Crude Oil Export Legislation Necessary to Resolve U.S. Refining 

Shortage

Domestic Energy Producers AllianceDecember 8, 2015

U.S. Energy Renaissance Endangered

What is the Domestic Energy Producers Alliance?

1. DEPA is an alliance of: U.S. independent producers, royalty owners, and oilfield service 

companies 20 state and national oil and natural gas associations representing the 

interests of:• 2.6 million American oil and gas workers• 10 million American royalty owners

2. DEPA supports lifting the outdated ban on U.S. crude oil exports• Imposed in 1975 during Nixon Era of Scarcity

3. There is no organized opposition to lifting the ban U.S. crude oil exports are supported by:

• 100% of the U.S. oil and natural gas exploration and production industry

• 94% of the U.S. refining industry

2

From Scarcity to Energy Abundance in America

Source: EIA. October-November 2015 data calculated as averages of weekly data.3

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 2,000

 4,000

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 20,000

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

thou

sand

 bpd

U.S. crude oil production, imports and exports vs. net imports of crude and products

U.S. Field Production of Crude Oil U.S. Imports of Crude Oil

U.S. Exports of Crude Oil U.S. Net Imports of Crude Oil and Petroleum Products

9,184

7,356

4,595

475

2005 Net liquid imports 12.6 MMBpd

~ 60% of U.S. consumption

U.S Crude & Petroleum Products Net Imports

U.S Crude ImportsU.S Crude Exports

1Q15 Net liquid imports 4.9 MMBpd

~ 25% of U.S. consumption

Projected 20 MMBpd

World Petroleum and Other Liquids Production

OPEC

MMBpd

Non-OPEC Other

North America

Source: U.S. Energy Information Administration, March 2015 Short Term Energy Outlook

“The Wedge”N. Am. production

growth

20146.0 MMBpd70% light sweet oil

4

“Cowboyistan”Bakken + Eagle Ford + “New” Permian

3 key elements for success*:RigsRednecks Royalties

Most unconventional plays are natural gas

* “Hat tip” to author Robert Bryce, whose latest is, “Smaller Lighter Faster Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong”

70% of U.S production growth is from these three plays50% of world production growth is from these three plays

Only in America is land ownership in fee simple title.

5

0

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16 World ProductionCowboyistan = World’s #7 Liquids Producer

#7

OPEC member

MMBPD

SOURCE: EIA SEPTEMBER SHORT‐TERM ENERGY OUTLOOKhttp://www.eia.gov/naturalgas/crudeoilreserves/ for proved reserves. DEPA estimates for Cowboyistan potential.

6

Total Recoverable Reserves Estimates Cowboyistan vs. World Proved Reserves

“Cowboyistan”Bakken + Eagle Ford + “New” Permian

U.S. Energy Renaissance Endangered By 2 Key Factors

1. OPEC manipulation by predatory pricing practices to drive U.S. producers out of business2. The combination of restricted U.S. refining capacity and an archaic export ban on U.S. crude oil

TIME Magazine, April 20, 2015“OPEC says the demand for oil – its oil – will rise during 2015 because the cartel is winning its price war against U.S. shale producers by driving them out of business.”

The Wall Street Journal, April 16, 2015“The boom in U.S. oil supplies will end in 2015, the Organization of Petroleum Exporting Countries said…”

The Wall Street Journal, March 8, 2015“OPEC’s top official said that the cartel’s decision to continue pumping crude in the face of collapsing prices is hurting the U.S. shale‐oil industry and that a global pullback on investment could lead to a shortage that will push the market upward again.”

OPEC Chief, The Wall Street Journal, March 8, 2015“Projects are being canceled. Investments are being revised. Costs are being squeezed… When OPEC didn’t reduce its production, everything collapsed for the U.S. shale‐oil‐rig market.” 

OPEC Chief, Reuters, January 26, 2015 “Maybe we will go to $200 if there is a real shortage of supply because of the lack of investment.”

7

Financial Times, May 14, 20158

The Saudis openly bragabout their actions to harm U.S. producers. 

Foreign Control Seized Through Acquisitions of Strategic U.S. Oil Infrastructureto Refine Their Oil at the Exclusion of U.S. Producers 

9

Where was the U.S. government during the sale of these strategic assets?

Source: EIA foreign capacity weighted by percent ownership.

10

28% of U.S. Refining Capacity is Foreign‐Owned

Calculated Conversion of U.S. Sweet Refineries by Canadian Heavy Sour Developers w/Preferential Processing Rights to the Exclusion of U.S. Crude

Example:  Husky Oil Purchase of the Lima, Ohio RefineryDownstreamIn Downstream, the Company worked to better position its assets with a  number of cost‐efficient initiatives. These included significant investments at the Lima Refinery to process heavier feedstock as the Company prepares to bring on more heavy oil thermal projects in Western Canada. 

