[House Report 114-267]
[From the U.S. Government Publishing Office]


114th Congress   }                                   {   Rept. 114-267
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                   {          Part 1

======================================================================



 
            TO ADAPT TO CHANGING CRUDE OIL MARKET CONDITIONS

                                _______
                                

 September 25, 2015.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Upton, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 702]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 702) to adapt to changing crude oil market 
conditions, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     9
Committee Consideration..........................................    10
Committee Votes..................................................    10
Committee Oversight Findings.....................................    12
Statement of General Performance Goals and Objectives............    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    12
Duplication of Federal Programs..................................    12
Disclosure of Directed Rule Makings..............................    12
Advisory Committee Statement.....................................    13
Applicability to Legislative Branch..............................    13
Section-by-Section Analysis of the Legislation...................    13
Changes in Existing Law Made by the Bill, as Reported............    13
Dissenting Views.................................................    16
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. FINDINGS.

  The Congress finds that--
          (1) the United States has enjoyed a renaissance in energy 
        production, establishing the United States as the world's 
        leading oil producer;
          (2) the United States upholds a commitment to free trade and 
        open markets and has consistently opposed attempts by other 
        nations to restrict the free flow of energy; and
          (3) the United States should remove all restrictions on the 
        export of crude oil, which will provide domestic economic 
        benefits, enhanced energy security, and flexibility in foreign 
        diplomacy.

SEC. 2. REPEAL.

  Section 103 of the Energy Policy and Conservation Act (42 U.S.C. 
6212) and the item relating thereto in the table of contents of that 
Act are repealed.

SEC. 3. NATIONAL POLICY ON OIL EXPORT RESTRICTION.

  Notwithstanding any other provision of law, to promote the efficient 
exploration, production, storage, supply, marketing, pricing, and 
regulation of energy resources, including fossil fuels, no official of 
the Federal Government shall impose or enforce any restriction on the 
export of crude oil.

SEC. 4. STUDY AND RECOMMENDATIONS.

  Not later than 120 days after the date of enactment of this Act, the 
Secretary of Energy shall conduct a study and transmit to the Committee 
on Energy and Commerce of the House of Representatives and the 
Committee on Energy and Natural Resources of the Senate recommendations 
on the appropriate size, composition, and purpose of the Strategic 
Petroleum Reserve.

SEC. 5. SAVINGS CLAUSE.

  Nothing in this Act limits the authority of the President under the 
Constitution, the International Emergency Economic Powers Act (50 
U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et 
seq.), or part B of title II of the Energy Policy and Conservation Act 
(42 U.S.C. 6271 et seq.) to prohibit exports.

                          Purpose and Summary

    H.R. 702, to adapt to changing crude oil market conditions, 
was introduced by Representative Joe Barton (R-TX) on February 
4, 2015. The legislation would repeal section 103 of the Energy 
Policy and Conservation Act of 1975 and prohibit any 
restriction on the export of crude oil, except under emergency 
authority of the President. The legislation also would require 
the Secretary of Energy to conduct a study and make 
recommendations on the appropriate size, composition, and 
purpose of the Strategic Petroleum Reserve (SPR).

                  Background and Need for Legislation

    Forty years ago, Congress passed legislation in response to 
the Arab oil embargo restricting oil exports and establishing 
the Strategic Petroleum Reserve to release oil in response to 
energy supply interruptions. Today's energy security situation 
is much improved from that of the 1970's. Domestic energy 
production is nearing record levels, while import dependence 
and consumption are declining. The Committee believes that 
removing oil export restrictions likely would encourage 
additional domestic production and contribute to further 
reducing the nation's import dependence.
    The United States is the world's number one producer of 
petroleum liquids, yet it maintains restrictions on the export 
of crude oil. Crude oil export restrictions run counter to the 
national interest and deny substantial benefits to the U.S. and 
its allies and trading partners. While restrictions on the 
export of refined petroleum products have been lifted entirely, 
the export of crude oil remains generally prohibited, though 
some exceptions have been made through Executive Orders and 
Acts of Congress. For example, in certain circumstances, a 
Federal license can be obtained to export crude oil to Canada 
or to exchange crude oil with another country for an equal 
amount of petroleum products.
    Restrictions on crude oil exports are a vestige of the 
past, originally intended to compliment a complicated system of 
oil price controls that were repealed decades ago. History has 
shown that attempts to control prices through government 
regulation generally have failed. In 1981, President Reagan 
eliminated the price controls program through Executive Order 
12287, stating:

          For more than 9 years, restrictive price controls 
        have held U.S. oil production below its potential, 
        artificially boosted energy consumption, aggravated our 
        balance of payments problems, and stifled technological 
        breakthroughs. Price controls have also made us more 
        energy-dependent on OPEC nations [(Organization of 
        Petroleum Exporting Countries)], a development that has 
        jeopardized our economic security and undermined price 
        stability at home.\1\
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    \1\See Weekly Compilation of Presidential Documents, vol. 17, no. 4 
(January 28, 1981).

    The Committee believes that crude oil export restrictions 
are detrimental to the national interest. Export restrictions 
impose costs on the economy, discourage additional domestic 
crude oil production, result in higher gasoline prices for 
consumers, and reduce competition in world oil markets.
    Lifting all restrictions on crude oil exports would benefit 
the U.S. in many ways. Allowing crude oil exports would 
encourage continued growth and investment in our nation's oil 
production capacity, potentially creating thousands of new jobs 
and new supplies of stable energy, a reassuring symbol to our 
allies and trading partners. Crude oil exports also would 
improve the nation's balance of trade and reduce OPEC's 
monopoly power, significantly improving U.S. energy security 
and national security.

                HISTORY OF CRUDE OIL EXPORT RESTRICTIONS

    The U.S. has a long history of ill-conceived and abandoned 
attempts to control energy markets through government 
regulation. Throughout the last several decades, many of the 
policies enacted in an attempt to control the price and supply 
of energy commodities have been repealed. The existing 
restrictions on U.S. crude oil exports were conceived in the 
1970's, an era of energy scarcity when the U.S. was faced with 
projections of rising fuel demand, falling crude oil 
production, and increasing reliance on imports. When the Arab 
members of OPEC imposed an oil embargo from October 1973 to 
March 1974, it exposed the nation's vulnerability, resulting in 
fuel shortages and price spikes.
    Congress responded to the embargo with new laws attempting 
to control the price and supply of crude oil. The Emergency 
Petroleum Allocation Act of 1973, and later the Energy Policy 
and Conservation Act of 1975 (EPCA), led to price controls on 
domestic crude oil, tariffs on imported crude oil, and 
restrictions on petroleum exports.\2\ The lessons learned from 
these failed energy policy initiatives were explored during the 
Subcommittee on Energy and Power's December 11, 2014 hearing 
entitled ``The Energy Policy and Conservation Act of 1975: Are 
We Positioning America for Success in an Era of Energy 
Abundance?'' In his testimony, Dr. Charles Ebinger, Senior 
Fellow at the Brookings Institution, testified that ``in 
reviewing the history of U.S. energy policy since the early 
1970's, it is apparent that whenever the U.S. government has 
tried to favor a particular fuel absent market realities there 
have been unintended consequences which have been deleterious 
to the U.S. economy and U.S. energy security.''
---------------------------------------------------------------------------
    \2\See P.L. 93-159 and P.L. 94-163.
---------------------------------------------------------------------------
    Mr. Lucian Pugliaresi, President of the Energy Policy 
Research Foundation, agreed with Dr. Ebinger, explaining that 
``[o]ften these policies, in an attempt to either promote the 
development of alternatives to petroleum or to insulate 
consumers from price volatility, prevented more productive 
responses from both consumers and producers.''

