It's dirty oil and there is too much of it. Now, a group of Californians is proposing to export up to 5% of the state's grimy crude to the Far East.
Wait a minute. Isn't this country running out of oil? Are we supposed to tear up the Alaskan wilderness looking for oil to replace the gunk that someone wants to ship from Bakersfield to Singapore?
The movement of oil around the globe could encounter its share of mine fields. Some are the real thing, as in the Persian Gulf these days, and some are political.
And given the importance the Reagan Administration has attached to finding and pumping more domestic oil to limit dependence on imports, an Interior Department spokesman calls the California plan politically risky.
But it seems to have economic logic on its side. And, says Roy Greenaway, chief of staff for Sen. Alan Cranston (D-Calif.), "You can't ignore the facts just because it's difficult to explain politically."
The whole export idea is a reflection of California's unique, ongoing crude oil glut and the nasty nature of much of the state's home-grown crude. There is not much of a market for the oil here, and consultants say the state's struggling independent oil producers could get perhaps $3 more per barrel and long-term contracts from such places as Japan, Korea and Singapore.
That would tend to strengthen those producers and supposedly encourage them to explore for more domestic oil--theoretically expanding U.S. oil reserves rather than merely raiding them for the benefit of other countries. Meanwhile, the crude couldn't be legally exported until deals were struck to import equivalent amounts of oil.
"This country will always be a net importer," says E. C. (Gene) Kozlowski, a Los Angeles oilman and president of the California Independent Producers Assn. "The question is how to maximize the value of our domestic reserves."
The plan has the ancillary virtue of exporting the air pollution that comes from burning the thick, sulfur-ridden oil mined from the San Joaquin Valley. It is so dirty, for instance, that it is effectively banned from electric power plants in Southern California.
But whatever the advantages, the oilmen are wading into murky trade and political waters.
The soon-to-be-filed application to export perhaps 50,000 barrels per day of heavy California crude has run up against a congressional effort to ban all crude exports on grounds that domestic oil supplies are too precious. It has also riled local independent refiners, who stand to pay higher prices for their crude or, they contend, lose some business altogether.
And given the rarity of crude oil exports from this country, the proposal is viewed with great suspicion by those--including consumer groups and the domestic shipping industry--who have succeeded for more than a decade in blocking the export of crude from Alaska's mammoth North Slope oil fields to Japan.
The ban on North Slope exports was imposed by Congress in return for permission to build the 800-mile Trans Alaska Pipeline System, an arrangement put together in 1973 in an atmosphere of oil shortages and sharply rising prices. Though the California plan is modest, it would more than double the nation's current measly exports of crude.
"After all this time, we would hate to spring a leak over in California," said Howard Marlowe, a Washington lobbyist and director of a group called Coalition to Keep Alaska Oil. "It would be the proverbial camel's nose under the tent."
The California proposal comes as U.S. and Canadian trade negotiators last week agreed on asweeping new free-trade plan that, among other things, would permit the export of up to 50,000 barrels a day of North Slope crude to Canada--a proposal that is already drawing fire in Congress.
There are few limits on exporting oil after it's been refined into gasoline or other products, but hardly any crude is sent out of the United States. The exceptions are about 18,000 barrels a day of Michigan crude oil to Canada and a recently approved, largely symbolic deal that has led to the export of 3,600 barrels a day of crude from Alaska's Cook Inlet, a smaller, separate oil field from the North Slope, to the Far East.
Meanwhile, the country is importing more than 5 million barrels of crude daily, more than one-third of its oil needs, and the total is rising.
Although there are instances where exports would make economic sense, reliance on imported oil and shrinking domestic reserves have generally made crude exports politically unacceptable. Permission to send crude out of the country must also meet some stiff tests under the Export Administration Act and the Energy Policy and Conservation Act.
Among other things, such exports must be matched by equivalent imports to make the transactions "energy neutral;" have a positive effect on consumer oil prices; require a finding that the product can't reasonably be processed in this country, and fit various definitions of the national interest.
Cases on Both Sides