Environmentalists Gain in U.S. Budget Deal Permitting Oil Export

Congress to Vote on Opening the Tap on U.S. Oil
  • Deal includes extension of renewable energy tax breaks
  • Republican riders to block Obama's power plant rules blocked

The spending deal that is set to hand the oil industry a major victory by allowing unfettered exports of U.S. crude for the first time in 40 years also is delivering some major wins for environmentalists who fought that policy.

The gains include an extension of renewable energy tax breaks, new life for a 50-year-old conservation program and allowing spending on a Green Climate Fund that aims to help developing countries deal with the effects of climate change. Republicans also agreed to stand down from some riders meant to block some of the Obama administration’s environmental regulations.

“This agreement contains important wins for the environment," said Rhea Suh, president of the Natural Resources Defense Council, in a statement. "As a result, the public will be healthier and the U.S. will continue making progress on climate change."

The tradeoff for those environmental victories: an end to the 40-year-old ban on exporting most U.S. crude oil enacted during the supply shortages of the 1970s. 

Paris Accord

Environmentalists opposed lifting the oil export ban, warning that it could boost global demand for U.S. crude and drive up the greenhouse gas emissions that result from burning it. The deal comes just days after international leaders struck a major climate accord in Paris.

In a major win for the White House, Republican leaders agreed not to actively block the Obama administration from doling out federal dollars to the United Nations’ Green Climate Fund that aims to help developing countries adapt to rising seas and other impacts of climate change. The spending bill would not prohibit the administration from reprogramming or re-purposing funding to the initiative.

That is a change from an earlier House spending bill that would have blocked spending on the Green Climate Fund.

President Barack Obama had asked Congress to dedicate $500 million toward the fund as an initial down-payment on a total $3 billion commitment by the United States. Senator James Inhofe, a Republican from Oklahoma, and Senator John Barrasso, a Republican from Wyoming, have argued that Congress should now allow U.S. taxpayer dollars to flow into the UN fund without explicit Senate approval of the international climate pact.

Thursday Vote

Mainstream environmental groups counted more wins than losses in the spending and tax deal, including the stripping away of hundreds of riders that aimed to check the Obama administration’s environmental rules. The Sierra Club said in an e-mailed statement that Democrats "extracted a high price as part of the deal."

“Despite the lifting of the crude oil export ban, Democrats secured positive measures to protect our climate and America’s working families, as well as prevent destructive, poison pill riders designed to undo essential policies which protect clean air, clean water, public health and our climate," said Sierra Club’s executive director Michael Brune, in an e-mail.

The tax and spending deal had been brokered by Congressional leaders to help smooth its passage through the Senate and House, which may vote as soon as Thursday. While Obama is opposed to stand-alone legislation lifting the export ban, the White House has stopped short of threatening to veto the provision as part of the wider spending bill.

”Huge Victory"

Representative Joe Barton, a Texas Republican who led a House drive to end the ban, said the deal "is a huge victory."

"It puts the United States in the driver’s seat of energy policy worldwide," Barton said.

Limits on U.S. oil exports would be lifted immediately, according to the bill released early Wednesday by the House Appropriations Committee. It would allow the president to impose restrictions on exports for national-security reasons and in case of a shortage.

The tax measure also would extend a $1 per gallon biodiesel tax credit for fuel blenders and tax credits for renewable energy sources -- provisions sought by Democrats in exchange for lifting the oil export ban.

Wind Developers

Wind developers would get at least five more years to claim a production tax credit that helps finance those projects, with the amount of that credit gradually scaling down.

Commercial and residential solar developers also would be able to claim an investment tax credit for at least five more years under the government-wide spending package, though it would gradually phase down from covering 30 percent of qualifying costs today to 10 percent.

"By extending the solar investment tax credit for five years with a commence construction provision and a gradual ramp down, bipartisan members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America," said Rhone Resch, president of the Solar Energy Industries Association, in an e-mailed statement.

Solar companies surged Wednesday after the deal was reached. SolarCity Corp., the biggest rooftop installer, gained as much as 28 percent, the most intraday in more than two years. SunEdison Inc., the largest renewable-energy developer, climbed as much as 24 percent and panelmaker SunPower Corp. increased as much as 18 percent. They were the top movers on the Bloomberg Intelligence Global Large Solar Energy index of 20 companies, which climbed as much as 6.7 percent, the most since July.

Conservation Fund

The 50-year-old Land and Water Conservation Fund, which expired in September, would get a three-year re-authorization, under the legislation. The fund is the principal source of money for land acquisition by four federal agencies; it also provides matching grants to help states build outdoor facilities and buy new lands and waters for recreation.

Conservationists, sportsmen, hunters and hikers cast the temporary extension as a modest win, falling short of the permanent extension and full funding they have been seeking.

Limited Scope

Land Tawney, executive director of Backcountry Hunters and Anglers, said in an e-mailed statement that the group is "disappointed by the limited scope of this measure."

Some environmentalists were deeply troubled by the deal. Jason Kowalski, policy director for the group 350.org suggested that provisions boosting renewable power do not make up for the potential carbon dioxide emissions that could result from widespread U.S. crude exports.

“Supporters of climate action in Congress need to realize that caving on the oil export ban is like a group of firefighters giving an early Christmas present to the local arsonists," Kowalski said in an e-mailed statement. "Big Oil’s business plan is to burn the planet and lifting the ban just adds fuel to the fire."

Provisions that would block endangered species protections and limit restrictions on the financing of overseas coal-fired power plants are troubling, said Lukas Ross, a climate and energy campaigner with the group Friends of the Earth.

"There are a lot of people who think this has no place in the funding process and who feel like they’ve been thrown under the bus," Ross said in a telephone interview. "Anti-environmental extremism could be in control of the House of Representatives for a long time, and we can’t keep having a process where we barter away environmental protections just to keep the government open."

Hess Corp.

John Hess, the chief executive of Hess Corp., who has pushed for lifting the export ban, said the move "will have far reaching benefits for our country."

"Overturning this antiquated policy from the 1970s would create jobs, boost economic growth, increase investment in American energy, and enhance energy security around the world," Hess said in an e-mailed statement.

Oil Falls

West Texas Intermediate crude for January delivery declined 4.1 percent to $35.83 a barrel at 12:36 p.m. on the New York Mercantile Exchange. It fell as low as $35.62. The U.S. benchmark slid below $35 a barrel Monday for the first time since February 2009. The gap between WTI and January Brent, the North Sea grade used globally, was at $1.47 after narrowing to 60 cents.

Brent for January settlement, which expires Wednesday, slid $1.15 to $37.30 a barrel on the London-based ICE Futures Europe exchange. The more-active February contract decreased $1.20 to $37.53.

The U.S. already permits some crude shipments overseas, primarily to Canada. 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.

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