    CURRENT LAW AFFECTING CRUDE OIL EXPORTS AND LICENSING PROCEDURES

    Section 103 of EPCA authorizes the President to restrict 
exports of coal; petroleum products; natural gas; petrochemical 
feedstocks; and supplies of material or equipment determined 
necessary to maintain further exploration, production, refining 
or transportation of energy supplies, or for the construction 
or maintenance of energy facilities within the U.S.\3\ Through 
modifications to EPCA, current U.S. policy allows unrestricted 
exports of coal, petroleum products, petrochemical feedstocks, 
and related supplies and materials. Exports of natural gas are 
permitted on a case-by-case basis. Today, only crude oil 
exports are restricted under the authority provided in section 
103 of EPCA.
---------------------------------------------------------------------------
    \3\See 42 U.S.C. Sec. 6212.
---------------------------------------------------------------------------
    Under section 103 of EPCA, the President is provided with 
the authority to promulgate rules to prohibit the export of 
crude oil, with exceptions where the President determines such 
exports to be ``consistent with the national interest.''\4\ The 
Department of Commerce implements crude oil export restrictions 
and requires a license to export crude oil to all destinations, 
including Canada.\5\ The licensing procedures allow for exports 
of crude oil from Alaska's Cook inlet, exports of oil to Canada 
for consumption or use therein, exports in connection with 
refining or exchange of strategic petroleum reserve oil, 
exports of certain California heavy crude oil, exports 
consistent with certain international agreements, exports 
consistent with Presidential findings, and exports of foreign 
origin crude oil not comingled with domestic crude. While the 
U.S. is exporting more crude oil than ever before, exports 
amounted to only about four percent of total U.S. production in 
2014.\6\
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    \4\See 42 U.S.C. Sec. 6212(b)(1).
    \5\See 15 C.F.R. Sec. 754.2.
    \6\See U.S. Energy Information Administration, U.S. Exports of 
Crude Oil. U.S. exports averaged 351,000 bbl/d in 2014. See also U.S. 
Energy Information Administration, U.S. Field Production of Crude Oil. 
U.S. field production of crude oil averaged 8,719,000 bbl/d in 2014.
---------------------------------------------------------------------------

            TRENDS IN U.S. CRUDE OIL SUPPLY AND DISPOSITION

    Crude oil production in the U.S. has been growing rapidly 
in recent years. According to the U.S. Energy Information 
Administration (EIA), crude oil production exceeded 9.6 million 
barrels per day (bbl/d) in April 2015, nearly doubling the 
amount produced in 2008 and setting a record dating back to 
1971.\7\ At the same time, imports have fallen dramatically. 
Approximately twenty-seven percent of the petroleum consumed in 
the U.S. was imported, the lowest annual average since 1985. 
Last year, the U.S. exported about four million barrels per day 
of crude oil and petroleum products, resulting in net imports 
of about five million bbl/d.\8\
---------------------------------------------------------------------------
    \7\See U.S. Energy Information Administration, U.S. Field 
Production of Crude Oil. U.S. field production of crude oil averaged 
9,612,000 bbl/d in April of 2015, an amount not recorded since May of 
1971; production averaged 5,001,000 bbl/d in 2008.
    \8\See U.S. Energy Information Administration, U.S. Net Imports by 
Country. U.S. net imports of crude oil and petroleum products averaged 
5,065,000 bbl/d in 2014. See also U.S. Energy Information 
Administration, Exports. Total exports of crude oil and petroleum 
products averaged 4,176,000 bbl/d in 2014; of that, finished petroleum 
products averaged 2,717,000 bbl/d and crude oil averaged 351,000 bbl/d.
---------------------------------------------------------------------------
    With no export restrictions in place, the U.S. is the 
world's leading exporter of refined petroleum products. There 
are 137 refineries in the U.S. with a total operable capacity 
of about eighteen million barrels per day of petroleum.\9\ Each 
refinery has its own unique configuration designed to 
economically optimize the use of certain crude oil blends. Many 
of the refineries in the U.S. are optimized to process heavier 
oils than most of the shale oil produced in the U.S., although 
today, they are running at record level to accommodate the 
increasing production.\10\ However, transportation bottlenecks 
and limited refinery demand have placed downward pressure on 
domestic crude oil prices.
---------------------------------------------------------------------------
    \9\See U.S. Energy Information Administration, Number and Capacity 
of Petroleum Refineries.
    \10\ See U.S. Energy Information Administration, Refinery 
Utilization and Capacity. In 2014, an average of 90.4% of operable 
capacity at U.S. refineries was utilized; gross inputs to refineries 
averaged 16,156,000 bbl/d in the same period.
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 CHANGING DYNAMICS OF WORLD ENERGY MARKETS AND THE DOMESTIC CRUDE OIL 
                             PRICE DISCOUNT

    Historically, U.S. oil prices have been in line with 
international prices. However, in recent years, U.S. crude oil 
has sold at a substantially lower price than international 
levels, in part because of crude oil export restrictions. The 
Brent-WTI spread, the difference between the prices of Brent 
crude from the North Sea (international benchmark) and West 
Texas Intermediate crude (WTI) (domestic benchmark) is expected 
to remain around $6/bbl into the foreseeable future.\11\
---------------------------------------------------------------------------
    \11\See U.S. Energy Information Administration, Annual Energy 
Outlook 2015.
---------------------------------------------------------------------------
    These changing market dynamics were addressed in testimony 
before the Subcommittee on Energy and Power on March 3, 2015. 
For example, Mr. Scott Sheffield, Chairman and Chief Executive 
Officer of Pioneer Natural Resources Company remarked:

          Prices for U.S. crude oil continue to weaken, 
        compared to international prices. A massive buildup of 
        oil is occurring in the United States, surpassing the 
        volumes that domestic refineries are interested in 
        buying. Storage of domestic crude oil is at an 80-year 
        seasonal high--over 434 million barrels--and storage 
        capacity is running out. This is symptomatic of the 
        combination of the export ban and the limited appetite 
        for light tight oil among the only customers we can 
        access. Absent the ban, U.S. producers could be selling 
        their crude oil abroad and driving global crude oil 
        prices lower by increasing global supply.

    The substantial increase in U.S. crude oil production has 
spurred questions about how the new supplies will be absorbed. 
In his testimony on March 3, 2015, Mr. Charles Drevna, 
President of the American Fuel and Petrochemical Manufacturers 
observed that ``[r]efiners have already started to adapt to 
increased domestic production by reducing imports, increasing 
utilization, changing the crude mix, and investing in 
additional refinery changes. The U.S. has reduced crude oil 
imports from outside North America from 46 percent in 2007 to 
23 percent in 2014.''
    Mr. Drevna testified further that ``[t]he enormous growth 
in U.S. crude oil production has naturally led to questions 
about whether it is time for the U.S. to address the crude oil 
export ban. AFPM believes that the free market should drive all 
energy policy and does not oppose lifting the ban.''
    The price differential between domestic crude oil and the 
international crude oil benchmarks also was discussed in the 
Subcommittee on Energy and Power's July 9, 2015 hearing. Dr. 
David Montgomery, an economist testifying on behalf of NERA 
Economic Consulting, stated:

          The clearest evidence that restrictions on exports 
        are still limiting oil production is the price of light 
        oil produced from the Bakken and other tight formations 
        continues to be depressed below comparable crudes on 
        the world market. This type of oil needs to be 
        exported, because refineries in the U.S. were not 
        designed to use the quantities of light crude that we 
        now produce without costly changes in operation or 
        equipment.

    Dr. Montgomery testified further:

          The ``actual prices available at the wellhead'' that 
        concern EIA are still being depressed by export 
        restrictions, which as a result continue to hold down 
        U.S. production.
          The differential between prices of Bakken oil in 
        North Dakota and prices that are indicative of 
        international oil prices gives an indication of how 
        much oil export restrictions are depressing prices and 
        production. That differential would be reduced if 
        restrictions were lifted, providing the needed 
        incentive for production to increase.

