License to Drill: The Case for Modernizing America's Crude Oil and Natural Gas Export Licensing Systems

Abstract

Revolutionary extraction technologies have helped increase the supply of fossil fuels in the United States, driving down prices, spurring economic activity, and potentially reversing the longtime status of the United States as a net energy importer to a significant exporter. Impeding that transition are outdated federal regulations — in particular discretionary export licensing systems for natural gas and crude oil — that restrict exports, distort domestic energy prices, deter investment, and encourage graft. They also subvert some of the Obama administration stated policy objectives and could run afoul of U.S. international trade obligations. Despite the potential economic windfall, opposition to exporting natural gas and crude oil has materialized among certain domestic consuming industries and environmental groups, causing the administration to delay any approvals on pending export-license applications. But there are compelling reasons to approve those applications and to overhaul our disjointed, anachronistic, export license systems to properly reflect the new energy landscape. This paper describes those reasons and provides a basic roadmap for reform.

Keywords: US natural gas reserves, US oil exports, natural gas exports, United States energy policy, BIS regulations, international trade, American federal government regulations, export licensing, hydraulic fracturing, fracking

JEL Classification: N70, O13, Q40, Q48