Husky Energy Investor Presentation - March 2015

11

Canadian‐Owned Companies Converting U.S. Refineries to Run Canadian Heavy Sour/Bitumen

Suncor Energy ‐‐ Paid $150MM in 2003 to purchase ConocoPhillips’ Rocky Mountain assets(Calgary)  including a 60,500 Bpd refinery in Denver, and $30MM in 2005 to buy 

Valero’s adjacent refinery. Spent $445MM to expand the plant to 103,000 Bpd capacity and upgrade the facility to “handle a wider range of [Canadian] oil sands.”

Encana/Conoco ‐‐ Established JV in 2007 in which Encana received 50% ownership in two(Calgary)  ConocoPhillips refineries in exchange for COP joint ownership of oil sands 

projects. Announced plan to invest $5.3B to expand Wood River, IL          (306,000 Bpd) and Borger, TX (146,000 Bpd) refineries’ bitumen processingcapacity from 30,000 Bpd to 275,000 Bpd. Both conversion projects were in service by 2011.

12

Most Light Sweet Refining Capacity Is Located Outside of the U.S. as a Result of Foreign Refinery Conversions

12 MMbpdHeavy sour

U.S. Refining

6 MMbpdLight sweet

Source: Oil & Gas Journal 2014 Refinery Survey (2013 numbers)Nelson Complexity Index (NCI) is the industry standard for measuring the relative cost of constructing the components that make up a petroleum refinery. The index can range from 1 (most simple) to over 15 (most complex).Source: Oil and Gas Journal’s “Worldwide Refining Survey, 2014.”

Heavy Sour Light Sweet 

64 MMbpdLight sweet

5 MMbpdHeavy sour

World (Non‐U.S.)

$85 billion has been spent since 1990 to reconfigure U.S. refineries to run heavy sour oil. Much of this investment was made by foreign countries with exclusive agreements to process their crude even at the exclusion of U.S.-produced crude oil.

13

World Light Sweet Refining Capacity

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 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

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U.S. Light Sweet Oil: The Environmental Solution

U.S. Light Sweet Oil Foreign Heavy Sour Oilvs.The Environmental Benefits of

U.S. Light Sweet Oil 

1. Requires 20% less energy to transport2. Reduces refinery emissions by 60%3. Contains essentially no sulfur4. Eliminates bottom of barrel coke residue

Australia Caltex AUS, Kurnell 135,000Caltex AUS, Lytton 108,600BP, Bulwer Island 96,850

Japan Cosmo Oil, Chiba 228,000JX Nippon, Muroran 180,000Kyokuto, Ichihara, Chiba 171,500Cosmo Oil, Yokkaichi 147,250Idemitsu Kosan, Shunan, Yamaguchi 114,000Nansei Sekiyu, Okinawa 100,000

South Korea SK Innovation, Inchon 275,000Taiwan Chinese Petro, Kaohsiung 270,000Lithuania AB Mazeikiu, Mazeikiu  190,000Germany Deutsche Shell, Harburg 107,000

Holborn Europa, Harburg 78,000Greece Hellenic Petro, Thessaloniki 66,500Ireland Phillips 66, Whitegate 71,000Italy Api Raffineria, Falconara, Marittima 82,900

Italiana Energia, Mantova 69,420Sweden Shell Raffinaderi, Gothenburg 80,000Switzerland Tamoil SA, Collombey 72,000UK Murco Petroleum, Milford Haven 105,682

Essar UK, Stanlow 272,000Total SA, Killingholme S. Humberside 206,705

TOTAL CAPACITY AT RISK 3,227,407

Closed

Closed, partially

Closed to re‐open, new owner

For sale/under review

Global Light Sweet Refineries In Jeopardy: U.S. Crude Export Opportunities by Country

15Operating Status Change since OGJ 2014 Worldwide Refinery Survey; Industry, consultant and industry reports.

China is just too far away

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c‐04

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$/bb

l

West Texas Intermediate

Brent (World Price)

WTI vs. Brent Oil Price History Since 2005

*Source: EIA

March 4, 2013 DEPA media dinner  in D.C. on exports –

Brent/WTI spread $20

$2.73 differential(WTI higher)

Total Discount to Date: $134 Billion**Average $11 differential (Brent higher)

** Represents the largest policy-driven wealth transfer in U.S. industry history

$134 Billion

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Bakken ProductionRamp Up

Refiner Crack Spread History Since 1990

17

“Crack spread” is the difference between price of a barrel of unrefined crude oil vs. the total value of refined products from that barrel (after “cracking”), as reported on a daily basis. Crack spreads reported daily via OPIS (Oil Price Information Service), Platts McGraw Hill Financial, Argus Media Limited and Bloomberg.

Historical Average

$5.00

West Coast Refiners Making Record Profits

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U.S. Gasoline Prices are Set in Global Product Market, So U.S. Price Does Not Pass Through to Consumers

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4.7 

0.0

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1.0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Million bp

d

Crude Oil NGLs Other Liquids Finished Products (i.e. gasoline)

4.7 MILLION BARRELS PER DAY EXPORTS

Source: EIA

U.S. Exports of Petroleum and Refined Products

20

No organized opposition to lifting the ban

“Consumers and Refiners United for Domestic Energy.” Members make up only 6% of U.S. refining capacity. Source: EIA Refinery Capacity and Utilization Report – January 2015.