        BENEFITS OF REMOVING U.S. CRUDE OIL EXPORT RESTRICTIONS

    Lifting all restrictions and allowing U.S. exports to reach 
global oil markets would strengthen the U.S. economy, improve 
the nation's energy security, and enhance national security. 
This consensus is supported by several studies from government, 
academic, and private sector experts, which were submitted for 
the record during the Subcommittee on Energy and Power's July 
9, 2015 hearing.\12\ The Subcommittee also received testimony 
with supporting examples where lifting the restrictions on 
exports was shown to be in the national interest.
---------------------------------------------------------------------------
    \12\See, e.g. U.S. Government Accountability Office, ``Crude Oil 
Export Restrictions, Studies Suggest Allowing Exports Could Reduce 
Consumer Fuel Prices,'' July 8, 2015; Energy Information 
Administration, ``What Drives U.S. Gasoline Prices,'' October, 30, 
2014; The Brookings Institution, ``Changing Markets: Economic 
Opportunities from Lifting the U.S. Ban on Crude Oil Exports,'' 
September 2014; Heritage Foundation, ``Time to Lift the Ban on Crude 
Oil Exports,'' May 15, 2014; Council on Foreign Relations, ``The Case 
for Allowing U.S. Crude Oil Exports,'' July 2013; Center for Strategic 
& International Studies, ``Delivering the Goods: Making the Most of 
North America's Evolving Oil Infrastructure,'' February 2015; Cato 
Institute; ``License to Drill: The Case for Modernizing America's Crude 
Oil and Natural Gas Export Licensing Systems,'' February 21, 2013; 
Aspen Institute, ``Lifting the Crude Oil Export Ban: The Impact on U.S. 
Manufacturing,'' October 2014; Center for New American Security, 
``Energy Rush: Shale Production and U.S. National Security,'' February 
2014; Resources for the Future, ``Lifting the Oil Export Ban: What 
Would it Mean for U.S. Gasoline Prices?'' April 11, 2014; Peterson 
Institute for International Economics, ``U.S. Policies toward Liquefied 
Natural Gas and Oil Exports: An Update,'' July 2014; ICF International, 
``The Impacts of U.S. Oil Export on Domestic Crude Production, GDP, 
Employment, Trade, and Consumer Costs,'' March 31, 2014; IHS, ``U.S. 
Crude Oil Export Decision,'' 2014 and ``Crude Oil Supply Chain,'' 2015; 
NERA Economic Consulting, ``Economic Benefits of Lifting the Crude Oil 
Export Ban,'' September 2014; Harvard Business School, ``America's 
Unconventional Opportunity,'' 2015; Rice University Baker Institute for 
Public Policy, ``To Lift or Not to Lift'' The U.S. Crude Oil Export 
Ban: Implication for Price and Energy Security,'' June 18, 2015; and 
Columbia University SIPA Center on Global Energy Policy, ``Navigating 
the U.S. Oil Export Debate,'' January 2015.
---------------------------------------------------------------------------

Economic benefits oil exports

    The Committee believes that allowing crude oil produced in 
the U.S. to reach a global customer base would provide broad 
economic benefits to the U.S. Unrestricted U.S. exports of 
crude oil would incentivize domestic production, which would 
spur economic investment and create jobs, benefitting 
communities across the country. The increased production likely 
would lower gasoline prices for consumers while improving our 
balance of trade and providing steady tax revenue to State and 
local governments.
    Reports by the U.S. Government Accountability Office (GAO) 
indicate that removing export restrictions would increase 
domestic production up to 3.3 million barrels per day on 
average from 2015 through 2035, and lower consumer fuel prices 
from 1.5-13 cents per gallon. GAO reports also suggest that 
removing restrictions is expected to increase the size of the 
economy, with implications for employment, investment, public 
revenue, and trade.\13\
---------------------------------------------------------------------------
    \13\See U.S. Government Accountability Office, ``Changing Crude Oil 
Markets: Allowing Exports Could Reduce Consumer Fuel Prices, and the 
Size of the Strategic Reserves Should Be Reexamined,'' October 20, 
2014. See also U.S. Government Accountability Office, ``Crude Oil 
Export Restrictions: Studies Suggest Allowing Exports Could Reduce 
Consumer Fuel Prices,'' July 8, 2015.
---------------------------------------------------------------------------
    EIA's examination of the implications of removing 
restrictions on U.S. crude oil exports supports the findings by 
GAO and those that emerged in the Subcommittee's hearing 
record. In a summary report following a series of studies, EIA 
stated that ``petroleum prices in the United States, including 
gasoline prices, would be either unchanged or slightly reduced 
by the removal of current restrictions on crude oil 
exports.''\14\
---------------------------------------------------------------------------
    \14\See U.S. Energy Information Administration, ``Effects of 
Removing Restrictions on U.S. Crude Oil Exports,'' September 1, 2015. 
See also ``What Drives Gasoline Prices,'' October 2014; and 
``Implications of Increasing Light Oil Production for U.S. Refining,'' 
May 2015.
---------------------------------------------------------------------------
    During the Subcommittee on Energy and Power's July 9, 2015 
hearing, Dr. David Montgomery, Senior Vice President at NERA 
Economic Consulting, summarized the effects of U.S. oil export 
restrictions in terms of the harm it imposes on the U.S. 
economy. Dr. Montgomery testified that ``[t]he NERA study found 
that across all the scenarios we examined, restrictions on oil 
exports reduce U.S. GDP, slow down job growth and recovery from 
the recession, and cause higher gasoline prices.''
    Dr. Montgomery testified further that ``I still conclude 
that restrictions on U.S. crude oil exports impose those costs 
on the U.S. economy, lead to less crude oil production in the 
U.S. and cause higher gasoline prices for consumers than there 
would be if these restriction were lifted.''

Energy security benefits of oil exports

    Lifting restrictions on U.S. crude oil exports has been 
found by GAO and others to improve the U.S. balance of trade 
and reduce reliance on imports.\15\ Witnesses during the 
Subcommittee on Energy and Power's July 7, 2015 hearing agreed. 
Dr. David Montgomery explained the relationship between crude 
export restrictions and import dependence:

    \15\See U.S. Government Accountability Office, ``Changing Crude Oil 
Markets: Allowing Exports Could Reduce Consumer Fuel Prices, and the 
Size of the Strategic Reserves Should Be Reexamined,'' October 20, 
2014.
---------------------------------------------------------------------------
          Removing restrictions on oil exports would improve 
        our balance of trade and reduce import dependence . . . 
        Our balance of trade and import dependence are 
        functions of net imports, that is the difference 
        between the amount exported and the amount imported . . 
        . Thus, unless refined product consumption increases, 
        any increase in crude production reduces net imports.

National security benefits of oil exports

    The U.S. should lead by example when it comes to energy. 
Removing restrictions on oil exports likely would result in 
increased domestic production, which would, in turn, add supply 
to the market and reduce global price volatility. U.S. oil 
exports also would allow U.S. allies in Europe and Asia to 
diversify their crude oil supply away from OPEC and Russia. 
Allowing U.S. oil exports also would strengthen America's 
economic power, furthering our global influence.
    The impact of lifting crude oil export restrictions on 
national security and energy diplomacy were examined in the 
Subcommittee on Energy and Power's March 3, 2015 hearing. For 
example, Ms. Amy Jaffe testified that ``[i]n the global 
context, hoarding energy supplies inside our borders sends the 
message to other countries that they too should be hoarding 
their energy. Such attitudes were precisely what worsened the 
economic damage to the global economy during the 1979 oil 
crisis.''
    During the Subcommittee on Energy and Power hearing on July 
9, 2015, Ambassador Petr Gandalovic, Ambassador of the Czech 
Republic to the United States, gave his nation's perspective as 
a U.S. ally:
    The larger the number of stable democracies among the world 
energy exporters, the more robust the energy security of the 
Czech Republic and the European Union will be.
    U.S. energy exports would send a strong signal to the world 
community that democracies stick together.

               EXCEPTIONS WARRANTING EXPORT RESTRICTIONS

    The Committee believes that the U.S. should adhere to a 
general policy allowing for unrestricted crude oil exports in 
order to promote the efficient exploration, production, 
storage, supply, marketing, pricing, and regulation of energy 
resources. The Committee recognizes that export restrictions 
may be warranted in special circumstances for reasons of 
national security. H.R. 702 is not intended to limit the 
authority of the President to prohibit exports in such 
circumstances.

