	Background

In the wake of the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) embargo of oil shipments to the United States, and during an era of U.S. oil price controls, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. For nearly four decades, total repeal of the crude oil export prohibition was not a major policy issue since U.S. oil production was declining and import volumes were increasing. From January 2010 to April 2015 U.S. crude oil production increased by approximately 4.3 million barrels per day, a nearly 80% increase. During certain periods, these discounts were as large as $30 per barrel (see Figure 1 ). On December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 ( H.R. 2029 ), which was signed by the President and became P.L. 114-113 . The law includes a provision that repeals the EPCA crude oil export prohibition. 114-113 also included provisions that addressed two topics that were part of the export restriction debate: (1) maritime transportation of crude oil from the United States to foreign destinations, and (2) the effects of policy changes on independent oil refiners. 114-113 repeals Section 103 of the Energy Policy and Conservation Act (EPCA; P.L. 94-163 ), which provided the President authority to restrict the export of various hydrocarbon materials and directed the President to "promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States." P.L. However, the law does include a "Savings Clause" and exceptions that either maintain or provide the President with authority to restrict crude oil exports under certain circumstances such as national emergencies or demonstrable effects to prices and supply that might result from allowing crude oil exports. Potential Crude Oil Export Volumes

During the crude oil export debate, and since enactment of P.L. Analytical studies published during the debate about the effects of removing crude oil export restrictions estimated that exports may range from 0 to approximately 2 million barrels per day. 114-113 . Second, and perhaps more important for all U.S. oil producers, domestic/international price differentials will likely be moderated by the ability to export crude oil on an unrestricted basis. However, U.S. refiners may not be able to financially benefit from large price differentials in the future should crude oil exports have the anticipated effect of eliminating or limiting the domestic/international price differential. In a 2015 hearing, Paul Jaenichen, head of the U.S. Maritime Administration (MARAD), said that the lack of cargo has contributed to a decline in the number of ships participating in the Maritime Security Program (MSP), under which vessels receive operating subsidies in return for being made available to the Department of Defense in time of war or national emergency. P.L. The annual subsidy increases from $3.1 million per ship to around $5 million per ship through FY2020 and then $5.2 million per ship in 2021. Enhanced Section 199 Tax Deduction for Independent Refiners

Division P, Section 305 of P.L. Refinery advocates presented two oil transportation-related concerns that would result in a competitive disadvantage should crude oil export restrictions be removed. 114-113 changed how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief. The change to Section 199 in P.L. Overall, the enhanced deduction for independent refiners has the potential to reduce tax liability by up to 1.575% of oil transportation costs. 114-113 have several notable limitations. 114-113 . Additionally, for independent refiners that are able to claim the enhanced deduction, the reduction in tax liability will generally be worth, at most, 1.575% of oil transportation costs.
On December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 (H.R. 2029), which was signed by the President and became P.L. 114-113. Included in P.L. 114-113 is a provision that repeals Section 103 of the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163), which directs the President to promulgate a rule prohibiting crude oil exports. For nearly four decades, repeal of EPCA was generally not a policy issue since oil production was declining and imports were rising. However, increasing U.S. light oil production starting in the 2010/2011 timeframe, projected production increases, and domestic-to-international oil price differentials that were as large as $30 per barrel, motivated many companies and trade organizations to advocate removing the EPCA crude oil export prohibition. P.L. 114-113 also includes a "savings clause" and a list of exceptions that maintain and provide the President with authority to restrict exports under certain circumstances.
Enactment of P.L. 114-113 allows U.S. crude oil to be marketed and sold to international buyers and concludes a nearly two-year debate about the varied and multi-dimensional considerations associated with allowing the export of crude oil produced in the United States. Some oil producers may benefit from this policy change, when market conditions warrant, by potentially selling crude oil for a higher price to global buyers. Perhaps more important for all U.S. oil producers is that allowing crude oil exports may limit the domestic/international price differential in the future. Studies published during the debate estimated that crude oil exports might range between 0 and 2 million barrels per day, reflecting the uncertainty of future market conditions that might motivate exports. Exactly how much crude oil will be exported will depend on oil price differentials, which had narrowed to less than $1 per barrel in January 2016.
In addition to repealing EPCA Section 103, P.L. 114-113 also includes provisions that address two considerations discussed during the crude oil export debate. First, owners of U.S. flag ships advocated that crude oil exporters be required to use such ships for overseas transport. While this requirement was not included in P.L. 114-113, the law does include a provision that authorizes increasing the annual subsidy paid to U.S. flag cargo ships participating in the Maritime Security Program (MSP), which provides an operating subsidy in exchange for participating ships being subject to Department of Defense acquisition during times of war. The operating subsidy for each participating ship was increased from $3.1 million to around $5 million per year thru 2021.
Second, independent U.S. refiners were generally opposed to allowing unrestricted crude oil exports as many of them were benefiting from price discounts that might either be eliminated or limited as a result of removing export restrictions. Some refiners expressed concern that the cost of waterborne crude shipments from the Gulf coast may result in a competitive disadvantage and that the value of investments made in crude-by-rail infrastructure may be adversely affected should crude oil export restrictions be removed. P.L. 114-113 modified the Section 199 tax deduction for independent refiners by changing how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief. Overall, the enhanced deduction for independent refiners may have fairly modest effects. For most independent refiners that are able to claim the enhanced deduction, the change has the potential to reduce tax liability by up to 1.575% of oil-related transportation costs.