WASHINGTON — The European Union wants a binding agreement ensuring it “free access” to U.S. fossil fuels, according to a leaked internal negotiating document.
In particular, EU negotiators appear to be stepping up pressure on the United States not only to significantly increase exports of its newfound natural gas surplus — a contentious process that is already underway — but also to weaken a longstanding ban on crude oil exports. These details have become public just ahead of a new round of talks between the U.S. and EU toward a major trade agreement called the Transatlantic Trade and Investment Partnership.
“The EU proposes to include a legally binding commitment in the TTIP guaranteeing the free export of crude oil and gas resources,” a three-page “non-paper” from the Council of the European Union, apparently dated to May, states. The leaked document was first disclosed this week by the Washington Post.
The paper, which hasn’t been authenticated by the U.S. or EU governments, offers a rare glimpse into the TTIP discussions, which have been held under conditions of almost complete secrecy since they began last year. This week’s leak comes as the two sides are trying to decide whether to attempt to draw up a chapter on trade in energy and raw materials, and it follows a broader energy-related leak that surfaced in May.
The new document suggests that U.S. officials have been “hesitant” to engage on the issue of the crude oil export ban, particularly given that the EU seems to be pushing for “binding legal commitments” around the issue. In an attempt to ameliorate political concerns, however, the paper suggests that legal changes may not be necessary.
The EU stance instead calls for “transforming any mandatory and non-automatic export licensing procedure into a process by which licenses for exports to the EU are granted automatically and expeditiously. Such a specific commitment would, in the EU’s view, not require that the U.S. amend its existing legislation on oil and gas.”
Some U.S. lawmakers have pushed back quickly against the prospect that Congress’s say in such an issue could be undercut or pushed aside entirely.
“Attempting to use a transatlantic trade agreement to scuttle established U.S. law prohibiting the export of America’s oil would be a titanic mistake for our consumers, national security, and energy policy,” Massachusetts Sen. Edward J. Markey said Tuesday in a statement.
“The Middle East is in turmoil. Gas prices are sky high in the middle of driving season. And we still import millions of barrels of oil a day. Exporting our crude oil is not the answer for anyone but oil companies.”
Warning that it’s now “open season” on U.S. energy laws, Sen. Markey called on the Obama administration to confirm that a “full debate” would be held on the issue and that Congress would have the last word on whether current laws are modified. (Markey wrote a related letter to President Barack Obama in January outlining some of the legal obstacles to weakening the export ban.)
Civil society groups, too, are concerned about the sovereignty and due process implications of the EU’s apparent demands.
“In order for the U.S. to export to the European Union, current law requires that the president undertake what’s known as a national interest determination,” Ilana Solomon, the director of the Responsible Trade Program at the Sierra Club, a conservation and advocacy group, told MintPress News.
“The EU is now urging that this process be scrapped: no analysis, no national interest process, no review — exports to the EU must be automatically granted. That’s extremely concerning.”
“First beneficiaries”
The U.S. ban on crude oil exports has remained in place for four decades, enacted in reaction to the Arab oil embargo of the mid-1970s. At that time, U.S. domestic oil production was relatively low, and the embargo’s impact struck lasting fear in policymakers and the U.S. public alike.
In recent years, however, the U.S. has risen to become one of the world’s leading oil producers, with domestic production having grown by 50 percent since 2008, according to industry analysis. Just this week, the Bank of America found that the U.S. has surpassed Russia and Saudi Arabia, to become the world’s largest oil producer. The country has already become the world’s most important producer of natural gas, even while limits on this trade remain in place.
In direct response to this growing stature, domestic pressure has mounted substantially in recent months both to export more natural gas and to lift or relax the restrictions on the foreign sale of crude oil. The rationales for this new push are disparate, however, ranging from economic to geostrategic compunction.
