US Congress to lift crude export limits: UpdateOREANDA-NEWS. December 18, 2015. Congressional leaders' \\$1.1 trillion budget deal may repeal the US' 40-year-old crude export restrictions in exchange for extending renewable energy tax credits, but it will not lead to a flood of exports anytime soon.

US oil exporters face tough competition in a global market already awash in low-cost, light crude, with today's economics unable to support meaningful shipments of US crude. Overseas refiners will be reluctant to switch current crude slates without some discounts, concessions producers will be loath to make in today's market.

And the traditional outlet for excess light crude, Asia, is seeing a slowdown in growth that leaves that market well supplied.

The wide-ranging budget deal is designed to avert a shutdown of the federal government and set funding levels for federal agencies through September 2016. Republican and Democratic leaders from both houses of Congress negotiated the deal in closed-door meetings over the past two weeks, with the goal of passing the two bills by 22 December. While party leaders may face opposition from within their ranks, the 2,009-page government funding bill and a second, 233-page measure designed to renew expiring tax credits are expected to pass.

The change in the crude export limits is the most contentious provision in the package. During the negotiations, Democrats used the issue to pressure Republicans to extend the wind and solar energy tax credits by five years and block hundreds of environmental riders.

In a concession to refiners that complain lifting export restrictions will make them less competitive, the deal provides US independent refiners with a tax deduction that allows them to write off a portion of their transportation costs. The sweetener could soften the impact of east coast refiners that face higher shipping expenses because of a requirement to use US-flagged ships when moving oil between US ports.

US producers pushed for lifting the export restrictions, saying it would boost the domestic economy by allowing them access to higher international crude prices. But the WTI/Brent spread has narrowed to nearly \\$1/bl in recent months, making exports unprofitable. Even when crude exports do begin, they may follow a similar path to that of lightly processed condensate exports, which federal officials cleared starting last year. Earlier this year, many producers hoped condensate would become a steadily growing outlet. But expectations had to be revised when exports peaked at 145,000 b/d in June and fell to 80,000 b/d in July and then 97,000 b/d in August, with few signs of improvement with recent price levels.

The end to the export restrictions also could have implications for US midstream companies that move and store crude, particularly along the US Gulf coast.

A number of new pipelines and storage facilities have been proposed in the past year, which could facilitate the future volumes. The Louisiana Offshore Oil Port (LOOP) is seeking shipper commitments for proposed marine vessel crude loading services, which would essentially allow the import terminal to become a facility for exports. In Houston, Fairway Energy Partners is planning a storage site with an initial capacity of 10mn bl, while NuStar is building out 400,000 bl of storage in Corpus Christi, while also developing a new crude loading dock at the port.

Wind and solar developers under the bill could see significant benefits. The deal extends until 2020 a federal production tax credit for wind, but the legislation would begin to phase out that provision. The wind credit would be cut by 20pc for facilities beginning construction in 2017, and then by a 40pc cut in 2018 and by 60pc in 2019. The deal also extends by five years and phases out a solar investment tax credit that was set to expire at the end of 2017.

Conservative groups and environmentalists are planning to fight the two bills, but party leaders likely have included enough provisions amenable to both sides to ensure both bills are approved.

The House plans to vote on the tax extension bill tomorrow, with Republicans likely making up most of the support. The House on 18 December will then move the budget bill, where party leaders expect Democrats to carry the vote. The House will then merge the bills and send the resulting legislation to the Senate for approval before 22 December.