House Democrats are open to lifting the 40-year-ban on U.S. crude-oil exports and are negotiating with Republicans in hopes of extracting trade-offs in exchange for a top Republican priority, a Democratic leadership aide said Monday.

Senate leaders from both parties were already near a deal but faced resistance from House Democrats and some Republicans. On Monday, House Democrats said they were willing to discuss lifting the trade restrictions, depending on what concessions they would get in exchange, said the aide, who discussed the private discussions on the condition of anonymity.

An agreement could drive the most important change in U.S. oil policy in more than a generation. Repealing the trade limits would allow the United States, now the world’s largest oil and gas producer, to join other nations in allowing unfettered access to its crude. It would also put unprocessed crude on the same footing as gasoline, diesel and other refined petroleum products that can be freely sold overseas. 

Oil producers including ConocoPhillips, Continental Resources Inc., Hess Corp., and Pioneer Natural Resources Co. have lobbied Congress to lift the ban, established during the energy-supply shortages of the 1970s, as the industry slashes more than 100,000 jobs to cope with a global crude glut and the lowest prices in seven years. Exports are seen helping to bump up the price of domestic West Texas Intermediate crude, which typically trades at a discount to the international benchmark, Brent.

Congress is considering lifting the export ban as part of either a package to extend expired tax provisions or a $1.1 trillion government spending bill. Current funding authority expires at the end of the day Wednesday.

House Speaker Paul Ryan of Wisconsin told fellow Republicans during a conference call Monday evening that while discussions on a deal are continuing, he is optimistic an agreement can be passed this week, said spokeswoman AshLee Strong in an e-mail.

Ryan said he anticipated that both bills would be filed Tuesday and that members would discuss it at closed-door meetings Tuesday and Wednesday, said two Republican House members who participated in the call and spoke on condition of anonymity. Filing the bills Tuesday would allow votes to be held Thursday.

Seeking Concessions

Second-ranking Senate Republican John Cornyn of Texas said Democrats are seeking a long list of concessions in exchange for the oil export measure.

"They are asking for the sun and the moon and the Aurora Borealis in exchange for it, and that is causing some problems," Cornyn said in an interview.

The approach likely would be constructed to allow Congress to pass legislation including the oil export language without House Democratic votes, the Democratic aide said. That would leave another major sticking point: whether fiscal conservative Republicans in the House will go along, especially if the package includes subsidies for renewable energy projects as Democrats are seeking.

"Asking movement conservatives to choke down permanent subsidies isn’t going to be easy. Asking conservatives to take even five years of renewable subsidies isn’t going to be easy," said Kevin Book, managing director of ClearView Energy Partners. "That primal opposition to green subsidies is likely to be much stronger in the House. Senators, after all, represent entire states, including renewable sectors."

Although the House has twice passed legislation that would lift the export restrictions on most raw unprocessed crude, the debate is tangled up in other non-energy disputes, such as a Democratic push to permanently extend the Child Tax Credit, the Earned Income Tax Credit and the college-tuition tax credit, now set to expire at the end of 2017. 

House Minority Leader Nancy Pelosi has said Democrats are wary of handing oil companies a victory, and she is seeking to ensure that any compromise benefits American families and social programs. Pelosi, a Democrat from California, said last week that Republicans rejected Democrats’ proposal to index the child tax credit to rise with inflation.

Democrats also are seeking an extension of renewable energy tax credits that are anathema to a large bloc of House Republicans who view them as wasteful subsidies propping up wind and solar power.

Deal Architecture

If the oil export provision goes into the tax extender package -- and the 188 House Democrats largely vote against that -- then House Speaker Paul Ryan would have to get enough support from his 246 Republican members to pass it on their own. About three-dozen conservative Republican members of the House Freedom Caucus haven’t signed off on the plan.

"The biggest hurdle is not so much House Democrats, because I think Pelosi is willing to look the other way," said Peter Cohn, a senior analyst at Height Securities. "The big question is how the Republicans are going to react when they see the package."

The strategy would provide political cover for Democrats at the expense of Republicans who would need to align behind the final tax package.

Republicans’ success in lifting the trade restrictions -- a major priority for the party as well as U.S. oil producers -- depends "on the architecture of the final deal," said ClearView’s Book.

Fiscal conservatives in the House who have been outspoken against extending tax credits for wind and solar power may be loath to support their permanent reauthorization or even a short-term renewal in exchange for crude exports. 

October Bill

The House in October passed a bill to lift the crude-export limits, and earlier this month it approved a similar measure as part of broader energy legislation that won the chamber’s approval. The full Senate has not acted. 

The White House threatened to veto both of the House bills, though it isn’t clear whether the Obama administration would block a broad spending bill or tax package that includes repeal of the trade restrictions. White House spokesman Josh Earnest told reporters Monday that the administration continues to oppose legislation lifting the export ban, but he wouldn’t say if President Barack Obama would veto a fiscal accord that included the change.

Advocates of repeal say American exports may actually lower the cost of domestic gasoline by reducing the price difference between U.S. and international crude prices. Some refiners, such as PBF Energy Inc. of Parsippany, New Jersey and Monroe Energy LLC, the Philadelphia-area unit of Delta Air Lines Inc., warn they may be harmed by unfettered exports.

The U.S. already permits some crude exports, primarily to Canada, and the Obama administration has taken steps within the last year to loosen the longstanding restrictions. In August, the Commerce Department agreed to license some exports to Mexico under an exchange agreement. Last December, the agency said ultra-light oil known as condensate would be considered a refined petroleum product as long as it is at least mildly processed -- allowing it to be exported without a license.

The U.S. exported about 500,000 barrels a day in October, a 22 percent increase from September, according to the latest information from the Commerce Department’s Census Bureau. The nation’s crude exports reached a record of 586,000 barrels a day in April. By contrast, Saudi Arabia, the world’s largest oil exporter, shipped abroad about 7.2 million barrels of crude a day in 2014, according to the Organization of the Petroleum Exporting Countries, or OPEC.

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