US Congress passes bill lifting crude export ban

OREANDA-NEWS. December 22, 2015. The US Congress today easily passed a \\$1.8 trillion spending and tax bill that will repeal longstanding restrictions on exporting crude while extending tax credits for wind and solar energy for five years.

The legislative deal will allow unrestricted crude exports in the US for the first time since 1975, when Congress imposed export limits in reaction to the Arab oil embargo. Energy security concerns have since largely subsided, as the shale drilling boom pushed up domestic production from 5.5mn b/d in 2010 to 9.3mn b/d this year.

The US House of Representatives this morning approved a \\$1.1 trillion government spending bill and \\$680bn tax extenders bill in a 316-113 vote. The US Senate an hour later approved the legislative package 65-33. President Barack Obama is expected to sign the bill before a short-term government funding bill expires on 22 December.

Few expected Congress could lift the export restrictions while Obama remained in office. But congressional leaders in closed-door negotiations this month reached a surprise deal that tied crude exports to a must-pass budget bill. Republicans in the deal agreed to extend renewable energy tax credits for five years in exchange for Democrats permanently repealing crude export restrictions.

Wind and solar developers were among the biggest winners from the deal. The deal extends the \\$23/MWh wind production tax credit until 1 January 2020, though the amount of that credit will begin phasing down starting in 2017. Solar energy tax credits will get a similar five-year extension through 1 January 2022, with a phase-down schedule that starts in 2020.

The deal includes \\$1.9bn in tax credits to help independent refiners offset some of the higher shipping costs from the 90-year-old Jones Act, which requires crude transported between US ports be carried on US-flagged tankers. East coast refiners have been fighting to keep export restrictions over concerns that their higher shipping costs will make them less competitive.

The deal is unlikely to lead to a flood of crude exports anytime soon. Exporters will face stiff competition in a market already saturated with low-cost light crude. US producers are already exporting nearly 500,000 b/d, mostly to Canada, under existing export rules. US crude exports will likely only increase to 640,000 b/d by 2025 even without regulatory restrictions, the US Energy Information Administration projected in a report this September.

Lawmakers retained some authority in the bill for the US to restrict crude exports. The US president could limit exports for up to a year by declaring a national emergency. The US Commerce Department could also restrict exports for a year if it found crude exports were responsible for supply shortages or pushing crude prices "significantly above world levels."