“It is time to let American oil trade freely on the global market, just as other U.S. energy commodities are traded in the global economy.” Ryan Lance, Chairman and CEO, ConocoPhillips

"We fully support the elimination of the ban on crude exports. We believe the long-term interests of the U.S. are best served by exports.” Rhonda I. Zygocki - Executive Vice President, Policy and Planning, Chevron

"In the current debates about LNG and crude oil exports, economists and leaders from across the political spectrum, from all sides, agree that free trade would lead to increased investment, more jobs and, importantly, increased production.“ Rex Tillerson - Chairman and Chief Executive Officer, Exxon-Mobil

"Policy makers here in the US should embrace a truly liberalized diverse and global energy market ... [US oil and natural gas exports] would reinforce the long term future of North American energy production ... and help to make the global energy system much more stable."Ben van Beurden - Chief Executive Officer, Royal Dutch Shell

"[Allowing oil exports] will encourage further investments in oil and gas exploration and production, create more jobs, (and) improve the balance of trade."Lee Warren - Manager - Internal & External Communications, Marathon Oil Corporation

“Tesoro supports free trade and free markets. As such, Tesoro supports legislation to relax the current restrictions on the export of American petroleum.” Tesoro, Export of US Crude Oil Policy Statement

Opposed: C.R.U.D.E.* Lobbying Group Alon, Delta, PBF, PES

Philadelphia Energy Solutions IPO filing –“Upon our formation, we believed that rapid growth in the production of light, sweet domestic crude oil from developing shale formations such as the Bakken, Eagle Ford and Permian… would create opportunities to secure domestic crude oil at advantaged prices relative to other sources of crude oil.”

In favor of lifting the ban:Chevron, Royal Dutch Shell, Exxon-Mobil, Marathon Oil, ConocoPhillips, Tesoro

We do not oppose lifting the existing restrictions on U.S. crude oil exports, Congress should pursue U.S. policies that promote a free marketplace for all competitors.  Charles T. Drevna, President, American Fuel & Pertrochemical Manufacturers

Only a few companies oppose lifting the ban on exports!

21

94%

6%Refiners are pocketing $22 billion a year at no benefit to American consumers.Source: U.S. Energy Information Administration

Jerry Wascom President ExxonMobil Refining & Supply Company

Gary Yesavage President Chevron Manufacturing

Douglas Sparkman Chief Operating Officer BP Fuels North America

Lori Ryerkerk Executive Vice President, Global Manufacturing Shell

July 20, 2015

The Honorable Fred Upton The Honorable Frank Pallone, Jr. Chairman Ranking Member Committee on Energy and Commerce Committee on Energy and Commerce

Dear Chairman Upton and Ranking Member Pallone:

As representatives of U.S. refineries, we would like to express our support for ending the 30-year old ban on U.S. crude oil exports. The U.S. is about to become the world’s largest crude oil producer, due partly to the shale revolution. Allowing U.S. crude oil access to world markets will help expand American exports in general, create benefits for our economy and U.S. consumers, and promote a more resilient global oil market.

In the 1970s, the U.S. faced a scarcity of domestic oil production and was heavily reliant on crude oil imports from other parts of the world. Much has changed in the past 30 years. Innovation and technology has spurred a new era of abundance in the U.S., allowing for a dramatic increase in crude oil production and a precipitous reduction in our crude oil imports. Withholding U.S. crude oil from the global market has created market distortions and inefficiency. Repealing the outdated ban on U.S crude oil exports would resolve these flaws.

Crude oil is the feedstock refiners are reliant upon to produce clean gasoline, diesel and home heating oil for American consumers and the global market. Allowing the export of U.S. crude oil will promote increased investment in domestic crude production and greater domestic supply for U.S. refiners. Further, it will allow for a healthy and vibrant global oil market which will not only benefit our refining sector but aid our economy, keep our skilled workers going strong and add to our tax revenues. Repealing the current artificial market constraints will have long term economic and energy security benefits.

Additionally, American consumers would benefit from the export of crude oil, according to studies by the Government Accountability Office (GAO) and Brookings Institution. The GAO found U.S. consumer fuel prices could fall if exports were permitted because the expanded outlet for oil would boost investments and global supplies. Brookings Institution found that allowing U.S. crude exports would increase domestic oil production, resulting in better job opportunities and greater economic benefits for the country.

U.S. crude oil in storage is near record high levels. By allowing producers to ship the excess overseas to meet global demand, American consumers can benefit from more intense competition among oil suppliers.

We urge policy makers to consider our views as refiners and consumers of crude oil, and take action to enable the export of domestic crude oil. Ending the outdated ban on crude exports is needed to ensure that investment in this country continues to grow and boost domestic production to provide Americans with greater job opportunities and economic benefits.

Sincerely,

Refiner Letter Supporting Crude Oil Exports

22

Rapid Decline of U.S. Rig Count

*DEPA jobs estimate; rig counts from Baker-Hughes

U.S. rig count has declined by 1,192 rigs, or 62% since mid-November*. One rig laydown equals the loss of 120 direct and indirect jobs.

