Congress passed a $1.1 trillion spending bill (H.R. 2029) that contains a provision to end the United States’ ban on crude oil exports and earmarks for funding the federal pipeline safety program. The measure passed in the House (316-113) and the Senate (64-33) on Friday, December 18, and was signed by President Obama later that day.
The ban on crude oil exports was first imposed in 1975 in order to protect U.S. supplies of oil and petroleum products in response to the 1973 Arab oil embargo. At the time of enactment, and until relatively recently, the United States was largely dependent upon crude oil imports. With dramatic increases in oil production worldwide and decreased consumption over the last decade, however, oil prices have steadily declined, motivating calls to repeal the outdated export ban.
Repeal of the 40-year old ban was intended to stimulate the market for U.S. produced-oil, enabling domestic producers to compete in the global marketplace at a time when U.S. production is beginning to wane. The first freely traded cargo shipment of U.S. oil departed Texas on New Year’s Eve destined for Europe. The current price of foreign crude, however, is not much higher than the cost of a barrel of U.S. oil, which makes shipping it across the ocean an expensive prospect for many buyers.
Long term predictions about the likely effects of ending the U.S. export ban on domestic output, and the U.S. economy more generally, are varied. Some experts predict that, given the growth of global inventories and the recent lifting of sanctions on Iranian oil imports, rapid production and price increases resulting from the ban are unlikely. Others predict a more pronounced positive effect on the U.S. economy, resulting in immediate increases in production, additional investment in the economy, new jobs, and other benefits.
In addition to a repeal of the crude oil export ban, the spending bill earmarked $146,623,000 in funding for the federal pipeline safety program, provided that (among other things) no less than $1,000,000 of the funds are used for finalizing and implementing rules required under the federal Pipeline Safety Act related to leak detection systems and automatic and remote-controlled shut-off valves. PHMSA has already proposed a rulemaking on those issues for hazardous liquid pipelines for which the comment period closed on January 8, 2015. A proposal for natural gas pipelines is forthcoming as well.