marketability of the St;ate'a prOduction, thereby increaaing production, employment, and revenues to the 

State and Federal GOvernment. 

I appracu.to your concet-nll regar~ing this important isaue . California'• economic health ie important to all of ue . Thank you for the opportunity to teatify here tOday . 
161 

In eedle£ <XAICiplll'ln-. widl If»~ cl EnBr&Y <• k:Ck:r from Findlerg 10 Sel:maly O'Lalry, aaadled to leua-10 Pmident Oimoo, IUD lllaclleci) we challen,ed 

key IIISUI!Ipticm and oondllliODf in lbc JaDe 1994 DOE RpOit, "&pxtiDs Alaska NOI1h 

Slcpe CruiJo:: Oil. • Our c:mcema, larJely liDIIIIIWcml, li:Dd to diacredlt DOE's cooclusions 

cl.Det ecx:aomic bealftll. 

For example, .J:XE an--to !law ~y <Mn&llled SliiJIIO Al.-b aod 

cmdcnlatlld fcdcnlltax pia· We inquiftld abaut lbc bales fa-lppii'Cit ifiiXlOIIiSietlcic8 in 

lqQted resul13 aod weft: IIJid - DOt too coaviiiiCiatdy - that lbc model mat produced 

time resulta waa, ill the~ cl ia ..... <X:Jmedy COIIIInll:led. . 

Funba, DOE llllllld tblt lbc ~tma iDaala in ~flail exportina Nortb Slq~e oo may stim!UIB pnxhdita ia Alllb.llx'ouch invelbm:ra (DOE n:pon, fliBl!l B-1) 

aud prae::rtcd a IICdiaa oa ~ poducdoa nde8 resulq from !be aumpcim that Ill 

iDmmc:alal n:vema fa' die~ is ilmlecd in Alalb.. Bat tbe ~also conccdcs 

(in a fOOIDolll:) thallbc lllljor produca'l wmlcl DOt -'ly llliliYI!Il all iDcmDcala.l 

revi!IWI! ill Alasb. 

ThmM ID Nalisgrl Epgy lJrerin' 

Ala*a cum:ady poricllllbolsl ~ cl U.S. domc:.dc oo ~ md Ia lllcdy 

to be cme <:4 !he llalial'l top clcaacllic producers wdl inlo lbe next cearury. E:qnUng 

Ned! Slope cil oould ~ J1llber chu dea'eMe ow n:fl.aoe on foreip oil, especially iii 
i !!l!!ilittl. 11 ~J~ tl&l !l~i l~r l

Ji i!i!i't fiij~ ~~~ llil fiiiJ. ~UlH!i I 

1 .. 1r J~~.~ .. f J.! 1! .. 1 ,.~~~ Uu!J~" 

fr}e. i

1

il 

·t ~JJ __ I · ~~~ at -: i ~-I ~!r. ~. !I~ _.a 

tl . iir , ~-~ . l 8 I I . rlr ·i 
163 

1Aw11. 1tJ11.. TatlmotfJ: AIUr:l NonA SIGpr CntM 011 /!'.:1IJJaf a.. 

IH19. 199S(~J) 

p-oposaJ to ddll in die Arc:lic Nllia)ll Wildlife Rdup.. SUflpCliiCdly to reduce our 

depeadena: Cl'l foreign oil(- 1Criti.te say ANWR. export arpiDCidS at odds," Al!t1brgp 

J)jly :tie'a. ~ aa.:bld). 

Recent events have DDt RKIDced our~ stUed <lCliKlmD tballiflilla tbc CllpOit 

ban will beadlt BP lO die dltrimalt d IIBtiaall eoqy IDCIIrily IDCl U.S. jobs aod will ~tin inaca8cd ~ dlt m A1alb and lbe llllliou's west coast. 

"Kl-4 cr, ~.D. Rild o.t. Pb. D. 