23

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10%

20%

30%

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70%

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90%

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Swift

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Triangle

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Eclipse

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Laredo

Comstock

Penn

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Current Response of U.S. Producers to OPEC Manipulation of Oil Prices

Capex cut by as much as  81% (Emerald)

Drop drilling rigs

Defer well completions –saves 60% of CWC

• Avoid selling flush oil and gas production in a poor market

• Wait for service costs to fall before completing wells

Shut in high‐cost stripper wells temporarily

Shut in production – some operators don’t have to sell

• $61.2B in capital expenditure reductions already announced for 2015*

• 230,931 direct industry layoffs*

• ~693,000 to 924,000 indirect industry jobs lost**

Mid‐point49%

2014‐2015 Capex Reduction

*Source: Company announcements as of July 10, 2015**Based on Goldman Sachs conclusion that “each oil‐sector job lost is associated with three to four fewer non‐energy jobs.”The Effect of Slowing Energy Sector Activity on Non‐Energy Payrolls, April 8, 2015 24

Cowboyistan, Industry 50% Cut CaseIndustry production, excluding legacy Permian production

Note: Assumes an 8% increase in productivity due to high grading

1.55 MMBpd

~700,000 bbl/day

DEC 2014

Rig Count

Assumes 50% Rig Reduction by June 30, 2015

Eagle Ford

Bakken

New Permian

25

EIA projects U.S. crude oil production will drop 1.1 million barrels per day by September 2016 from peak.*

Source: EIA Short Term Energy Outlook, September 9, 2015

Crude Oil Exports Will Elevate GDP“More broadly, the revolution in the production of “unconventional” oil and gas has been one of the major contributors to the U.S. economic recovery, estimated by IHS to have added nearly 1% to U.S. GDP annually, on average, over the past six years – accounting for nearly 40% of overall GDP growth in that time. 

…It is rare that policy options arise in the energy world that offer such overwhelming, unmitigated benefits as allowing American producers to export crude oil to international markets. The recently released IHS report, Unleashing the Supply Chain, documents the benefits across the economy from 2016‐2030:  $86 billion in additional GDP,  about 400,000 new jobs annually,  25% higher pay for workers in the energy industry supply chain – an additional $158 per household, and $1.3 trillion in federal, state and municipal revenue from corporate and personal taxes.” 

Carlos Pascual, Senior Vice President, IHS Testimony to the U.S. Senate Committee on Energy and Natural Resources 

March 19, 2015

26

“CBO estimates that the development of shale resources will increase GDP by about two‐thirds of 1 percent in 2020 and about 1 percent in 2040; the increases in GDP will lead to slightly larger percentage increases in federal revenues... 

Increases in oil and gas production resulting from shale development have boosted U.S. economic output and federal receipts and will continue to do so. The further increases in production that would result from the changes in export policies considered here would also have positive economic and budgetary effects...”

Congressional Budget OfficeThe Economic and Budgetary Effects of Production Oil and Natural Gas From Shale

December 9, 2014

U.S. Oil Revolution is Shaping World Events*

Ken Hersh, CEO of NGP Energy Capital Management:

“The impact of the Lower 48 oil and gas revolution is, and will be, the single‐most defining aspect on this planet today that will shape the next 50 years.”

The ramifications of the U.S. moving from being primarily an oil consumer to being both a producer and consumer of oil, will shape global events for the next 50 years as oil scarcity gives way to oil abundance.

Hersh describes the transition as a “paradigm shift.”  

World politics were now re‐orienting away from a concept of “resource scarcity” and toward “resource abundance.”

The U.S. is living in the past with our export restrictions….that’s a holdover from our scarce mentality...”

*Oil and Gas Investor, May 201527

Re‐Asserting America’s Energy Leadership with Crude Oil Exports Gets us off foreign oil!

Adds 1% to GDP growth.

Eliminates/drastically reduces the U.S. trade deficit.

De‐intensifies the Middle East’s strategic importance, especially Iran.

Ends OPEC dominance once and for all.

Reduces our European allies’ dependence on Russia.

Jobs – puts Americans back to work here.

Lowers and stabilizes gasoline prices for U.S. consumers.

Fair, free trade is consistent with American principles.

American producers have been forced to take on the role of the world’s swing producer, but we are cut off from exporting oil to world markets, making it impossible to accomplish.

The U.S. energy renaissance is pro‐environment, producing premium quality oil vs. heavy sour.

Provides U.S. energy independence by 2020.

America can once again be the growth engine of the world for the next 50 years as we were            post‐WWII.

Saves American lives!