                      STRATEGIC PETROLEUM RESERVE

    The Strategic Petroleum Reserve was authorized by EPCA to 
provide strategic and economic security against a supply 
interruption and fulfill U.S. obligations under the 
International Energy Program.\16\ The SPR is a network of 
underground storage caverns at four sites in Louisiana and 
Texas. The SPR currently holds about 695 million barrels of 
oil, representing the largest stockpile of petroleum in the 
world. The SPR holds the equivalent of 137 days of import 
protection based on 2014 net petroleum imports, while the U.S. 
commitment to the International Energy Agency is ninety days of 
import protection.
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    \16\ See 42 U.S.C. Sec. 6234
---------------------------------------------------------------------------
    The infrastructure and equipment to support a drawdown 
across the SPR is both large and complex. Given the changes in 
U.S. and international energy markets, and the fact that many 
of the SPR's facilities are reaching the end of their design 
life, the comprehensive review directed by H.R. 702 is 
warranted. The state of the SPR was a focus of the Subcommittee 
on Energy and Power's April 30, 2015 hearing. Assistant 
Secretary Christopher Smith, Department of Energy, testified in 
support of such a study, stating:

          The global environment in which [the SPR] operates 
        has changed markedly since its creation in the 1970's. 
        At that time, the mission of the SPR was to avoid 
        ``national energy supply shortages'' (i.e. a loss of 
        supply to U.S. refineries). Today, the impacts of an 
        overall supply disruption of global oil markets would 
        have the same effect on domestic petroleum prices, 
        regardless of U.S. oil import levels or whether or not 
        U.S. refineries import crude oil from disrupted 
        countries.
          In response to these changing dynamics, the 
        Department has initiated work on a comprehensive long-
        term strategic review of the SPR. The SPR will examine 
        future SPR requirements regarding the size, 
        composition, and geographic location of the Reserve; 
        and determine the impact of these requirements on 
        future SPR surface, below-ground, and distribution 
        infrastructure.

                                Hearings

    The Subcommittee on Energy and Power held a legislative 
hearing on H.R. 702 on July 9, 2015, and prior hearings 
examining crude oil export restrictions and the Strategic 
Petroleum Reserve. The hearings and witnesses included the 
following:
    On July 9, 2015, the Subcommittee held a hearing entitled 
``H.R. 702, Legislation to Prohibit Restrictions on the Export 
of Crude Oil'' and received testimony from:
           Peter Gandalovic, Ambassador to the United 
        States, Czech Republic;
           Mark Kreinbihl, Group President, The Gorman-
        Rupp Company;
           Kirk Lippold, Commander, USN (Ret.), 
        President, Lippold Strategies; and
           David Montgomery, Ph.D., Senior Vice 
        President, NERA Economic Consulting.
    On April 30, 2015, the Subcommittee on Energy and Power 
held a hearing entitled ``Strategic Petroleum Reserve 
Discussion Draft and Title IV Energy Efficiency'' and received 
testimony from:
           The Honorable Christopher A. Smith, 
        Assistant Secretary for Fossil Energy, U.S. Department 
        of Energy.
    On March 3, 2015, the Subcommittee held a hearing entitled 
``21st Century Energy Markets: How the Changing Dynamics of 
World Energy Markets Impact our Economy and Energy Security'' 
and received testimony from:
           The Honorable Adam Sieminski, Administrator, 
        U.S. Energy Information Administration;
           John Kingston, President, McGraw Hill 
        Financial Global Institute;
           Amy Jaffe, Executive Director, Energy and 
        Sustainability, University of California, Davis;
           Scott Sheffield, Chairman and Chief 
        Executive Officer, Pioneer Natural Resources;
           Charles Drevna, President, American Fuel & 
        Petrochemical Manufacturers; and
           Graeme Burnett, Senior Vice President for 
        Fuel Optimization, Delta Airlines.
    On December 11, 2014, the Subcommittee on Energy and Power 
held a hearing entitled ``The Energy Policy and Conservation 
Act of 1975: Are We Positioning America for Success in an Era 
of Energy Abundance?'' and received testimony from:
           The Honorable Adam Sieminski, Administrator, 
        U.S. Energy Information Administration;
           Lucian Pugliaresi, President, Energy Policy 
        Research Foundation, Inc.;
           Charles Ebinger, Ph.D., Senior Fellow, 
        Energy Security Initiative, The Brookings Institution; 
        and
           Deborah Gordon, Director, Energy and Climate 
        Program, Carnegie Endowment for International Peace.

                        Committee Consideration

    On September 10, 2015, the Subcommittee on Energy and Power 
met in open markup session to consider H.R. 702, and forwarded 
the bill to the full Committee, without amendment, by a voice 
vote. On September 17, 2015, Committee on Energy and Commerce 
met in open markup session and ordered H.R. 702 reported to the 
House, as amended, by a record vote of 31 yeas and 19 nays.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following reflects the record votes taken during the Committee 
consideration:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held hearings and made 
findings that are reflected in this report.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 702 is to amend the Energy and Policy 
Conservation Act to prohibit the Federal Government from 
imposing or enforcing any restriction on the export of crude 
oil.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
702, would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

       Earmark, Limited Tax Benefits, and Limited Tariff Benefits

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 702 contains no earmarks, limited tax benefits, 
or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974. At the 
time this report was filed, the estimate was not available.

                  Congressional Budget Office Estimate

    At the time this report was filed, the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 1974 
was not available.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                    Duplication of Federal Programs

    No provision of H.R. 702 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting H.R. 702 specifically 
directs to be completed no rule makings within the meaning of 5 
U.S.C. 551.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Findings

    Section 1 would include findings that the United States:
           Has enjoyed a renaissance in energy 
        production, establishing the United States as the 
        world's leading oil producer;
           Upholds a commitment to free trade and open 
        markets and has consistently opposed attempts by other 
        nations to restrict the free flow of energy; and
           Should remove all restrictions on the export 
        of crude oil, which will provide domestic economic 
        benefits, enhanced energy security, and flexibility in 
        foreign diplomacy.

Section 2. Repeal

    Section 2 would repeal section 103 of the Energy Policy and 
Conservation Act of 1975, relating to the authority of the 
President to restrict the export of coal, petroleum products, 
natural gas, or petrochemical feedstocks.

Section 3. National policy on oil export restriction

    Section 3 would provide that, notwithstanding any other 
provision of law, to promote the efficient exploration, 
production, storage, supply, marketing, pricing, and regulation 
of energy resources, including fossil fuels, no official of the 
Federal Government shall impose or enforce any restriction on 
the export of crude oil.

Section 4. Study and recommendations

    Section 4 would direct the Secretary of Energy to conduct a 
study on the appropriate size, composition, and purpose of the 
Strategic Petroleum Reserve.

Section 5. Savings clause

    Section 5 states that nothing in this Act limits the 
authority of the President under the Constitution, the 
International Emergency Economic Powers Act, the National 
Emergencies Act, or Part B of title II of the Energy Policy and 
Conservation Act to prohibit exports.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets and 
existing law in which no change is proposed is shown in roman):

ENERGY POLICY AND CONSERVATION ACT

           *       *       *       *       *       *       *



                            TABLE OF CONTENTS

     * * * * * * *

        TITLE I--MATTERS RELATED TO DOMESTIC SUPPLY AVAILABILITY

                         Part A--Domestic Supply

Sec. 101. Coal conversion.
[Sec. 103. Domestic use of energy supplies and related materials and 
          equipment.]
     * * * * * * *

        TITLE I--MATTERS RELATED TO DOMESTIC SUPPLY AVAILABILITY

Part A--Domestic Supply

           *       *       *       *       *       *       *


  [domestic use of energy supplies and related materials and equipment

  [Sec. 103. (a) The President may, by rule, under such terms 
and conditions as he determines to be appropriate and necessary 
to carry out the purposes of this Act, restrict exports of--
          [(1) coal, petroleum products, natural gas, or 
        petrochemical feedstocks, and
          [(2) supplies of materials or equipment which he 
        determines to be necessary (A) to maintain or further 
        exploration, production, refining, or transportation of 
        energy supplies, or (B) for the construction or 
        maintenance of energy facilities within the United 
        States.
  [(b)(1) The President shall exercise the authority provided 
for in subsection (a) to promulgate a rule prohibiting the 
export of crude oil and natural gas produced in the United 
States, except that the President may, pursuant to paragraph 
(2), exempt from such prohibition such crude oil or natural gas 
exports which he determines to be consistent with the national 
interest and the purposes of this Act.
  [(2) Exemptions from any rule prohibiting crude oil or 
natural gas exports shall be included in such rule or provided 
for in an amendment thereto and may be based on the purpose for 
export, class of seller or purchaser, country of destination, 
or any other reasonable classification or basis as the 
President determines to be appropriate and consistent with the 
national interest and the purposes of this Act.
  [(c) In order to implement any rule promulgated under 
subsection (a) of this section, the President may request and, 
if so, the Secretary of Commerce shall, pursuant to the 
procedures established by the Export Administration Act of 1979 
(but without regard to the phrase ``and to reduce the serious 
inflationary impact of foreign demand'' in section 3(2)(C) of 
such Act), impose such restrictions as specified in any rule 
under subsection (a) on exports of coal, petroleum products, 
natural gas, or petrochemical feedstocks, and such supplies of 
materials and equipment.
  [(d) Any finding by the President pursuant to subsection (a) 
or (b) and any action taken by the Secretary of Commerce 
pursuant thereto shall take into account the national interest 
as related to the need to leave uninterrupted or unimpaired--
          [(1) exchanges in similar quantity for convenience or 
        increased efficiency of transportation with persons or 
        the government of a foreign state,
          [(2) temporary exports for convenience or increased 
        efficiency of transportation across parts of an 
        adjacent foreign state which exports reenter the United 
        States, and
          [(3) the historical trading relations of the United 
        States with Canada and Mexico.
  [(e)(1) The provisions of subchapter II of chapter 5 of title 
5, United States Code, shall apply with respect to the 
promulgation of any rule pursuant to this section, except that 
the President may waive the requirement pertaining to the 
notice of proposed rulemaking or period for comment only if he 
finds that compliance with such requirements may seriously 
impair his ability to impose effective and timely prohibitions 
on exports.
  [(2) In the event such notice and comment period are waived 
with respect to a rule promulgated under this section, the 
President shall afford interested persons an opportunity to 
comment on any such rule at the earliest practicable date 
thereafter.
  [(3) If the President determines to request the Secretary of 
Commerce to impose specified restrictions as provided for in 
subsection (c), the enforcement and penalty provisions of the 
Export Administration Act of 1969 shall apply, in lieu of this 
Act, to any violation of such restrictions.
  [(f) The President shall submit quarterly reports to the 
Congress concerning the administration of this section and any 
findings made pursuant to subsection (a) or (b).]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    H.R. 702, a bill ``to adapt to changing crude oil market 
conditions'' was introduced in light of the growing interest in 
lifting the long-standing prohibition on the export of crude 
oil from the U.S., due to growing domestic supply and declining 
prices for producers. The extreme approach taken by this bill 
not only repeals current crude export restrictions, but also 
ensures that no export restrictions--for any reason--could be 
implemented or enforced in the future. Beyond incentivizing a 
major increase in domestic oil production, the vaguely drafted 
provisions of the bill could have potentially vast consequences 
for consumers, the environment and climate change, and national 
security.

                               BACKGROUND

    The Energy Policy and Conservation Act of 1975 (EPCA) is 
the primary statute restricting the export of domestically 
produced crude oil. EPCA was enacted in the wake of the 1973 
embargo of crude oil deliveries to the U.S. by the Organization 
of Arab Petroleum Exporting Countries (OPEC). The embargo 
resulted in rapid increases in the price of imported crude oil, 
raising concerns about the scarcity of domestic oil resources 
and the U.S. reliance on foreign oil.\1\
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    \1\Congressional Research Service, The Strategic Petroleum Reserve: 
Authorization, Operation, and Drawdown Policy (Aug. 27, 2013) (R42460) 
(online at www.crs.gov/pdfloader/R42460). The price of imported crude 
oil rose from roughly $4 per barrel in the last quarter of 1973 to an 
average price of $12.50 per barrel in 1974.
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    EPCA includes several provisions intended to mitigate the 
impact of disruptions in the supply of petroleum products on 
the U.S. The law directs the President to prohibit the export 
of crude oil and natural gas produced in the United States, 
unless doing so is determined to be in the national interest 
and consistent with the purposes of EPCA. The law also 
authorizes the Strategic Petroleum Reserve (SPR) for the 
storage of up to 1 billion barrels of petroleum products.\2\
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    \2\Congressional Research Service, The Strategic Petroleum Reserve: 
Authorization, Operation, and Drawdown Policy (Aug. 27, 2013) (R42460) 
(online at www.crs.gov/pdfloader/R42460).
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    The Department of Commerce's Bureau of Industry and 
Security (BIS) is responsible for regulating crude oil exports 
by issuing licenses to interested companies.\3\ In accordance 
with EPCA's general prohibition on crude oil exports and 
regulations issued pursuant to the 1979 Export Administration 
Act, BIS will only approve export licenses for the following 
transactions:
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    \3\Congressional Research Service, U.S. Oil Imports and Exports 
(Apr. 4, 2012) (R42465) (online at www.crs.gov/pdfloader/R42465).
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           Exports from Alaska's Cook Inlet;
           Exports to Canada for consumption or use 
        therein;
           Exports in connection with refining or 
        exchange of SPR oil;
           Exports of heavy California crude oil up to 
        an average of 25,000 barrels per day (b/d);
           Exports that are consistent with 
        international agreements;
           Exports that are consistent with findings 
        made by the President; and
           Exports of foreign-origin crude that has not 
        been commingled with U.S. crude oil.\4\
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    \4\15 CFR Sec. 754.2(b)(1).
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    BIS also considers export license applications for 
exchanges involving crude oil on a case-by-case basis. BIS 
typically approves these export licenses only if the exchange 
is temporary, or under specific exceptional circumstances.\5\
---------------------------------------------------------------------------
    \5\Id. at (b)(2).
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    Over the past several years, the number of approved 
applications and the level of crude oil exports have steadily 
increased. The number of approved crude oil license 
applications grew from 31 approved applications in FY 2008 to 
189 approved applications in FY 2014.\6\ In the first five 
months of 2015 crude exports have averaged 491,000 b/d, going 
primarily to Canada.\7\
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    \6\Congressional Research Service, U.S. Crude Oil Export Policy: 
Background and Considerations, at 10 (Dec. 31, 2014) (R43442) (online 
at www.crs.gov/pdfloader/R43442).
    \7\U.S. Energy Information Administration, Effects of Removing 
Restrictions on U.S. Crude Oil Exports (Sept. 2, 2015) (online at 
www.eia.gov/analysis/requests/crude-exports/pdf/fullreport.pdf); U.S. 
Energy Information Administration, Exports by Destination (online at 
www.eia.gov/dnav/pet/PET_MOVE_EXPC_A_EPC0_EEX_MBBLPD_M.htm).
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A. Crude oil production
    Domestic crude oil production has increased significantly 
over the past few years, reversing a decline that began in 
1986. According to the U.S. Energy Information Administration 
(EIA) U.S. crude oil production increased from 5.1 million b/d 
in 2007 to an estimated 9.4 million b/d in the first half of 
2015.\8\ EIA currently projects crude oil production to average 
9.2 million b/d in 2015, and then drop to 8.8 million b/d in 
2016.\9\ EIA also notes that tight oil development is still at 
an early stage, and that changes in U.S. crude oil production 
can be affected by technological advances which allow 
production to occur in potentially high-yielding tight 
formations.
---------------------------------------------------------------------------
    \8\U.S. Energy Information Administration, Short-Term Energy 
Outlook September 2015, at 7 (Sept. 9, 2015) (online at www.eia.gov/
forecasts/steo/pdf/steo_full.pdf).
    \9\Id. at 6.
---------------------------------------------------------------------------
    However, EIA projections suggest that the recent gains in 
tight oil production may be temporary. EIA projects that 
domestic production slows after 2015, and expects that ``after 
2020, tight oil production declines, as drilling moves into 
less productive areas.''\10\
---------------------------------------------------------------------------
    \10\U.S. Energy Information Administration, U.S. Crude Oil 
Production to 2025: Updated Projection of Crude Types, at 1 (May 29, 
2015) (online at www.eia.gov/analysis/petroleum/crudetypes/pdf/
crudetypes.pdf).
---------------------------------------------------------------------------
    In its 2015 Annual Energy Outlook Reference Case, EIA 
projects all domestic crude production to peak at 10.6 million 
b/d in 2020.\11\ If the price of oil remains well below $100 
per barrel, EIA projects domestic production to only reach 10 
million b/d in the same year.\12\ Should domestic production 
significantly expand like in the ``High Oil and Gas Resource'' 
case, production could continue to climb to a high of 16.6 
million b/d in 2040.\13\
---------------------------------------------------------------------------
    \11\U.S. Energy Information Administration, Annual Energy Outlook 
2015, at 18 (Apr. 2015) (online at www.eia.gov/forecasts/aeo/pdf/
0383(2015).pdf).
    \12\Id.
    \13\Id. at ES-4.
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B. U.S. refining capacity

