Democrats Suggest Renewing Subsidy for Renewables in Exchange for Ending Oil Export Ban

Published September 7, 2015

Increased calls for lifting the four-decades-old ban on the export of U.S. crude oil led to a flurry of activity on Capitol Hill shortly before Congress’ August recess, with some Senate Democrats indicating they might agree to lift the ban in exchange for extending federal subsidies for wind and solar power. 

By a vote of 12–10 in late July, the Senate Energy and Natural Resources Committee approved the Offshore Production and Energizing National Security Act of 2015 (OPENS Act). In addition to ending the ban, OPENS Act would increase coastal states’ share of federal revenues raised by drilling off their coasts.

Horse-trading Possibilities

The close vote in committee indicates an end to the ban is far from certain.

 “I might be willing to support [lifting the ban], but only if there is a more balanced package of changes in the bill,” said Sen. Angus King (I-ME) told Environment & Climate News in July. “For example, [I would like to see an] extension of the renewable credits for wind and solar and other kinds of potential environmental and renewable supports. I think this bill, while it can be justified and argued, is totally unbalanced, and I can support it if it’s modified to be more balanced in terms of our future energy needs.”

Opposition to the Wind Production Tax Credit and tax credits for solar investment have intensified in recent years, resulting in Congress allowing their expiration in 2014, along with subsidies for several other industries. Supporters of continued government support for the wind and solar industries are desperately looking for a legislative vehicle to have the expired subsidies reinstated.

Although most congressional Republicans are eager to end the ban on the export of crude oil, it is unclear if they are willing to pay the price some Democrats are demanding.

“Lifting the ban is long overdue, but it is especially important now in the low-oil-price environment,” said Marita Noon, executive director of Energy Makes America Great. “Due to the ban, our oil producers are forced to sell their oil at a discounted price, typically 3–12 percent off the global rate.

“Lifting the ban would benefit domestic production and not hurt consumers who are enjoying lower-cost gasoline, as it is priced based on global rates,” Noon said. “This issue is so important that it should not have the baggage of tax extenders attached to it. The OPEN Act will add revenues to state and federal coffers. The extenders will cost taxpayers money.” 

Need for Change Highlighted

Momentum for lifting the oil export ban received a substantial boost in July with the release of Empowering America: How Energy Abundance Can Strengthen U.S. Global leadership, a report published by the Atlantic Council. It was written by an Atlantic Council task force co-chaired by Sen. Lisa Murkowski (R-AK), chairwoman of the Senate Energy and Natural Resources Committee, and Sen. Mark Warner (D-VA).

The report notes the boom in U.S. oil and gas production in recent years has fundamentally altered the global energy picture.

“Our unprecedented rise in oil production, from 5 million barrels per day to a 40-year high of 9.5 million b/d in only 7 years, helped to prevent a price spike from being triggered by the Libyan revolution, to sustain Iran oil sanctions, and to mitigate the market effects of unplanned oil disruptions across the globe,” the report stated.

“America must now practice the philosophy we have preached at home and abroad since 1973: join the global market and reject protectionism,” the report said. “The United States has many tools with which we can help other nations gain autonomy, prosperity, and energy security, but allowing unfettered exports of our natural gas and oil abundance would be a force multiplier with powerful results.”

Some Are Already Exempt

Some countries are already exempt from the oil export ban, including Canada. Currently, the United States exports more than a half-million barrels of oil a day to Canada, accounting for 5.2 percent of daily U.S. oil production, according to the Energy Information Administration.

Recent action by the Department of Commerce (DOC) added Mexico to the list of exempt countries. On August 14, DOC announced it would allow U.S. producers of light, sweet crude oil to export their product to Mexico in exchange for Mexican heavy oil. DOC’s action is intended to alleviate a bottleneck in storage facilities along the Gulf Coast, where U.S. oil has piled up with no place to go.

Daniel Simmons, vice president for policy at the Institute for Energy Research, says the oil export ban was a flawed policy overdue for repeal.

“The ban on exporting oil is a remnant of 40-year-old failed economic policies,” Simmons said. “The ban was kept in place for decades because it appeared that U.S. production would only fall and consumption would only increase. Reality has proven far different.

“Today, we have booming production and stagnant oil demand,” Simmons said. “It’s time to end this 40-year-old experiment of banning our own potential exports. The [United States] does not ban the export of corn, or wheat, or coal, or Boeing airplanes, and there is no good reason to ban the export of oil.”

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.

Internet Info

Atlantic Council, “Empowering America: How Energy Abundance Can Strengthen U.S. Global Leadership”: