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Cezary Podkul, Reuters, Published January 08 2014

US refiner begins talks with rivals to lobby against lifting ban on oil exports

NEW YORK - Independent U.S. refiner PBF Energy has begun talks with a half-dozen of its rivals to consider jointly lobbying Washington against lifting a decades-old ban on U.S. crude oil exports, sources said on Wednesday.

New Jersey-based PBF, run by veteran refinery investor Thomas O'Malley, organized a telephone call earlier on Wednesday to discuss creating a lobby group that would seek to maintain existing restrictions on crude exports, according to two people with knowledge of the call.

HollyFrontier Corp., Delta Air Lines' Monroe Energy , Philadelphia Energy Solutions and Alon USA Energy joined the call, as did larger rivals Valero Energy Corp. and Marathon Petroleum Corp., one of the sources said.

The discussion, which the source said was likely to be continued next week with many of the same participants, is the first evidence of a more focused lobbying effort that may counter rising calls to ease the ban, which was imposed in 1975 after the Arab oil embargo.

Valero is the only company thus far to have publicly spoken out in support of the limits, but Wednesday's call suggests other export foes are likely to emerge as the debate over one of this year's biggest energy policy issues heats up.

A growing number of oil producers and some politicians say it is time to reconsider the restrictions, particularly now that the rapid rise in shale oil production threatens to exceed domestic refiners' demand for light, sweet crude -- potentially causing a drop in domestic prices.

But opening up overseas shipments would likely hurt refiners, who benefit from a glut of cheap, domestically produced crude oil that currently cannot be sold overseas.

The purpose of Wednesday's call was to gauge the refiners' interest in forming a lobbying group, according to one of the people. The existing refiner industry group, the American Fuel and Petrochemical Manufacturers, will not oppose easing the ban because it supports free markets, its president has said.

A spokesperson for PBF Energy declined comment. Spokespeople for Monroe's parent company, Delta Airlines, and PES also declined comment. HollyFrontier did not immediately reply to an email sent after working hours.

Alon has "started the process of becoming informed about a potential lifting of the ban," a spokesman said when asked about the call. He said the company would take a position once it gathered more information on the issue.

Refinery split

It is not yet clear how many of the refiners will support the effort, or how much money they will put toward financing it. Some divisions have already emerged within the refining industry, as both Marathon and Philips 66 - refining companies that were recently spun out of integrated oil firms - have said they would not stand in the way of easing the ban.

PBF Energy and Monroe Energy - both of whom were active in last year's successful effort to knock back rising ethanol quotas - are the most likely leaders and financiers of any lobbying effort, said one of the people. A follow-up meeting or call is set for next week to set the strategy for the effort.

The issue poses a thorny dilemma for refiners, who face other restrictions on trade that directly impact their bottom lines. A nearly 100 year-old law known as the Jones Act limits domestic shipping only to U.S.-flagged vessels, which East Coast refiners and fuel suppliers say drives up their costs.

Opposing the lifting of the crude oil export ban could weaken refiners' hand in pushing for reforms of the Jones Act, as they might be seen supporting one market obstacle while pushing for the abandonment of another.