    As of January 1, 2015, the United States had 140 operating 
refineries with a total crude oil processing capacity of 
roughly 18 million b/d.\14\ Each refinery has its own unique 
configuration that is generally designed to economically 
optimize the use of a certain crude oil blend and the 
production of oil products that will maximize profit 
margins.\15\ More than 50% of the refining capacity in the U.S. 
is located in the Gulf Coast region, where the refineries are 
configured to process heavy crude. Refining of light sweet 
crude is concentrated primarily on the east coast.\16\
---------------------------------------------------------------------------
    \14\U.S. Energy Information Administration, Refinery Capacity 
Report (Jun. 18, 2015) (online at www.eia.gov/petroleum/
refinerycapacity/refcap15.pdf).
    \15\Congressional Research Service, U.S. Crude Oil Export Policy: 
Background and Considerations (Dec. 31, 2014) (R43442) (online at 
www.crs.gov/pdfloader/R43442).
    \16\U.S. Energy Information Administration, This Week in Petroleum: 
Regional refinery trends continue to evolve (Jan. 7, 2015) (online at 
www.eia.gov/petroleum/weekly/archive/2015/150107/includes/
analysis_print.cfm).
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C. Imports of crude oil

    Despite increased production, the U.S. remains heavily 
dependent on imports of crude oil. In June 2015, the U.S. 
imported an average of 6.9 million b/d of crude oil.\17\ In 
2014, U.S. imports declined to an estimated 26% of the 
petroleum it consumed.\18\ This is the result of a variety of 
factors, including a rise in domestic oil production and a 
decreased demand for petroleum products--due to increased 
alternative fuel use, higher fuel efficiency standards and the 
overall economic downturn. EIA projects that net U.S. petroleum 
imports will fall to 21% of consumption in 2016, which would be 
the lowest level since 1969.\19\
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    \17\U.S. Energy Information Administration, U.S. Net Imports of 
Crude Oil (Aug. 31, 2015) (online at www.eia.gov/dnav/pet/hist/
LeafHandler.ashx?n=PET&s =MCRNTUS2&f=M).
    \18\U.S. Energy Information Administration, Monthly Energy Review 
August 2015 (Aug. 26, 2015) (online at www.eia.gov/totalenergy/data/
monthly/). In 2005, U.S. imports made up 60% of consumption.
    \19\U.S. Energy Information Administration, Short Term Energy 
Outlook June 2015 (June 9, 2015) (online at www.eia.gov/forecasts/steo/
archives/Jun15.pdf).
---------------------------------------------------------------------------
    Nearly the entire recent decline in crude oil imports has 
occurred in light sweet crude which fell roughly 85% between 
2010 and June 2015.\20\ Imports of light sweet crude to the 
U.S. Gulf Coast have been virtually eliminated.\21\
---------------------------------------------------------------------------
    \20\U.S. Energy Information Administration, Crude Imports, Imports 
of lights sweet from World to Total U.S. (accessed Sept. 8, 2015) 
(online at www.eia.gov/beta/petroleum/imports/ browser/#/
?chartindexed=1&e=201504&f=m&g=g&s=201001&v=l&vs=PET_IMPORTSWORLD-US-
G.M).
    \21\U.S. Energy Information Administration, EIA tracking tool shows 
light-sweet crude oil imports to Gulf Coast virtually eliminated (Feb. 
10, 2015) (online at www.eia.gov/todayinenergy/detail.cfm?id=19931).
---------------------------------------------------------------------------

D. Volatility in global oil market

    Starting in the second half of 2014 the price of a barrel 
of oil fell rapidly. The price of futures contracts for West 
Texas Intermediate crude oil (WTI), the main U.S. benchmark oil 
price, fell from approximately $100 per barrel in July 2014, to 
the current price of around $46 per barrel.\22\
---------------------------------------------------------------------------
    \22\U.S. Energy Information Administration, Cushing, OK Crude Oil 
Future Contract 1 (Sept. 24, 2015) (online at www.eia.gov/dnav/pet/
hist/LeafHandler.ashx?n=pet&s=rclc1&f=d).
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    Analysts have identified several factors contributing to 
the recent fall in global oil prices, including: decreased 
demand in Europe and Asia; significantly increased production 
by the world's major oil producers; and OPEC's decision to 
maintain current production levels in order to secure their 
share of the global market.\23\ In fact, a recent analysis 
estimates that oil prices could fall as low as $20 per barrel 
due to oversupply, and that U.S. production is ``the likely 
near-term source of supply adjustment'' since OPEC has 
maintained its market share by producing ``above its 30-
million-barrel-a-day quota for the past 15 months.''\24\
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    \23\Congressional Research Service, Lower Oil Prices 2015 (Jan. 6, 
2015); A Simple Guide to the Sudden Collapse in Oil Prices, Washington 
Post (Dec. 1, 2014) (online at www.washingtonpost.com/blogs/wonkblog/
wp/2014/11/28/a-simple-guide-to-the-sudden-collapse-in-oil-prices/)
    \24\How Low Can Oil Go? Goldman Says $20 a Barrel Is a Possibility, 
Bloomberg Business (Sept. 11, 2015) (online at www.bloomberg.com/news/
articles/2015-09-11/-20-oil-possible-for-goldman-as-forecasts-cut-on-
growing-glut).
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 ANALYSIS OF H.R. 702, A BILL ``TO ADAPT TO CHANGING CRUDE OIL MARKET 
                              CONDITIONS''

    The following is a brief summary and analysis of the 
legislation.

A. Summary of H.R. 702

    H.R. 702 lifts the ban on crude exports by repealing the 
Presidential authority to restrict exports of coal, petroleum 
products, natural gas, or petrochemical feedstocks under 
section 103 of Energy Policy and Conservation Act of 1975 
(EPCA).\25\ Section 3 of the bill also establishes a national 
policy on oil export restriction, preventing any official of 
the federal government from imposing or enforcing any 
restriction on the export of crude oil.\26\
---------------------------------------------------------------------------
    \25\H.R. 702, a bill to adapt to changing crude oil market 
conditions Sec. 2; Pub. L. No. 94-163 (1975).
    \26\H.R. 702 Sec. 3.
---------------------------------------------------------------------------
    Section 4 requires the Secretary of Energy to conduct a 
study and develop recommendations on the ``appropriate size, 
composition, and purpose of the Strategic Petroleum Reserve.'' 
The study and its accompanying recommendations would be due to 
the House Committee on Energy and Commerce and Senate Committee 
on Energy and Natural Resources within 120 days of 
enactment.\27\
---------------------------------------------------------------------------
    \27\Id. at Sec. 4.
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    Section 5 is a savings clause which aims to preserve some 
of the President's authority to restrict exports for reasons of 
national security. This section was added during the Full 
Committee markup by an amendment offered by Rep. Green.

