US House of Representatives votes to end oil export ban

On Friday, October the 9th, the United States House of Representatives voted to end the forty-year old ban on the export of crude oil from the United States. The vote on H.R. 702, “an act to adjust to changing crude oil market conditions,” is an important milestone in the effort to lift the export ban. However, the bill faces an uncertain future in the United States Senate, along with the threat of a presidential veto.

The House voted 261-159, with 235 Republicans joined by 26 Democrats supporting H.R. 702. Congressman Joe Barton, a Republican from Texas, introduced the bill last February. It is one of several initiatives to end the export ban that has been introduced in recent years, in both chambers of the United States Congress.

The export ban was put in place in the 1970s after the Organisation of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the United States and other countries, in retaliation for supporting Israel in the 1973 Arab-Israeli War. The embargo drove the price of gasoline in the United States skyward, forcing its government to impose gasoline rationing.

In response, Congress passed the Energy Policy and Conservation Act of 1975. Section 103 of the Act authorises the President to restrict exports of coal, petroleum products, natural gas, and petrochemical feed-stocks. H.R. 702 would repeal Section 103.

Advocates of the bill assert that lifting the ban will stimulate more petroleum production, increase American exports, generate jobs, provide international allies and partners with a reliable source of energy, and “dilute the market share of unfriendly countries.”

Those who want to keep the oil export ban in place, argue that the continued dependence of the U.S. on crude oil requires that it remains in force. Some also warn that lifting the ban would lead to an increase in domestic energy prices.

President Obama stands with the bill’s opponents. During the week prior to the vote, his Secretary of Energy, Ernest Moniz, criticised the bill, and the White House threatened to veto the legislation, if it is passed by Congress.

After the vote in the House, the White House issued a “Statement of Policy” asserting that “legislation to remove crude export restrictions is not needed at this time. Rather, Congress should be focusing its efforts on supporting our transition to a low-carbon economy. It could do this through a variety of measures, including ending the billions of dollars a year in federal subsidies, provided to oil companies, and instead, investing in wind, solar, energy efficiency, and other clean technologies to meet America’s energy needs…If the President is presented with H.R. 702, his senior advisers would recommend that he veto the bill. ”

Whilst the U.S. oil and gas industry generally supports the legislation, some elements within that industry, oppose lifting the ban. Jay Hauck of ‘The Crude Coalition’, which represents a group of oil refiners, warns that lifting the ban could raise their costs. He cites a Department of Energy report, published in September, which estimated that American refiners’ profits could drop by 22 billion by 2025, if the ban is lifted. Other US government reports, including some from the Department of Energy, however, have projected little to no price increases, and have supported ongoing market research, which has concluded that lifting the ban would benefit the U.S. economy as a whole.

The next hurdle to be overcome, by advocates of lifting the oil export ban, lies in the United States Senate. Two key committees in the Republican-controlled chamber have approved legislation to lift the ban, but Majority Leader, Mitch McConnell, to date, has yet to signal his readiness to bring such language to a vote in the upper chamber. He needs to secure ’cloture’, the requirement that 60 of the chamber’s 100 senators, must agree to allow a bill to be brought to their chamber’s floor for a full debate and vote.

In today’s Senate, attaining ‘cloture’ for a bill ending the export ban, is a challenge for the Republicans, with their narrow majority of 54 votes. Senate Democrats control 44 seats and can count on the support of two independents. Such a procedural vote would likely fall along party lines, especially with the President threatening a veto.

One possible strategy being considered, is to tie an end to the oil export ban to a legislative priority of the Democrats: for example, Senator John Hoeven, a Republican from North Dakota, proposes binding language similar to H.R. 702 to legislation that would reauthorise, and fully fund, the Land and Water Conservation Fund, a law that acquires and maintains national parks, wildlife refuges, and forests, with revenues generated from the oil and gas industry. The fund expired for the first time in 51 years at the end of September.

The House’s passage of H.R. 702 was an important step in the effort to repeal the crude oil exports. However, if the Senate baulks on voting to lift the ban this year, it is unlikely that Congress will to do that in 2016. In an election year for Congress, legislators will be wary of legislation that has any prospect of being blamed fairly, or unfairly, for any rise in U.S. domestic energy prices, even if that risk is negligible.

Nevertheless, the October House vote on H.R. 702, has made the end of the oil export ban all the more certain, but not necessarily this year, or the next.

Ian J. Brzezinski, Senior Fellow at the Brent Scowcroft Center on International Security at the Atlantic Council