P.O. Box 1430 

Ccrdova, AK 995'74 

(9CTT) 424-3915 

~~~a~. 0.1..-. 

P.O. Bm.l88 v--. AK 99E86 

(90'7) 83~S410 

Staa Stcpbena 

P.O. Bolt 1297 

Valdsz, AK 99tll6 

(9Cf1) 835-4731 
164 

EXPORTS: 

Oil questions 
President Bill Clinton 

1600 Pennaylvania Avenue 

WashiDgton, D.C. 20510 

165 

RE: Exporting !Jaaka North Slope Crude Oil 

Dear President Clinton: 

August 2, 1994 

Aa Alaskans with coxnbinecl ca:perience oflOO years ofideDtif,ying and woridng to 

correct probleJDB uaociated with production and tran.portati.on of Aluka North 

Slope crude ail, we are deeply cancamed that aerioua emiromnental and economic 

iallues associated with the Trana-Aluka Pipeline System (TAPS) are being diami._t 

without due consideration by your Administration. We believe that thiB serious 

oversight stems in part from the lack of a cabinet-level poaition to raise theae issues 

since Interior Secr.tary Babbitt hu recuaecl himaelf tram TAPS matters, and from 

the Alaskan CongrMaional. deleptiClll's lcmg history of dismissing ooncerns that run 

counter to the North Slope oil prodaeers. 

Recently three of ua met with Bob Anutrung. AIIBiBtant Secretary of the 

Departm'eot of Interior, Mike Damheck, Actin~ Direc:tor of the Bureau of Land 

Management, Debra W"illiama, Spec:ial Aadatant to the Secretary of the Interior for 

Alaaka, Tom Allen, Director o{tb.e BLM Aluka Ofliee, and Bta1ffrom CongreHman 

George Miller's and John Dinpll's oftlces. We disc:uaeecl many concerns regarding the 

present condition of the 'J.'rana..Alaaka Pipeline System (TAPS), foremost am.o111 

them being the federal government's appanmt inability to regulate the TAPS. 

Wa tt;roncly balieya that lift;iD& tha c:rude oil tqporl; ban at this time will be 

coun.terproductive to OJl&OiDI eftbrta by int«national federal. state and giyate 

parties to jmprnye mrulatgry gymjsbt of those t;rana-national oil comwmiee. 

For example, 

• EriEg EnyimpmnntaJ 'lbnwtl pPeod 1m TAPS Pjpelino 

No apparent consideration hu been given by DOE to the already uiBting 

environmental threats posed by the preMDt condition of the TAPS doc:umented in 

the BLM audit conducted by Owen 'lbero and the follow-up intenlal AJ;yeska and 

BLM audita. In our view, BP, the primary proponent tbr lifti!lg the crude ail es:part 

ban, is chiefty1'eiiJ)Oll8ible fbr the claJI&'m'uua condition of the pipeline. All the 

majority owner and operator of the TAPS, BP hu 'rirtually eliminated any 

meaningful quality control at' the pipeline, leavinc it in an indeterminate condition. 

One of the key l"'OIIICCD11 fur this llituation w the hilltoric and ongaiDg harassment 

and intimidatiac of'inspectom,'a practice which still continues t:odq, despite 

promiaM to desist made by Al,.U Preeident David Pritchard during 

eon,r..m.ona1 overaight bMrinp in .Jul;y and Novamber 1993. We are concerned 

that 1iftiiJg the crude ail ezport ban wm. be counterproclw!tiye to the oora ongoiDg 

efforts to regain federal caatroliiDd ovel"'lisbt of' the TAPS. 
166 

pap2 

• Ngrtb Slgpe DR&R <DimpeptHnr Rem,qyal & Bmtnmtjm) Funde 

Exxon a Dl&Jor North Slope oil producer, ia currently in federal tax c:ourt where the 

IRS ia 'd.allenging E:zxon's applkation for a multi-billion dollar tax deduction for 

tax yean prior to 1984 for future North Slope DR&R costa. In 19841, the federal 

tax law was changed to~ that these monies were NOT to be 'W8ed for tu: 

credite. BP and Arc:o are apedied. to eventually wind up in federal tax court fJ'Ier 

this same issue. The total tu credit for all North Slope producers ia estimated to 

be between $18 to $24 billion, which means, 8IIIJUJDing the muimum corporate 

tu: rate, apprazimately $6 to $8 billion realized to the U.S. Treasury. Collection of 

legitimate income tax would do much more to reduce the federal deficit than 

hypothetical and illusory U.S. Treuary pine touted by the advocatee of'lift;ing 

the aport ban. 

• TAPS DR&R Funds 

In 1985 a negotiated tariff settlement between TAPS owners and the State of 

Alaska was apprvved by the Fedaral Energy Regulatory Commisllion (FERC). A 

little noticed provision of't.b,.t settlement estabUahed a coDec:tion ac:hedule for 

future dismantling, removal and raltonltion of the TAPS. TAPS DRa:R was gi'OI!III8d up at the then current corporate income tax rate of.wl&. Howtm!r, in 

1986, the tu: law was reCormed to reduce corporate income tax to a ~um of 

S491o. PipeliDe ownen have ClOiltinued to c:oJlect the DMR money, Including tax. at 

the 46'1(, rate, at once profit:inc and aborting the federal goyermnent on income 

taxea and the State of Ala8b 011 taus and royaltiee, while at the same time 

buildiDg up an estimated ibur billion dollars of' ofJ.book, to-paid income for the 

TAPS owner~~ (see enclosure). 

Under FERC pJocedwee, the TAPS tariff agreemmt ahould be revisited becaUIIe 

this new information indicate. that, due to ezcesaive DRa:R collections, the tariff no lcmger serwa the public interest. A reviaed settlement could reclliec:t the 

nnplanned and pterioualy ~industry profits from DR&R collec:tions to an euvironmental trust. Tbat truat coulcl be uaed for such item. u tractor tup in 

Prince W'dJiam Sound and a vapor recovery &System at the marine tanker 

terminal, in addition to the intended DR&R. Beeauae the arguments to lli\ the 

export ban rest on shall:y 888Umpticlll8 about North Slope profit&, tbis element of 

the hiddao Alaaka North Slope pro&bs ebould be addreaaed before a determination 

ill made that it ia u--.ry to 1Ift the aport ban. 

• TAPS 1)p)er Traftlc Roqlatign 

Walt Parker, chair of the Aluka Huardou. Suhetance Spill Tecbnical Review 

Counc:il, recentJ;y stated durh:la a panel diacwlaioa onapill prevention at the annual 

meetiul of the Stat.-Britiah Cohmlbia Oil Spill Tulr. Farce that TAPS "tauur.ens are IUl:!ject to fewer apill-pnwentlon regulatione than wbeo the (Valde&] terminal 

opened in 19'1'1" (Auehorap Daib' N8WB, enclased). Walt Parker's llODcerD8 

parallel those of author Eric NalcJ. in his recent book "Tanbn Fu1ll of Trouble" 

(19SU Gro9e Pre., NY). '!be U.S. Cout Guard's budpt continues to be cut, Jimitiu8 its ahilit:iea tbr epill pr"8nnltioD tub: instead, the Amaicau public, 

industry and state 8Dd ft!denl ~ta ~peed billione at doDal1l respouding to 

and atudyh:lg the eft.math of' oil apllla. I..iftiug the arade oil aport lbau without 

fmpt"0'181lleute in tanker tndBe nplatiou and additioual apill pNmltj.oa 
167 

requirements at~ch u tractor toga ia throwing opeo the door to more spills in 

Prince William Sound. Allowing additicmal furejgn Bag tanlmrs into the T.APS trade 

would furlher invite spilla in the SouDd. 

Further, Dr. Richard Fineberg, a farmer policy aDalyat on North Sloe_e oil and gas 

iuuea for Alaaka Governor Steve Cowper, baa advised Secretary O'Leary that the 

DOE'• report "&portillg Alaaka North Slope Crude Oil" doea not provide aound baaea 

for its fundamental concluaions or the Department of Energy's recommendations (Bee 

attached). 

In our opinion, it would be a vwy sarioua IIDd regrettable declaioo. to lift the crude oil 

aport ban at this time. We urp )'011 to OOIIIIider the fUll rami1ications of lifting the 

export ban to the people most at risk from tbia deciaion. If we can be of any 

auiatance to you or your lltetf, pleaae contact ue. Full documentation of our c:onceros 

ia available immediately upon request. 

R~(%,~.D. 

Riki Ott, Ph.D. 

P.O. Boz 1430 

Cordova, AK 99574 

(907) 424-8915 

Sincerely, 

};;: 

(907) 886-&410 

-------,.., 

-~ Ri.chard. A. PiDeberg, Ph.D. 

P.O.Bcm·U6 

Eater, AK 99725 

