Export Proviso for North Slope Crude Comes Under Fire

The new trade agreement between the United States and Canada would finally open the export spigot for Alaska’s precious North Slope oil, a proviso that is already drawing fire from Congress, the maritime industry and other groups.

Exports of crude oil from the North Slope to foreign countries have been banned since 1973, the year Congress granted permission for the oil industry to build an 800-mile pipeline for transporting oil fromhuge, newly discovered Prudhoe Bay reserves.

The trade agreement reached last weekend would allow the export of up to 50,000 barrels a day of North Slope crude--about 2.6% of current production--to Canada. That would require congressional reversal of the longstanding export ban.

An aide said Rep. Don Bonker (D-Wash.), chairman of the Foreign Affairs subcommittee that oversees export controls, told chief U.S. negotiator Peter Murphy in a meeting Thurday that he would seek to delete the Alaska provision or severely restrict it.

“We let the Administration know there are very strong feelings on this in Congress,” said aide Mark Murray. “We see this is as one of the real friction points in this agreement.”

California Unaffected

Currently, about half of the 1.9 million barrels of daily North Slope production moves by tanker to California, where it accounts for 40% of the oil processed in the state’s refineries. The rest goes to Washington, Hawaii and ports in the Gulf of Mexico.

The office of the U.S. Trade Representative said it expects that any crude diverted to Canada would be shipped by tanker to the Puget Sound, where it would move by pipeline to Vancouver and provide competition for Alberta oil in serving British Columbia’s needs.

Douglas Perry, oil and gas specialist for the International Trade Administration, said the partial lifting of the North Slope export ban provides benefits to Canadian consumers that are reciprocated in other parts of the trade agreement dealing with energy. Most center on prohibiting future trade restrictions in the event of shortages or other problems.

Perry said the effect on California’s oil market would be “zilch” because economics suggest that the 50,000 Canada-bound barrels represent oil that would otherwise have gone to Gulf of Mexico ports rather than the closer California refineries.

Alaskan oil has created a glut in California and helped to drive the state’s crude-oil prices well below the national average. In turn, that has prompted some hard-hit California oil producers to ask permission to export their crude.

Meanwhile, Perry said the Alaskan crude that leaves the country might logically be replaced by Venezuelan oil, which is much closer to Gulf ports and refineries. To free-traders, such economic efficiency is a chief benefit of lifting export and import barriers. Using similar arguments, many economists argue that Alaskan oil’s natural market is Japan.

The Coalition to Keep Alaska Oil, made up of shipping interests, organized labor and some consumer groups, says the plan to send the crude to Canada would cost about 200 shipping jobs and remove up to four tankers from the 58-vessel fleet handling Alaskan oil.

While the trade agreement calls for U.S.-flag vessels to carry the exported crude, Canada is a far shorter journey than the trip to the Gulf. That involves unloading crude into a pipeline running along the Panama Canal and reloading it to other Gulf-bound tankers.

The coalition’s Washington, D.C., lobbyist, Howard Marlowe, said the chief concern of opponents is that the Canadians would need far more than 50,000 barrels a day in coming years as Canada’s oil fields are depleted and the nation, currently a net exporter of oil, becomes a net importer in 10-20 years.

Canada has been this country’s leading foreign supplier of oil for the past two years. In 1986, the Canadians sent 570,000 barrels of crude each day and another 237,000 barrels a day in refined products to the United States. By contrast, Canada received 85,000 barrels of U.S. crude and refined products.

Marlowe said the Canadians initially asked for 200,000 barrels a day, a sum that was reduced to 50,000 in the negotiations. This could not immediately be confirmed. “By itself, this is not calamitous,” he said. “But it is a harbinger of major problems in the future.”

Bonker aide Murray said: “This Administration has clearly demonstrated it intends to circumvent the congressional intent on export of Alaska oil. We have no reason to trust them that they won’t come back next year and expand the amount of oil.”