State Drillers Get Approval to Export Oil : Energy: Despite concerns about long-term energy needs, the federal government says California firms can ship a heavy grade of crude to Asia.

The Bush Administration, even as it pushes for oil drilling in Alaska’s Arctic refuge as a way to secure the nation’s energy future, has granted oil companies in California the first license to export home-grown crude to Asia--in part because California is awash in Alaskan oil.

The Commerce Department issued a one-year license Friday to Berry Petroleum Co. and Eastex Crude Oil Co. to export 25,000 barrels of California heavy crude to Asian markets. The oil amounts to about 1% of total state consumption.

The move was designed to ensure stable markets and acceptable prices for the heavy crude oil that is in oversupply in California. The glut is partly because production of lighter, more desirable Alaskan oil from Prudhoe Bay and other North Slope oil fields has displaced it, according to oil producers.

The action has drawn the protests of environmentalists. “To say that we should drill in (Alaska’s) Arctic National Wildlife Refuge and offshore areas so that we can send our own oil to Asia is simply outrageous,” said Robert Sulnick, executive director of the American Oceans Campaign, which opposes drilling in wilderness areas.

“We think it shows (that the President’s) national energy policy is a fraud,” he added.

Opening the refuge to oil drilling is a key part of the President’s proposed energy policy. The Senate this year dropped a bill that would have allowed such drilling, but the issue is expected to come up again next year.

For its part, the Commerce Department argued that the license will strengthen U.S. energy security because exports will allow independent oil producers to obtain a fair price for heavy crude, preventing them from having to shut down California wells.

In addition, the license will require that any heavy crude oil exports be exchanged for at least an equal amount of lighter crude from Asia, the department said.

The action underscores the complexity of crude oil markets in the United States and particularly in California, which in some ways is cut off from the rest of the nation.

While the United States in general remains dependent on imports for about half its oil, California floats in an ocean of heavy crude that, producers argue, cannot be economically shipped to other ports of the country.

Moreover, while about 70% of California’s oil is of the heavy variety, refineries outside the state are geared to process mainly lighter grades. Thus demand for heavy “sour” crudes--those with high sulfur content--is low; producers say the surplus runs to as much as 50,000 barrels a day.

Within the state, heavy crude oil is being displaced in favor of lighter oil from Alaska, from the newly started Point Arguello offshore project and from Ecuador, Venezuela and Mexico. Prices of the imported oil often are lower, producers said.

Heavy crude also is in less demand in part because existing and proposed state clean air rules require refiners to operate more cleanly and produce less-polluting gasoline.

All this means that the prices that heavy crude oil command scarcely justify pumping it out of the ground, producers argue. Prices for heavy crude are around $12 a barrel, compared to around $20 a barrel for light “sweet” low-sulfur Texas crude that is the benchmark grade in the rest of the country.

The state’s independent oil producers, which generate about 21% of California’s oil, can get up to $1 a barrel more in oil-thirsty Asian markets such as Japan and Taiwan, said Jerry Hoffman, senior vice president of Berry Petroleum Co. Berry and Eastex will act as brokers to export heavy crude produced by several California independents.

The proposed exports make sense, said Charles Imbrecht, chairman of the California Energy Commission. “We’re talking about a high-sulfur crude that doesn’t fit in our refineries, nor can it be economically transported to other refineries in the U.S.,” he said. “There’s no issue of this depriving Californians of oil supply for our refineries.”

Still, there are critics who questioned the wisdom of allowing exports.

“It raises a question,” said Sen. Joseph I. Lieberman (D-Conn.), an oil industry critic. “Obviously the whole rationale for ANWR is that we’ve got to produce oil here at home because we need it here at home, and this is taking it from home and selling it abroad.”

But he added that he was not familiar with the details of the decision. “Because this may be a special case, with a limited market for it here . . . maybe they have an argument,” he conceded.

Fred Haymond, a spokesman for the All American Pipeline, which connects California with West Texas and beyond, said his company’s pipeline could transport heavy crude “very efficiently” to other parts of the country.

The pipeline, owned by Goodyear Tire & Rubber Co., is running only partly full and could transport another 75,000 barrels of heavy oil to the Gulf Coast, he said.

Transportation of crude on the pipeline from the San Joaquin Valley to West Texas would add another $2.45 to the cost of a barrel of California oil.