(907) 4 7().. 7778 

'· c:J,~ Stan Btepbewt 

P.O. Box 1297 

Valdez, AK 99686 

(907) 835-4731 

/J)a.te.r'~ 

Walt Parker 

3724 Campbell Airport Rd. 

Anchorage, AK 99504 

(907) 333-5189 

encbure: 7128194letter from li'iDebeq to Secretary O'Leary 

cc: Haul O'Leary, DOE 

:am White, DOE Bob~,D0I 

Debra Williams, DOI Special A.liatant in A1uka 

Mike Damhec:k, BLM WllllhiD&tcm. D.C. 

Tom Allen, BLM .Alaaka 

COIJ8lWI8DWl John DmgaD Ccmgreuman Georp Miller 
168 

From the dwk o1 Richard A. Fineberg 

Ester, Alaska 99725 

V"ra Fax 

Secretary Hazel O'Leary 

Departmalt of Energy 

Washinaton, D.C. 

Dear Scaetary O'Leary: 

P.O. Box 416 

Phon• I FaJr (g(}7') 47P-m8 

July 28, 1994 

Be: Elqzgrtjn& Ala""' Nca1b Slope Crude Oil 

T read with great inll:reSt and disappointment your depanmatrs rqxm, "Exporting 

Alaska North Slope Crude OiL· As a former advisor to the Governor of Alaska on oil and 

gas issues who subsequently prepared several repxts for the Alaska S~ Legislature on North Slope economic iss~ I fiad hoped tbat your report would answer important many questioos about Alaskan oil deveiCJl:lmenl I was disappointed because the 1;c:port's 

conclusions appear 10 be critically <tependent oo buried, dubious or false assumptions that 

unda'Cut the validity of the report' a cOnclusioos.. For example: 

I lbe report asserts that Alaska would pin $700 million to$ t .6 billion in revenues between 1994 and 2000 if the ban wa lifted, and tbat under tow .. price scenarios 

most of tha1 gain would come in 1994-96. Having~ numerous n~pms on North 

Slope pufits, producUon prospec:ts and Alaska nM:Ducs since Itavina my position in the 

govc:m<r's office in 1989, I must say tbat tbe8e poorly explained estimates appear 10 be 

higbly implausible. Moreover, 1994 is Dearly twO-thirds over and if the ban were lifted, 

ANS seUers and refiners would then require some time to revise cmtracts, ;arrange 

shipments and reoonftaure their refinerY outputs. With most of 1994 gont!, how much of 

this theoreti'31 amount remains to be captured and how much is already lost to history? 1 

cannot make that c:aJculatioo beawse I reid the report from cover to cove~ but could never 

discover the bases for the $700 10 S1.6 trillion esttmate. 

I Althouah tJtaoe is a known, fUcd ~ betweal fedc:ra1 income taxes and 

stale revenues on ANS production at the DOE study prices, the DOE report inexplicably 

estimates federal gains to. be wen outside that precic:tlbl.e range, at S99 to S 188 millioo. 

This leads me to tielieYe the DOE rqn1 either omilied federal income taxes, or did not 

account for them cornx:tly. In eimer event, it would appear that producer 1;1U11s (and, consequently, jobs) may haw t.n ova--stated because fedenl tax effi:cu were not 

considered, and that tedlnl pins may have been uradasuted. This is precisely the kind of 

ambi&uity that would lead a camw reader to view with great slaepticism lh' conclusions of 

the DOE~ 

I RcprdinJ incmnental N«th Slope proU:tion that might JaUJ.t from lifting the 

ban, your authors noce that "lf expms of ANS crude oil raise c:rudc oil pric:es or save on costs of shi.PJ~inf and bandlina,lbe resultina revenues may be in~ m cdl ~­

related projects m the gqraphic:al areas wl:rae the new profits arc made. '1'1lis is 

particularly true for small companies, but less so fer the m,jor intepted o001plllies." 

(Report, pqe E-1.) In a fooencee, the report stata that "The lar&e ANS pr~ooucen made it 

clear in our interviews that they ••. would oat oecessarily reinvelt in Alaska the 

incmncntal revenues made as a result of exportiDa ANS oll." The same .aion JRSellls 

increased ~c:tion rases resultin& ftom the "reasonable" assumption "lhal: all incrl:mcntal 

revenues for the remaining )X'Oducers' share is iJlvested in ANS crude production activities 

