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Murkowski Introduces Bill to Lift Crude Oil Export Ban

On May 13, 2015 Senator Lisa Murkowski, Chair of the Senate Committee on Environment and Natural Resources, introduced the Energy Supply and Distribution Act of 2015 (S.1312), which if enacted would lift the crude oil export ban.

Co-sponsored with Sen. Heidi Heitkamp (D-ND) and twelve Republicans, the bill would permit exports of domestically produced crude oil without a Federal license “notwithstanding any other provision of law” (other than crude oil stored in the Strategic Petroleum Reserve), except to countries subject to U.S. sanctions. The bill would direct the Secretary of Energy to develop a standard definition of the term “condensate” and would express the sense of the Congress that processed condensate is a petroleum product.

S.1312 follows the bill introduced in the House of Representatives by Rep. Joe Barton (R-TX) last February, which would prohibit any official of the Federal Government from imposing or enforcing any restriction on the export of crude oil.

Both bills seek to cut through the layers of legislation and regulation implementing statutes enacted in the 1970’s that have prohibited exports of domestically produced crude oil except in limited circumstances, such as section 103 of the Energy Policy and Conservation Act, section 28(u) of the Mineral Leasing Act of 1920 and section 28 of the Outer Continental Shelf Lands Act.

Although these statutes give the President authority to lift export restrictions by means of specific authorizations or national interest determinations, the Administration has chosen not to expand the types of permitted transactions but has allowed the Commerce Department (which implements the Export Administration Regulations) to continue to license transactions such as swaps and exchanges in accordance with previously established policy. Preempting Sen. Murkowski’s focus on condensates, the Commerce Department late last year issued FAQ’s clarifying the circumstances under which processed condensate would be considered a refined product not subject to definition of crude oil and therefore not subject to the ban. A number of companies have since received commodity jurisdiction determinations for condensates.

The politics of lifting the crude oil export ban are complicated. A number of respected economic studies have found that permitting exports of crude would lower the price of gasoline at the pump because U.S. gas prices correlate with the world Brent price benchmark and increasing global supplies would lower the Brent price. Lifting the ban would also provide an incentive for U.S. producers to continue to invest, notwithstanding the recent sharp decline in the global price of oil. But many other factors could affect the pump price as well, such as the potential lifting of sanctions on Iran, which would flood markets with crude oil and dampen U.S. production, or political instability in Libya, Nigeria or Iraq, which could reduce global supply. In addition, aside from economics, key Administration officials believe lifting the ban would be contrary to its climate agenda.

With these and many other factors in play, neither Congress nor the Administration has wanted to take the lead to lift the ban. The Murkowski bill is one step in that direction, but there is a long way to go.