Congressional Spending Bill Would Lift The Ban On Exporting Crude Oil

The lifting of the ban could be a boon for domestic oil producers. Above, an oil pump near Alexander, N.D, in September.

Martha Irvine/AP

Congress is getting closer to lifting a 40-year-old ban on oil exports, a move that could be a boon for U.S. oil producers hoping to expand into the global market.

President Obama and environmentalists oppose ending the ban, but Congressional leaders made it part of a $1.14 trillion spending bill, unveiled Tuesday, greatly increasing its chance of passage.

As part of the deal, Democrats won some concessions to the president's environmental goals, including a five-year extension of wind and energy production tax credits. They also blocked Republican efforts to thwart the administration's clean air and water regulations.

The ban, which was first passed in response to the energy crisis of the 1970s, blocks the exports of most raw, unprocessed crude, but allows foreign sales of refined petroleum products such as gasoline and diesel.

As oil production has soared in the United States, critics have argued that the ban no longer makes sense.

The Financial Times says getting rid of the ban "represents a significant shift in policy that many had thought impossible just months ago," even though it's unlikely to increase the amount of crude flowing out of the country anytime soon:

"The spread between the price of West Texas Intermediate crude, for delivery in Oklahoma, and internationally traded Brent is only about $1.25 per barrel, meaning that any benefit for US producers from selling in world markets would be swallowed up in transport costs.

"In the long term, however, the liberalization of exports will help companies producing in the US by enabling them to find the most profitable markets for their oil."

"We have the best technology, the best oil and over time we will drive out Russian oil, we will drive out Saudi, Iranian," Republican Rep. Joe Barton of Texas said in an interview with Bloomberg News. "It puts the United States in the driver's seat of energy policy worldwide. It is a huge victory."

"There is little urgency or price advantage for US crude producers to export currently," Morgan Stanley analyst Adam Longson said in a research note quoted by Bloomberg. "However, the advantages could be much larger in a couple years' time as the US resumes growing production."

Nevertheless, supporters of the ban say lifting it encourages the world's continuing dependence on fossil fuels at a time when it should be moving to more sustainable energy production.

Sen. Jeff Merkley, D-Ore., said lifting the export ban was a "huge mistake" and "a windfall for big oil at the expense of working Americans and our planet."

The Natural Resources Defense Council said the move "flies in the face of other actions being taken to reduce oil use and attack climate change."

"We will continue to press the Obama Administration to put in place policies that limit the harm from the lifting of the ban, starting with protecting our coasts and climate by ensuring that drilling never again threatens the Arctic or Atlantic oceans."

Under the plan unveiled Tuesday, Congress will vote on the broad spending measure within days and then vote on separate legislation that would extend tax credits for wind and solar production, which are close to expiring.

Jason Bordoff, a former Obama adviser who runs the Center on Global Energy Policy at Columbia University, told the Times the plan achieves two goals:

"It's not every day that a compromise across the political aisle actually yields two good policies, but this is one of those cases. Free trade in oil plus more support for clean energy: that's a very positive outcome."

But Democrats were less enthusiastic about lifting the ban. House Minority Leader Nancy Pelosi noted that the move would harm the economy.

"Not only are we losing the oil, but we're losing the jobs that go into refining it," she said.