Federal Oil Laws Fuel Fight : State Producers Lobby to Lift U.S. Crude Export Ban

California’s independent oil and natural gas producers know how America could restore some balance to its trade with Japan--if it weren’t for a two-decade old federal law that they say is wrecking the market for their product.

The law--a legacy of the 1970s oil crisis--virtually bans the export of U.S. crude. And that gives Alaskan oil producers little choice but to send all their oil south--most of it to California.

In an era of unrelentingly low crude oil prices, the oil--which otherwise could be exported profitably to Japan--depresses prices for California crude by $2.50 a barrel or more beyond the already depressed world market price, the independents say.

“Anywhere from 300,000 to 500,000 excess barrels of oil end up in the California market each day,” said Daniel P. Kramer, executive director of the California Independent Petroleum Assn., which represents most of the independent oil and gas producers in the state.

And while the independents press a long wish list on state and federal policy makers, overturning the ban--which comes up for review this year--is at the top, he said.

The independents made their case at a Sacramento event Tuesday, framed by an oil-drilling rig erected on the grounds of the state Capitol.

They argue that by suppressing oil prices, the flow of Alaskan crude makes it uneconomical to pump much of California’s heavy crude oil out of the ground. Besides unleashing California production, exporting the Alaskan oil could cut $2.2 billion to $3.6 billion a year from the U.S. trade deficit with Japan, currently running at an annual $60 billion, the independents contend.

Indeed, some high-ranking energy experts have called lifting the ban a “no-brainer.” But it may not be easy to block its periodic renewal by Congress.

Among the opponents are the politically powerful Seafarers International Union, whose members transport the Alaskan crude down the West Coast. Any Alaskan oil transported to Japan most likely would travel in foreign flag tankers.

The Maritime Trades Department of the AFL-CIO, which includes the Seafarers and 41 other unions with a total of 8 million members, passed a resolution Friday that it plans to distribute to members of Congress.

“Three years have elapsed since the United States sent its sons and daughters off to war in the Persian Gulf. . . .” it reads. “Ironically, at this critical juncture in our nation’s history, an effort is under way to remove current restrictions on the export of Alaskan oil.”

The U.S. Department of Energy has launched a study of the idea and plans to hold public hearings next month in San Francisco and Anchorage before making a policy recommendation in April or May. The DOE will ponder how lifting the ban could affect crude prices and production, state and federal revenue, employment among both oil and maritime workers and tanker traffic.

“If the analysis concludes that lifting the ban would benefit independent producers, domestic production and the state, I would be a strong advocate,” Energy Secretary Hazel O’Leary said Tuesday.

Beyond creating jobs, the unions say the ban has saved West Coast consumers “billions” of dollars, as lower oil prices translated into lower gasoline prices at the pump.

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The independents point to a study they sponsored that predicts lifting the ban would raise crude prices both in California and Alaska, increasing domestic oil production by a net 400,000 to 500,000 barrels a day. That could create 5,500 or more jobs in California alone, according to the study by Martin Carnoy, an education professor at Stanford University, and Lenny Goldberg, a Sacramento-based consultant.

Goldberg further contends that consumers--in California and elsewhere--would not notice any rise in gasoline prices if the ban were lifted. “Prices at the gas pump fluctuate with world market prices, not regional crude oil prices,” Goldberg said.

Less optimistic is gasoline marketing expert Trilby Lundberg. Using the independents’ own numbers, all else being equal, she figures that ending the ban would raise pump prices as much as 6 cents a gallon.

The major oil companies are mostly staying out of the fight for now. But the battered independents aren’t likely to give up easily.

Jerry Hoffman, president of Taft-based Berry Petroleum Co., said the company, which averages about $60 million a year in gross sales, paid $6 million and $8 million in federal and state taxes in 1990 and 1991, respectively.

“This year we’ll be filing for a refund,” Hoffman said, “and it’s directly due to government rules interfering in our business. The government is killing the goose that lays the golden egg.”

The Cost to California Producers

California’s independent oil producers say that Alaskan crude, forced into the state’s market by a ban on U.S. oil exports, is depressing the price of their oil by an average of $2.50 a barrel or more. Chart compares the price of two grades of crude--the U.S. benchmark West Texas Intermediate and California’s Elk Hills Stevens--that are roughly comparable in the characteristics that affect cost.

1994 West Texas Intermediate: $14.24 Elk Hills Stevens: $11.70

Sources: Elk Hills Naval Petroleum Reserves, Bloomberg Business News

Researched by ADAM S. BAUMAN / Los Angeles Times