B. Issues raised by the Bill

    The boom in domestic crude oil production and anticipation 
of continued growth has led to increased calls to lift the 
limitations on crude oil exports. As described in a recent 
analysis by the Center for American Progress, ``the economic, 
national security, and environmental impacts of changing long-
standing U.S. crude oil policy are neither well-documented nor 
well-understood.''\28\
---------------------------------------------------------------------------
    \28\Center for American Progress, The Environmental Impacts of 
Exporting More American Crude Oil (Aug. 21, 2015) (online at 
www.americanprogress.org/issues/green/news/2015/08/21/119756/the-
environmental-impacts-of-exporting-more-american-crude-oil/).
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            1. Economic Impacts
    The economic impact of lifting the crude export ban is an 
area of considerable uncertainty and disagreement.\29\ 
Proponents of lifting the current export restrictions, 
including major oil producers, have argued that significant 
increases in production for purposes of export would result in 
lower oil and gasoline prices.\30\ But according to a recent 
study by EIA, the anticipated price of oil and gasoline would 
be virtually unchanged by an easing of export restrictions: 
``[w]hile removing restrictions on U.S. crude oil exports 
either leaves global prices unchanged or lowers them modestly, 
global price drivers unrelated to U.S. crude oil export policy 
will affect growth in U.S. crude oil production and exports of 
crude oil and products whether or not current export 
restrictions are removed.''\31\
---------------------------------------------------------------------------
    \29\U.S. Energy Information Administration, What Drives U.S. 
Gasoline Prices? (Oct. 30, 2014) (online at www.eia.gov/analysis/
studies/gasoline/pdf/gasolinepricestudy.pdf).
    \30\ According to two commonly cited studies by IHS and ICF 
International, reductions in oil prices would be anywhere from $0.25 to 
$5 per barrel (Brent prices), and lower gasoline prices would range 
from $0.014 to $0.12 per gallon. See IHS, U.S. Crude Oil Export 
Decision: Assessing the Impact of the Export Ban and Free Trade on the 
U.S. Economy (May 29, 2014); ICF International, for the American 
Petroleum Institute, The Impacts of U.S. Crude Oil Exports on Domestic 
Crude Production, GDP, Employment, Trade, and Consumer Costs (Mar. 31, 
2014).
    \31\U.S. Energy Information Administration, Effects of Removing 
Restrictions on U.S. Crude Oil Exports, at x (Sept. 2, 2015) (online at 
www.eia.gov/analysis/requests/crude-exports/pdf/fullreport.pdf).
---------------------------------------------------------------------------
    Further, U.S. consumers have actually enjoyed significant 
discounts on gasoline thanks to the combination of increased 
domestic production, decreased fuel demand, and export 
restrictions. A recent study found that annually, consumers in 
the Midwest, Gulf Coast and East Coast have saved approximately 
$6.1 billion, $6.7 billion, and $2.9 billion respectively.\32\ 
And Barclays estimates that ``the annual economic benefit of 
crude discounts to U.S. consumers is potentially greater than 
$10.2 billion.''\33\
---------------------------------------------------------------------------
    \32\Baker & O'Brien Inc., An Analysis of the Relationship Between 
U.S. Gasoline Prices and Crude Oil Prices (Sept. 2, 2015) (online at 
crudecoalition.org/app/uploads/2015/09/Baker-OBrien-report-09-01-
2015.pdf).
    \33\Barclays Equity Research, Crude Export Ban: Impact on Gasoline 
Prices, 2015 Edition (May 13, 2015) (online at crudecoalition.org/app/
uploads/2015/02/ENERGY_CRUDE_EXPORT_BAN_1035047681.pdf).
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    Another argument commonly used in favor of lifting export 
restrictions is that an oversupply of light crude in the U.S. 
has emerged due to a mismatch between the light sweet oil being 
produced and configurations of the U.S. refining capacity, much 
of which is optimized to run heavy sour crude. Opponents of 
lifting crude export restrictions, including many independent 
refiners, have challenged this premise of U.S. market and 
refining system oversaturation. During a March 3, 2015 hearing, 
a representative of the domestic refining industry noted that 
``U.S. refiners have plenty of room to accommodate new, 
domestic supplies of light crude oil, with additional capacity 
to further grow U.S. production. The refining industry is 
constantly shifting crude slates to maximize efficiency and to 
meet consumer demand.''\34\
---------------------------------------------------------------------------
    \34\House Committee on Energy and commerce, Subcommittee on Energy 
and Power, Testimony of Charles Drevna, President of the American Fuel 
& Petrochemical Manufacturers, Hearing on 21st Century Energy Markets: 
How the Changing Dynamics of World Energy Markets Impact our Economy 
and Energy Security, 114th Cong. (Mar. 3, 2015).
---------------------------------------------------------------------------
    The primary beneficiary of a shift in crude export policy 
would likely be domestic oil producers. EIA notes that the 
easing of crude export restrictions would likely result in a 
$29.7 billion increase in gross revenue for oil producers in 
2025.\35\ Further, ``allowing more crude oil exports could 
result in $8.7 billion less investment in U.S. refining 
capacity over the next 10 years.''\36\ CBO estimates that if 
the restrictions on crude oil exports are lifted, ``the prices 
of domestic light crude oils seen by some U.S. crude oil 
producers and petroleum refiners would rise.''\37\ These price 
increases would be seen primarily by refineries already 
configured for processing light sweet crude, like those on the 
east coast.\38\
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    \35\U.S. Energy Information Administration, Effects of Removing 
Restrictions on U.S. Crude Oil Exports, at 23 (Sept. 2, 2015) (online 
at www.eia.gov/analysis/requests/crude-exports/pdf/fullreport.pdf).
    \36\Center for American Progress, The Environmental Impacts of 
Exporting More American Crude Oil (Aug. 21, 2015) (online at 
www.americanprogress.org/issues/green/news/2015/08/21/119756/the-
environmental-impacts-of-exporting-more-american-crude-oil/).
    \37\Congressional Budget Office, The Economic and Budgetary Effects 
of Producing Oil and Natural Gas From Shale (Dec. 7, 2014) (online at 
www.cbo.gov/sites/default/files/cbofiles/attachments/49815-
Effects_of_Shale_Production.pdf).
    \38\U.S. Energy Information Administration, This Week in Petroleum: 
Regional refinery trends continue to evolve (Jan. 7, 2015) (online at 
www.eia.gov/petroleum/weekly/archive/2015/150107/includes/
analysis_print.cfm).
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            2. Climate and environmental impacts
    Maximizing U.S. oil production would exacerbate climate 
change and increase the risks to the land, water and air. 
According to a recent study, approximately one third of the 
world's remaining oil reserves and half of the remaining gas 
reserves should remain untouched over the next 40 years in 
order to prevent the global average temperature from rising 
more than 2+ C.\39\ An increase in oil production, consistent 
with unrestricted crude exports, would run counter to U.S. and 
global efforts to limit greenhouse gas emissions and prevent 
catastrophic climate change.
---------------------------------------------------------------------------
    \39\The geographical distribution of fossil fuels unused when 
limiting global warming to 2+ C, Nature (Jan. 7, 2015) (online at 
www.nature.com/nature/journal/v517/n7533/full/nature14016.html).
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    Further, the drilling boom has outpaced the building of 
infrastructure necessary to control methane leaks from oil and 
gas wells leading to increased emissions of this potent 
greenhouse gas. The energy sector--including sources like 
natural gas and petroleum systems--is the largest source of 
U.S. methane emissions, accounting for 263.5 million metric 
tons of CO2 equivalent in 2013.\40\ The lack of 
infrastructure to capture the co-produced methane, combined 
with low natural gas prices, often makes it cheaper for 
industry to burn the gas rather than capture and process 
it.\41\ So an increase in oil production--for purposes of 
exportation--would likely result in significant increases in 
uncontrolled greenhouse gas emissions.
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    \40\U.S. Environmental Protection Agency, Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2013 (April 2015) (online at 
http://epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-
2015-Chapter-3-Energy.pdf).
    \41\Gas flaring permits surge in Texas, Fuelfix.com (Apr. 9, 2012) 
(online at fuelfix.com/blog/2012/04/09/gas-flaring-permits-surge-in-
texas/).
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            3. National security impacts
    Lifting the ban on crude exports would dramatically alter 
decades of U.S. policies put in place to encourage energy 
independence and security. This is particularly concerning in 
light of section 3 of the bill, which prevents any future 
restriction on the export of crude oil. As noted above, imports 
of crude oil still represent over a quarter of the nation's 
annual oil consumption.\42\ Even with continued production and 
decreased demand, EIA estimates that total imports will only 
drop to 17% in 2040 with current regulations in place.\43\ 
Lifting the ban on crude exports would hinder the predicted 
decline in imports and leave the U.S. dependent on foreign 
countries for more than a quarter of its oil for decades.
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    \42\U.S. Energy Information Administration, Monthly Energy Review 
August 2015 (Aug. 25, 2015) (online at www.eia.gov/totalenergy/data/
monthly/pdf/mer.pdf).
    \43\U.S. Energy Information Administration, Annual Energy Outlook 
2015, at ES-4 (Apr. 2015) (online at www.eia.gov/forecasts/aeo/pdf/
0383(2015).pdf).
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    Critics of the ban on crude oil exports contend that access 
to U.S. crude would decrease Europe's reliance on Russian oil 
and free them from ``coercive energy supply policies''.\44\ 
This scenario is far from guaranteed. According to CRS, ``the 
decision to export crude oil will be based on commercial and 
economic considerations, not directed and controlled by the 
federal government,'' therefore, ``predicting and quantifying 
physical crude oil flows to a particular region in the world 
under a non-restricted export scenario is difficult and is 
subject to several assumptions that may or may not be 
realized.''\45\ European refineries are currently configured to 
process Russia's medium sour crude and would need significant 
time and capital to handle American light sweet crude.\46\ East 
Asian markets are the most likely beneficiaries of American 
crude oil exports, with China set up to be the top 
purchaser.\47\
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    \44\Senate Oil Export Hearing Panelists Debate National Security 
and Limited Refinery Capacity, Breaking Energy (Mar. 30, 2015) (online 
at breakingenergy.com/2015/03/30/senate-oil-export-hearing-panelists-
debate-national-security-and-limited-refinery-capacity/).
    \45\Congressional Research Service, Potential Market Effects of 
Removing Crude Oil Export Restrictions: Eastern Europe (May 29, 2015).
    \46\Senate Committee on Foreign Relations, Hearing on American 
Energy Exports: Opportunities For U.S. Allies and U.S. National 
Security, 114th Cong. (Jun. 23, 2015).
    \47\Id.
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C. H.R. 702 Is not necessary