28

Lower Gasoline Prices Most recent U.S. Energy Information Administration study published September 1, 2015: Petroleum product prices in the United 

States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports. (September 2015, EIA, Effects of Removing Restrictions on U.S. Crude Oil Exports)

IHS Energy: Since US gasoline is priced off global gasoline prices, not domestic crude prices, the reduction will flow back into lower prices at the pump – reducing the gasoline price 8 cents a gallon. The savings for motorists is $265 billion over the 2016 – 2030 period. (December 2, 2014, PACE, The ABC’s of the Crude Oil Export Ban and Gasoline Prices)

Allowing U.S. exports actually corrects a market distortion. Correcting the distortion, in turn, ultimately lowers the price of global oil. (December 2, 2014, PACE, The ABC’s of the Crude Oil Export Ban and Gasoline Prices)

The Congressional Budget Office, IHS Energy, ICF International, Columbia University and The Brookings Institution, among others,have all concluded through their own independent analyses that removing the current ban on U.S. crude oil exports would result in lower gasoline prices here at home. (January 22, 2015, PACE, Fact Check: Sens. Menendez and Markey Letter to Commerce Dept.)

Lifting the ban could result in an equally large reduction in refined product prices [including gasoline] due to a more relaxed OPEC response, up to 12 cents per gallon in our analysis. (January 20, 2015, Columbia University, Navigating the Crude Oil Export Debate).

Resources for the Future: Gasoline prices decline by 1.8 to 4.6 cents per gallon on average if the crude oil export restrictions are removed. (October 20, 2014, U.S. Government Accountability Office, Changing Crude Oil Markets)

ICF International: Petroleum product prices decline by 1.5 to 2.4 cents per gallon on average from 2015 – 2035 if restrictions are removed. (September 9, 2014, Brookings Institution, Changing Markets Economic Opportunities from Lifting the US Ban on Crude Oil Exports)

NERA: Petroleum product prices decline by 3 cents per gallon on average from 2015 ‐ 2035 if restrictions are lifted. (September 9, 2014, Brookings Institution, Changing Markets Economic Opportunities from Lifting the US Ban on Crude Oil Exports)

Rice University: “We also find empirical support… that lifting the ban on crude oil exports would not raise gasoline prices in the US. Since refined products, such as gasoline, can be freely traded in the international market, the prices of refined products sold in the US are in parity relationship with international prices…. Thus, the discounted prices of oil produced in the US are not reflected in US gasoline and refined product prices.” (Baker Institute for Public Policy,March 27, 2015)

Harvard Business School: Instead of raising domestic prices, then, the overall effect of lifting the oil export ban could actually reduce global prices for gasoline by increasing the global availability of crude oil. (June 2015, America’s Unconventional Energy Opportunity.)

29

Consumer Stability

ICF International: Lower gasoline prices as a result of ending the crude export ban could save American consumers up to $5.8 billion per year, on average, over the 2015 – 2035 period. (December 15, 2014, PACE, Ten Key Questions about the Crude Oil Export Ban)

IHS Energy: Lifting restrictions on crude oil exports will increase real household disposable income in the forecast due to an investment‐led expansion in economic activity and a lower unemployment rate. (November 2014, PACE, Lifting the Crude Oil Export Ban Benefits US Consumers)

ICF International: Given the international nature of US petroleum product movements, 2013 US petroleum product prices were between $.29 and $.94 per gallon lower than they would have otherwise been without horizontal multi‐stage hydraulic fracturing. This reduction saved US consumers an estimated $63 to $248 billion in 2013 and estimated cumulative saving of between $165 and $624 billion from 2008 to 2013.  (November 2014, PACE, Lifting the Crude Oil Export Ban Benefits US Consumers)

Brookings Institution: The welfare benefits to US households derive from higher real incomes from higher wages and lower gasoline prices. (November 2014, PACE, Lifting the Crude Oil Export Ban Benefits US Consumers)

Lifting the ban will have a .4 percent change in welfare (the broadest measure of net economic benefits to US residents) inciting a positive change in the US economy across all scenarios. (September 9, 2014, Brookings Institution, Changing Markets Economic Opportunities from Lifting the US Ban on Crude Oil Exports)

Removing the crude oil export restrictions is likely to increase domestic crude oil prices but decrease consumer fuel prices. (October 20, 2014, U.S. Government Accountability Office, Changing Crude Oil Markets)

Repealing the ban will have a positive effect on the consumer and the economy – including a reduction in the price at the pump for consumers; expanded public finances through generation of additional tax revenue; a reduction in trade deficit; as well as increased GDP, job creation and overall investment. (October 20, 2014, U.S. Government Accountability Office, Changing Crude Oil Markets)

Harvard Business School: Export bans are also inconsistent with longstanding U.S. trade policy and undermine U.S. efforts in opening markets generally, which benefits U.S. producers and consumers across all industries. (June 2015, America’s Unconventional Energy Opportunity.)

30

Impact of Decision Not to Eliminate Crude Oil Export Ban Effectively eliminates American oil and gas development

Drives oil and gas development overseas

Eradicates high‐paying, middle class U.S. jobs

Ends the American energy renaissance

We will not achieve energy independence in America

Creates and perpetuates the short‐supply cycle in America

Drives gasoline prices up

Insures OPEC dominance and the power of hostile nations

Funds terrorism

Continues to fund Iranian aggression in the Middle East

31

The IRANIAN DEALAlready, 231,000 oil and gas workers have lost their jobs. Iran will soon be EXPORTING 1 million barrels per day additional oil while the American Energy Renaissance is being held hostage by our own domestic sanctions banning oil exports. With America’s oil and natural gas industry already in a downturn, this will be another disaster for American jobs and the stability of U.S. consumer gasoline prices.

