Potential Oil Gusher for California

The Clinton Administration’s endorsement of lifting the export ban on Alaskan crude oil is good news for California. If Congress clears legislation ending the ban, Alaskan oil will go abroad instead of south to California, where it has been depressing prices and distorting the local market.

The prohibition on exporting Alaskan crude was adopted in the 1970s to win congressional support for construction of the 800-mile trans-Alaska pipeline after the discovery of huge oil deposits on the North Slope. The rationale was to keep the crude exclusively for U.S. use to ensure a measure of oil self-sufficiency. However, the oil industry in California suffered unintended consequences from the ban. With so much of the Alaskan crude, which would command higher prices in Asia, ending up in California and pushing down prices here, it has not been profitable for independent oil producers to invest in California production.

Alaska’s two Republican senators, Frank H. Murkowski and Ted Stevens, are sponsoring the bill to lift the ban. A bipartisan energy caucus in Congress has been pushing for such legislation, and U.S. maritime unions dropped their long opposition last spring when they were assured that ships using U.S. crews would continue to transport the crude.

The Administration said ending the ban would create up to 25,000 new oil industry jobs, most of them in California. The U.S. Energy Department said the change would boost prices for California crude and generate $180 million to $230 million in state tax and royalty revenues. California could certainly use the money.