Crude exports would boost US royalties: CBO

OREANDA-NEWS. October 02, 2015. A Republican bill lifting the 40-year-old restrictions on crude exports would likely push up prices for US crude and in turn increase royalty payments to the federal government by \\$1.4bn over the next decade, the Congressional Budget Office (CBO) said yesterday.

The findings lend support to a push by Republicans to repeal export restrictions first imposed in 1975 in the wake of the Arab oil embargo. Congress relies on the non-partisan budget office to provide an independent review of how proposed legislation will affect US government spending and revenue.

The budget review comes one week before the Republican-led US House of Representatives is poised to approve a crude export bill sponsored by representative Joe Barton (R-Texas). The bill is unlikely to become law without more Democratic support. But negotiations continue in the Senate, where the Senate Banking Committee tomorrow will take up a separate crude exports bill.

The CBO yesterday only scored the House bill. It expects lifting the export restrictions would raise demand for US oil, increase prices received by producers — by roughly \\$2.50/bl from 2016-2025 — and encourage additional production. The government calculates royalty payments based on a percentage of the wellhead price, so higher prices would increase royalty payments.

Royalty payments between 2016-2025 would be \\$1.4bn higher over the period than without a law change, CBO said. But 49pc of that money would go to states that receive a share of the proceeds from federal oil and gas leases. These increased royalty payments would begin by 2018 with an extra \\$50mn/yr and gradually increase to \\$330mn/yr by 2025. CBO expects the higher payments would be delayed for two years because of the time it would take for producers to develop contractual and physical arrangements for exports.

Other federal agencies have also found benefits of lifting the crude export restrictions. The US Energy Information Agency found domestic gasoline prices might drop without export restrictions. Refiners continue to oppose lifting the export restrictions, which they argue will increase US gasoline prices.