Proponents have particularly seized on the crisis posed by Russia’s recent aggression in Ukraine and the implications that this has had for gas exports to Europe, which is dependent on Russian petroleum. Indeed, the new EU paper uses this same link, noting in its first paragraph that its aim is to explain “the issues at hand … in light of the current crisis in Ukraine.”
On Thursday, three Republican senators introduced a new bill that would expedite exports of liquefied natural gas to Ukraine and U.S. allies in Europe.
“It is in America’s national security interest to leverage our nation’s energy boom to reduce the dependence of our allies on the natural resources of Vladimir Putin’s Russia,” one of the bill’s sponsors, Sen. John McCain of Arizona, said Friday. “Speeding the export of liquefied natural gas to Ukraine and Europe will help accomplish that goal.”
While U.S. gas exports have indeed increased in recent months, lifting the crude oil ban would likely be far more difficult.
Currently, the United States can export low levels of crude oil to Canada, due to exemptions written into the original law. In addition, late last month the Commerce Department reportedly changed longstanding policy to allow for the export of a lightly processed form of crude oil called condensates. (This decision, which could lead to such exports as early as next month, has been reported on in the media but hasn’t yet been publicly announced.)
Beyond this, however, the U.S. ban has remained absolute — a rarity in today’s increasingly globalized system, and one seen by some as hypocritical, given the U.S.’s typically aggressive stance in favor of free market access.
But in recent months, the oil and gas industry has significantly strengthened a campaign to push for weakening the ban. Doing so would, of course, be extremely lucrative for the sector. In March, the American Petroleum Institute, one of the industry’s most influential lobby groups, released its most comprehensive report on the issue, touting the benefits of relaxing the export ban in terms of jobs, tax revenues and consumer costs.
“Now that the U.S. is poised to become the world’s largest oil producer, the economic case for exports is clear,” Kyle Isakower, an API vice president, said in a press conference when the report was released.
“Harnessing these benefits, however, will require lawmakers and regulators to reexamine policies that were enacted long before the U.S. transitioned from a period of energy scarcity to our current position: one of energy abundance.”
Isakower suggested that lifting trade restrictions around domestic crude oil could create some 300,000 jobs by the end of this decade, and result in an additional $13.5 billion dollars in local, state and federal tax revenues.
He also noted that, over the next five years, relaxing the ban could lead to up to $70 billion in additional oil and gas exploration and development in the U.S. The leaked EU document, too, is clear on who would stand the most to gain the most from unrestricted exports, noting baldly: “EU and U.S. companies would be first beneficiaries.”
Global model
Such analysis goes to the heart of the concerns being expressed by green groups in both the U.S. and Europe around the recently leaked document.
“Europe is using this trade agreement to tie itself further into dependency on fossil fuels when it needs to break decisively with the climate-polluting energy of the past,” Colin Roche, an energy campaigner with Friends of the Earth Europe, told MintPress.
“This proposal, at a time when the EU is failing to live up to its potential for clean climate-friendly energy, neatly illustrates the stranglehold of the fossil fuel industry on energy policy and on the trade talks so far. While the public is being kept in the dark, the EU-U.S. trade deal is being used to trade away regulations that protect people and the planet.”
Further, the impact of the current discussions would likely go well beyond the U.S. and EU. The EU’s proposed model — “free access to natural resources once decisions on their exploration have been taken” — is clearly being seen as a new paradigm.
“In the future,” the non-paper states, “an energy and raw materials chapter negotiated between the U.S. and the EU could serve as a platform for each party’s negotiations with energy and raw materials relevant partners such as Mexico for instance.”
While the focus here is on fossil fuels, such expansive language would take into account a spectrum of commodities, potentially from many trade partners.
“They’re talking very broadly about natural resources, including fish, wildlife, trees and much more,” the Sierra Club’s Solomon said. “That’s a very dangerous precedent for the rest of the world.”
TTIP negotiators are meeting in Brussels next week for their sixth round of talks. The negotiations are expected to continue for years.