that add to reserves" (major producers An:o and axon - 4!1J> of ANS JIIOduction - are 
F Utebc~ I O'Leary 

7/2/J/94 (Parr l ) 

169 

factored aut because their oil is aanafened rather than !Old, leaving BP as the remainin~ 

major producer). Because major producer BP owns 91 ~ of the remaiiJins production, by 

1ts own terms tbe report's lcey assumptton on reanvestment is clearly not n::uonable. 

I The report notes thai data "imply that reserve additions in the range of 200 to 400 

million bam:1s could be produced b the investment resulting from exports of ... ANS 

crude. By oomparison, [c]WTCilt rcscrvcs at Endicott and Point Mcfntyte, major i'leCOOdary 

fields on the North Slope, are 262 and 3~6 million bmel.s respectively.• (Rqxlrt, at p. 12 

and p. 50). Fer some n:asoo, the R:pOrt mam no rden:nce to the bqest maJor secondary 

field on tbe North Slope, Kuparu.k, whose mnainin& reserves are three times tbat of the 

two fields named in the report. Is there a reason f<r this? The report's second Kuparuk 

omission referred the readel:: apin to Appeodix E-the same place at which the dubious 

assumptions noced above are supposed 10 be dernorlstrated: nolhing in that ~dix told 

me whether Kuparuk was included or exc:ludc:d from your analysis. or why u was omitted 

from the I£XL 

. I am limiting myselfhtre to clelrty demoasUable exa:mP~es because time s~; 

some m your deplrtmalt seem to be rusbiJJi toward a decision on BPs behalf. I wnte, 

therefore, to makle sure tbat you are aware tballbe DOE report releued JUDe 30 appears to 

be laced with sipficant tecbnX:al ~ Tbele ~s make it difficult for me to 

accept the cooclusi<lns one must adopt to IIIUlDe tbe econDIIIK: benefits your report claims 

the United States will rca1iz.e from 1iftiq lbc ban. Tbe Iadcr is ulacd to bel.i~ that 

caJifontia refinery acquisition COlD can 10 up wUhout aft'ec:tin& consumer p10line prkes, and that ANS wiU realize a premium in Tap111 becalll& ill proc1Jct slarc mall:hes Japan's 

needs. While I am oot ~to stare !bat sud! baoic usumpcioiiS are invalid. it is my 

opinion that this repat fails to dc:mol1lttlie tbem. Tbele assumptions are contradicted by 

the Coalition to Keep Alaska Oil's June 1994 JePmt, "Coalcquc::Dces of &porting Alaska 

Nonh Slope Crude Oil. • I do not presume to lmow who is correct But I must tell you 

that the latter report is JU'ikingly accume in !hole areu wi1b wbk:h I am familiar. M<re 

important, the cballenaina ~ is much lesl dependent on tbe ldnd of Hm:ulean and 

undocumellled assumptioos ~ to radllbe aJDClusioas in me DOE repcxt. 

The latter report a1Jo sets up tbe blclqpoond for taisitlt environmental concerns that 

are casually ttismissed by lbe DOE r.pon: In partil;ular, Califumia supply pats, pipelines, 

refinery sr.orap f¥:iliti8S and rc=fiJJay opcraicxls appelll' 10 be at risk. And. as my colleague 

Dr. Riki Ott of Cordova, A.luka, bas Pft\'iDully ldviJec1 you, the DOE report alto 

dismisses l«'ious eoviroamalla1 coocans iD Alub concemin& the imlegrtty of the AWka 

pipeline and marine tranJpar1lltion ddivsy ~ M aloaa-timc AlaaDn. I ~Dr. 

Ott's i~ in the eaviromDealal issues the DOE repm1 fails 10 address. But it is the 

manifest sbatoomin&s in the DOE ecooomic a.1ysis that at me to ask you to bue your 

decisial oo l:'let1el data tban lbe RIPXt you nlleued June 30. 

In sum. I do not belieYe your dqaiblwnt's repan providl:s sound bases for its 

fundamental cooclusioas and recommendalions In W!w 01 die UDCbcussed trelblems 

associated witb lifting die eJqXIft bat and tbe abllnce of ooaviocin& suppcrt for takiDi this 

action, I Q9POSe liftiJII the b11n lllbis time IDd request tbat yw address the implicatioos of 

the DOE report's serious defect~ bcbe makiq yQ~t decilion. 

0 

91-746 (173 ) 


ISBN 0- 16-047413-2