Iran Oil Minister Bijan Namdar Zanganeh: Production can increase by 500,000 barrels a day within a week after sanctions end and by 1 million barrels a day within a month following that. – Bloomberg 

Iranian light oil competes head to head with U.S. light sweet oil

Iranian Crude Oil and Condensate Output History and Forecast

32Source: Financial Times, “Assessing OPEC’s oil market strategy,” June 12, 2015.

U.S. Energy Information Administration, September 2015 U.S. Energy Information Administration, October 2014 U.S. Government Accountability Office Congressional Budget Office Center for New American Security Brookings Institution Aspen Institute Harvard Business School Columbia University Rice University ICF International IHS, Unleashing the Supply Chain IHS, U.S. Crude Oil Export Decision

Independent Studies Agree:  Exports Would Lower Gasoline Prices

33

The Case Has Been Made Public Support Has Been EstablishedAmerican Council of Engineering Companies

America’s Natural Gas Alliance 

American Fuel and Petrochemical Manufacturers 

American Petroleum Institute 

American Pipeline Contractors Association

American Rental Association

American Road and Transportation Builders Association

American Supply Association

Arkansas Independent Producers and Royalty Owners

Associated Equipment Distributors

Association of Equipment Manufacturers

BP

California Independent Petroleum Association

Chevron 

Colorado Oil and Gas Association

Council For A Secure America

34

The Case Has Been MadePublic Support Has Been EstablishedDistribution Contractors Association

Domestic Energy Producers Alliance

Energy Equipment and Infrastructure Alliance

Exxon

Illinois Oil and Gas Association

Independent Petroleum Association of America

Industrial Minerals Association North America

International Union of Operating Engineers

Kansas Independent Oil and Gas Association

Kentucky Oil and Gas Association

Laborers’ International Union of North America

Material Handling Equipment Distributors Association

Metals Service Center Institute

35

The Case Has Been MadePublic Support Has Been EstablishedMichigan Oil and Gas Association

National Association of Manufacturers

National Association of Royalty Owners

National Electrical Contractors Association

National Industrial Sand Association

National Ready Mixed Concrete Association

National Stone, Sand and Gravel Association

National Stripper Well Association

National Tank Truck Carriers

National Utility Contractors Association

North Dakota Petroleum Council

Northern Montana Oil and Gas Association

Ohio Oil and Gas Association

Oklahoma Independent Petroleum Association

36

The Case Has Been MadePublic Support Has Been EstablishedPermian Basin Petroleum Association

Petroleum Equipment and Services Association

Plastics Pipe Institute 

Portland Cement Association 

Producers for American Crude Oil Exports

Regulation Alert

Shell

Texas Alliance of Energy Producers

The Associated General Contractors of America

The INGAA Foundation, Inc.

U.S. Chamber of Commerce

West Virginia Independent Oil and Gas Association

Western Energy Alliance

37

38Source: PACE

Editorials In Support of Lifting the Ban

“Imagine there were a simple policy that would spur economic growth, lower gas prices and please international allies. This policy exists: removing the United States’ irrational and outdated ban on exporting domestically produced crude oil.” 

– The Washington PostLifting the export ban on crude oil would be a boon to the U.S. economy

August 2, 2015

“The Washington news isn’t all bad these days: Republicans and some Democrats are working hard to gather enough votes to repeal the 40‐year ban on exporting crude oil. With gasoline prices hitting new lows, now is the right political moment to do something right for the economy and national security.” 

– The Wall Street JournalOil Export Momentum: 

Support is growing to repeal a Nixon‐era ban that Iran and Russia loveJuly 29, 2015

“By continuing to restrict exports, the US is therefore undermining its own production and helping competitors such as Russia and Saudi Arabia to increase their share of world markets… In the global oil price war, the US is battling with one hand tied behind its back. It is time to abandon an outdated policy and make it a fair fight.”

– Financial Times US makes a strategic error in the oil price war

March 9, 201539

Op‐Eds In Support of Lifting the Ban

“The moment has come for the U.S. to deploy its oil and gas in support of its security interests around the world.” – Leon Panetta 

Former U.S. Secretary of Defense in the Obama Administration

“By allowing the U.S. to become a stable source of supply to global energy markets, counteracting supply disruptions that will inevitably affect other energy‐rich regions, President Obama and Congress can double down on promoting long‐term economic growth and reinforcing U.S. foreign policy leadership.” 

– William CohenFormer U.S. Secretary of Defense in the Clinton Administration

“Let’s hope the export ban is lifted with broad bipartisan support. The result will increase U.S. jobs and increase the country’s influence in world oil markets.”

