Oil Industry Campaigns for Exports as Prices Plummet

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DALLAS — With energy prices at the lowest levels since the 2008 global financial crisis, the oil industry is turning up pressure on Congress to allow exports in hopes of boosting domestic production.

The campaign comes at a time when ratings analysts are warning that oil prices under $40 per barrel pose a growing threat to local economies in producing regions, particularly the nation's energy hub in Houston.

"Houston has limited ability to raise property taxes to compensate for revenue losses, as Proposition 1 limits tax revenue increases to the lesser of 4.5% or the combined percentage increases in population and consumer inflation," Fitch analyst Steve Murray noted in an Aug. 25 report. "However, Houston's job diversity may mitigate some of this risk."

Lifting the export ban could mitigate the impact of falling prices in Houston, which serves as headquarters to both producing and refining companies.  Falling oil prices can be a benefit to refiners.

In Washington, 13 Democratic lawmakers have signed on as cosponsors to the leading House export bill.

An advertising campaign by the Domestic Energy Producers Alliance is timed for the return of Congress Sept. 1 targeting four states: Montana, New Mexico, Ohio and Virginia.

"The situation is now urgent," according to a statement from DEPA. "If we do not lift the ban on US crude oil exports, job losses will continue, gasoline and diesel prices will remain unstable, manufacturing will slow down, and America will once again become dependent on foreign oil."

In New Jersey, a new group called Allied Progress is launching television and online ads criticizing Sen. Robert Menendez, D-N.J., for endorsing oil exports limited to U.S. allies.

Industry officials fear that the potential end of an embargo on Iranian oil sales will further depress prices and put U.S. producers at a disadvantage.

"Mr. President, you lifted Iran's ban on oil exports," one ad states. "What about ours?"

Ports in Texas and Louisiana are expected to benefit from recent federal permits to export liquefied natural gas. Processing plants in Brownsville, Corpus Christi, Texas, and Sabine Pass, La., are expected to cost billions of dollars. If the LNG plants can line up customers overseas, producers in Texas and Louisiana would be the prime beneficiaries. However, the current upheaval in China could slacken demand. China's stumbling economy is seen as a factor in the rapidly falling oil price, recently below $40 per barrel for benchmark West Texas Intermediate crude.

Fitch's analysis of historical financial and economic data from selected Fitch-rated local governments since the early 1980s shows a high correlation between energy prices and government revenue.

"For example, sales tax collections in Texas fell by 1.4% in June 2015 from the previous June due largely to a weaker energy industry, ending a more than five-year streak of monthly gains," Murray said.

Two local Texas issuers at the highest risk, according to Fitch, are Culberson County Hospital District and Zapata County, which are in remote locations with limited economies.

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