    As noted above, the President currently has the authority 
to permit crude oil exports under certain circumstances and 
where appropriate. In fact, the Administration has already 
taken a number of steps to do so on a gradual basis.
    In 2014, BIS issued two private rulings to allow, without 
license, the export of condensate.\48\ Until recently, 
condensate was treated exclusively as a crude oil and subject 
to export restrictions. When asked to clarify its decisions, 
BIS stated, ``lease condensate that has been processed through 
a crude oil distillation tower is not crude oil but a petroleum 
product.''\49\ Some have questioned the Commerce Department's 
process and legal rationale behind these private rulings, 
highlighting the potential easing of restrictions on crude 
exports.\50\ Despite the uncertainty surrounding the commodity 
classification of condensate, refiners have already started 
making significant investments in condensate splitters 
(distillation towers) in order to extract and export the 
resulting components without restriction.\51\ According to EIA, 
an average of 84,000 b/d of condensate was exported during the 
first five months of 2015.\52\
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    \48\Condensate is the lightest form of hydrocarbons classified as 
crude oil, and refers to very light hydrocarbons that exist as a gas 
underground but condense to a liquid after reaching the pressure and 
temperature at the earth's surface. Some tight oil deposits have very 
high condensate content, for instance as much as half of all oil 
production in the Eagle Ford Shale is believed to fall into the 
condensate category. See e.g. Oil Change International, Should It Stay 
or Should It Go? The Case Against U.S. Crude Oil Exports (Oct. 11, 
2013) (online at priceofoil.org/content/uploads/2013/10/
OCI_Stay_or_Go_FINAL.pdf); What is Condensate? Introducing America's 
New Oil Export, Wall Street Journal (June 25, 2014) (online at 
blogs.wsj.com/corporate-intelligence/2014/06/25/what-is-condensate-
introducing-americas-new-oil-export/).
    \49\U.S. Department of Commerce, Bureau of Industry and Security, 
FAQs--Crude Oil and Petroleum Products (Dec. 30, 2014) (online at 
www.bis.doc.gov/index.php/licensing/embassy-faq).
    \50\Letter to Secretary Penny Pritzker, from Senators Edward J. 
Markey and Robert Menendez (July 2, 2014) (online at 
www.markey.senate.gov/imo/media/doc/2014-06-
25_Commerce_Condensate.pdf).
    \51\U.S. Energy Information Administration, Presentation by Adam 
Sieminski on the Effects of Low Oil Prices (Feb. 12, 2015) (online at 
www.eia.gov/pressroom/presentations/sieminski_02122015.pdf); 
Congressional Research Service, U.S. Crude Oil Export Policy: 
Background and Considerations (Dec. 31, 2014) (R43442) (online at 
www.crs.gov/pdfloader/R43442).
    \52\U.S. Energy Information Administration, Effects of Removing 
Restrictions on U.S. Crude Oil Exports, at vii (Sept. 2, 2015) (online 
at www.eia.gov/analysis/requests/crude-exports/pdf/fullreport.pdf).
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    On August 14, 2015, the Obama Administration approved 
several applications for the exchange of U.S. crude oil for 
similar quantities of oil from Mexico. The approval of these 
crude oil ``swaps'' was widely interpreted to signal another 
step by the Administration toward liberalizing restrictive U.S. 
policy toward exports of domestic crude oil.\53\
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    \53\See, e.g., U.S. approves landmark crude oil export swaps with 
Mexico, Reuters (Aug. 14, 2015) (online at www.reuters.com/article/
2015/08/14/us-usa-oil-exports-exclusive-idUSKCN0QJ1RI20150814).
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    When asked about the Administration's receptivity to H.R. 
702, the White House Press Secretary replied: ``this is a 
policy decision made over at the Commerce Department, and for 
that reason we wouldn't support legislation like the one that 
has been put forward by Republicans.''\54\
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    \54\Vote Near to Repeal Ban on Oil Exports, House Leader Says, New 
York Times (Sept. 15, 2015).
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D. H.R. 702 Is an extreme approach

    H.R. 702 is a blunt instrument that not only does away with 
the President's authority to restrict exports of crude oil, but 
also prevents the federal government from imposing or enforcing 
any restriction on the export of crude oil under any other 
authority.
    Section 2 of the bill repeals the President's ability to 
restrict the export of domestic crude under section 103 of 
EPCA. But section 103 authorizes restrictions not only on crude 
oil exports, but all on exports of coal, natural gas, petroleum 
products, and petrochemical feedstocks. Repealing this section, 
as the underlying bill proposes to do, would eliminate the 
authority to restrict any of these exports even for national 
security reasons--such as an embargo.
    Further, EPCA section 103 is the central authority for the 
current exemptions to the crude oil ban. Its repeal could 
undermine the criteria for export under statutes like the 
Mineral Leasing Act, the Outer Continental Shelf Lands Act, and 
the Trans-Alaska Pipeline Authorization Act.
    Section 3 of the bill prohibits any federal official from 
imposing or enforcing any restriction on the export of crude 
oil. That would include BIS, which is tasked with issuing 
export licenses for crude under certain circumstances. Under 
section 3 of the bill, BIS could be prevented from ever denying 
an export license.
    Such heavy handed drafting also appears to impact far more 
than just the export of crude. Since the term ``restriction'' 
is undefined, any federal action that could potentially impede 
the ``efficient exploration, production, storage, supply, 
marketing, pricing, and regulation of energy resources, 
including fossil fuels'' could be considered a restriction. For 
example, EPA's proposed measures to cut methane and volatile 
organic chemical emissions from the oil and gas sector could be 
considered a restriction. So could an order to shut down a 
pipeline that the Secretary of Transportation has determined to 
be a hazard to public safety and the environment under the 
Pipeline Safety Act.
    For the reasons stated above, specifically the potentially 
vast adverse consequences this flawed legislation holds for 
consumers, the environment and climate change, and national 
security, I dissent from the views contained in the Committee's 
report.

                                                 Frank Pallone, Jr.

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