– John Deutch MIT Chemistry Professor and Former Undersecretary of Energy in the Carter Administration

“America is living in the past with our export restrictions. Congress should lift the ban on U.S. crude oil exports and give our nation the extraordinary opportunity to complete the transition from an energy poor country to an energy superpower.”

– Ken Hersh Refiner and CEO of NGP Energy Capital Management

40

National Public Education Campaign• 7‐figure, multi‐state education campaign • Raising awareness about lifting the oil export ban• Launched in August with TV, radio, online and social media ads

• First ad focused on American jobs, gasoline prices and national security• Second ad focused on the Iranian Deal

• www.LiftTheExportBan.com

41

Appendix

42

State Tax Revenue Lost(Brent – WTI) Differential

Note: Assumes lost revenue = Brent - WTI

Lost Revenue by Year and State ($ million)

2015 data through June. Note: assumes revenue loss = crude oil production volume * (Brent – WTI) differential * tax rate. Sources: EIA, Bloomberg, state tax data. 43

282.5 496.5  378.9  289.5  147.9 

$1,595.2 

82.5 

109.6 85.5 

58.7 27.9 

$364.1 

387.3 

588.0 447.8 

340.1 

177.2 

$1,940.5 

$3,900 

    ‐

 500

 1,000

 1,500

 2,000

 2,500

 3,000

 3,500

 4,000

 4,500

2011 2012 2013 2014 2015 Total

Est. Re

venu

e Loss ($

 million)

ND OK TX

Total Lost Revenue(Brent – WTI) Differential

2015 data through June. Note: assumes gross revenue loss = crude oil production volume * (Brent – WTI) differential. Sources: EIA, Bloomberg. 44

2011 2012 2013 2014 2015 TotalTX 8.4 12.8 9.7 7.4 3.9 42.2ND 2.5 4.3 3.3 2.5 1.3 13.9CA 3.1 3.5 2.1 1.3 0.6 10.6OK 1.2 1.5 1.2 0.8 0.4 5.1NM 1.1 1.5 1.1 0.8 0.5 4.9LA 1.1 1.2 0.8 0.4 0.2 3.7Other States 7.3 8.4 5.5 3.7 1.8 26.6Federal 7.8 8.5 5.2 3.4 1.6 26.4Total 32 42 29 20 10 134

$32  $42 $29  $20  $10 

$134 

    ‐

 20.0

 40.0

 60.0

 80.0

 100.0

 120.0

 140.0

 160.0

Gross Reven

ue Loss ($b

n)

Lost Gross Revenue by Year and State ($bn)

Unintended Consequence of Outdated U.S. Crude Export Policy:  Domestic Oil Producers Forced to Subsidize North American Refiners  Captured domestic crude production trades at a discount to oil of similar quality in the world 

market The U.S. consumer does not benefit from artificially low domestic crude prices as refiners sell 

domestic and exported product at world prices  The smartest minds agree: Overturning the U.S. crude export ban will not raise prices for 

consumers1. U.S. Energy Information Administration (EIA) – Adam Sieminski2. Congressional Budget Office (CBO)3. The Center on Global Energy Policy ‐ Jason Bordoff4. Brookings Institution – Larry Summers5. IHS – Daniel Yergin6. Aspen Institute – Tom Duesterberg7. Baker Institute for Public Policy, Rice University – Ken Medlock8. Center for a New American Security 9. Harvard Business School 

45

What the Analysts are Saying…….

“Low Prices Are Dramatically Slowing Near‐term US Production Growth.”‐ RBC Capital Markets, 4/16/15

“A decline in production is expected.” ‐ Raymond James Equity Research, 4/15/15

“We are expecting growth to turn negative in 2H15.” – RBC Capital Markets, 4/15/15

“We’re going off an inevitable cliff because of the shrinking rig counts.”                                                   ‐ Carl Larry, head of oil and gas for Frost & Sullivan LP, 4/13/15

“Advances in oil‐drilling technologies are no longer enough to offset the rigs being idled by U.S. producers.”                                                                                                                  ‐ Paul Horsnell, global head of commodities research at Standard Chartered Plc in London, 4/13/15 Research Note

“Growth could go to zero on a month‐over‐month basis as soon as May.”                                                           ‐ Richard Hastings, macroeconomic strategist at Global Hunter Securities

Deutsche Bank, Goldman Sachs and IHS have projected that U.S. oil production growth will end, at least temporarily, with futures near a six‐year low.

“Output from the prolific tight rock formations, such as North Dakota’s Bakken Shale, will decline 57,000 barrels a day in May.” ‐ EIA, 4/13/15

46

U.S. Energy Renaissance at Risk ‐ Background1. Post‐1970s consensus: America was running out of oil and natural gas, and imports would increase 

unabated into the future. To combat this threat:

President Nixon imposed price controls after the 1973 Arab oil embargo.

U.S. later banned oil exports as an enforcement tool of this policy.

2. Given that gas production was declining, facilities were built in Texas, Louisiana, Maryland and California to import LNG from abroad. 

3. A calculated conversion of $85B spent over 25 years* of US sweet refinery assets to process heavy crude from Mexico, Venezuela and Canada to provide those countries downstream outlets for their current heavy sour crude production and future tar‐sand development needs.

4. However, we, the small U.S. Independents, developed new horizontal technologies in the 1990s and used them to discover a vast new supply of natural gas in tight rock reservoirs – 100+ years of new supply* – a real game‐changer!

5. These same technologies led to the discovery of the three new crude oil resource plays, the Bakken, Eagle Ford and “new” Permian unconventional, which have generated 50% of the world’s oil production growth since 2008. The U.S. accounts for 75% of world oil production growth since 2005, and these resource plays represent ~40+ years of new light sweet crude oil supply. 

6. Due to the conversion of US sweet crude refineries, we are unable to obtain domestic refinery space for this premium‐grade product and must seek international sweet crude refinery space.

*Sources: Aspen Institute and USGS

47

U.S. Energy Renaissance at Risk

1. LNG import facilities are now being retrofitted to EXPORT LNG abroad. U.S. has assured long‐term self‐sufficiency in natural gas.

2. Net imports of petroleum liquids have fallen to 25% of U.S. consumption, near the limit that will be difficult to exceed because 25% of U.S. refinery capacity is foreign‐owned.

3. Compounding this problem, since 2010 many U.S. light sweet oil refineries have been reconfigured  by their foreign owners to process heavy sour/bitumen. Result: Light oil refining capacity is severely limited in the U.S.

4. The U.S. is within 5 MMBpd of being entirely self‐sufficient in crude oil, which is equal to the daily capacity of foreign‐owned refineries in the U.S. 

5. Since 2008 the domestic energy renaissance has been the leading provider of jobs and strength to the U.S. economy.

6. A continued ban on the fair trade of domestic oil could push the country back into recession, due to mounting job losses, higher gasoline prices and reduced capital spending.

Currently

48

Foreign entities have acquired significant U.S. refinery assets since the 1980s

Foreign‐owned refineries have financial agreements that allow them to exclude domestic‐sourced crude

Foreign‐owned refineries currently import 1.1 MMBpd of oil from their own country (i.e., Saudi’s Motiva importing Saudi crude)

Foreign‐owned refineries could source ~4.9 MMBpd of foreign crude imports, putting U.S. producers at an even greater disadvantage

3.8 MMBpd

4.9 MMBpd

1.1MMBpd

The mismatch in sour vs. sweet refining capacity and the disadvantage of U.S. export laws allows foreign refiners to import their own crude, process it in U.S. refineries, and then ship refined product overseas at no advantage to U.S. consumers.

28% of U.S. Refining Capacity is Foreign‐Owned

49

Refining Capacity in the World

 ‐

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

Total Capacity

 ‐

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

Light Sweet Capacity

 ‐

 5.0

 10.0

 15.0

 20.0

 25.0

 30.0

Heavy Sour Capacity

Source: Oil and Gas Journal’s “Worldwide Refining Survey, 2014.”

The U.S. has the world’s second highest capacity…

And by far the most heavy sour capacity…

But only a miniscule amount of light sweet capacity.

MMBp

d

50

Oil and Gas Has Driven U.S. Jobs Growth

Energy production in Texas and North Dakota helped pull the U.S. out of the Great Recession. “Since Dec. 2007, Texas + ND ("Cowboyistan") created 6 jobs for every 1 job created in the other 48 states  and DC.”

Dr. Mark Perry, University of Michigan at Flint 

Courtesy of Dr. Mark Perry, University of Michigan at Flint, 3/9/15. Percentages relate to total TX+ND jobs vs. total jobs in the other 48 states.

What Was What Is

‐140,000

‐120,000

‐100,000

‐80,000

‐60,000

‐40,000

‐20,000

0

Cumulative Employment Decline Based on Announced Layoffs

51

Trade Deficit Reduction since 2005

2005-06 avg. deficit $61B per month

2013-14 avg. deficit$41B per month… a gain of $20B per month!

2008-09 recession

What happened?U.S. Net Imports of Petroleum Liquids

MMBpd

MMBpdUS Refined Petroleum Exports and Other

Crude oil exports are expected to eliminate much of the remaining deficit over the next five years.

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“Record imports swell US trade deficit” – BBC, 8/5/15In June 2015, the U.S. petroleum trade deficit widened by $1.5B, a 27% increase over the prior month as a result of declining U.S. oil production in the face of predatory OPEC policy and the U.S. crude oil export ban. (Source: U.S. Census Bureau)

What the U.S. Refiners are Telling Investors About Captive Light Sweet Crude

Favorable price dislocations between North American crude and rest of world… ~2.6 million bpd of refining capacity has been or is scheduled to be rationalized in the Atlantic Basin

IPO Filing Feb. 17, 2015 – “Upon our formation, we believed that rapid growth in the production of light, sweet domestic crude oil from developing shale formations such as the Bakken, Eagle Ford and Permian…would create opportunities to secure domestic crude oil at advantaged prices relative to other sources of crude oil.”

We see plentiful supplies of light sweet crude available at attractive prices

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