COP ConocoPhillips

WASHINGTON—The House voted Friday to lift the 40-year-old ban on oil exports, fueling a clash with President Barack Obama, giving the oil industry one of its top congressional priorities and shifting the focus to the Senate, where the measure faces steep hurdles to passage.

The House voted 261-159 to lift the ban that Congress first put in place after the 1970s Arab oil embargo that sent domestic gasoline prices skyrocketing.

More than a dozen oil companies, including Continental Resources Inc. ConocoPhillips, and Encana Corp., have been pressing the issue with Congress for more than a year.

They argue that allowing oil exports would eliminate market distortions, create jobs and stimulate more U.S. petroleum production, which has increased 80% since 2008 and has helped drive down the global price of oil to half of what it was in summer 2014.

U.S. oil exports to most foreign countries and in most instances are banned under the 1970s-era policy. Lifting the ban would help companies fetch a higher price on the global oil market.

"An extra dollar or two for the price of our product today is very important because our margins are incredibly squeezed," said Doug Suttles, CEO of Encana, a Calgary, Alberta-based company that pumps oil and gas in the U.S.

The White House has threatened to veto the bill, saying in a statement Wednesday that the it "is not needed at this time" in part because some studies project the impact of lifting the ban to be limited, Energy Secretary Ernest Moniz told Congress earlier this week. The White House also said instead that Congress should "be focusing its efforts on supporting our transition to a low-carbon economy."

The measure's prospects in the Senate are less certain, in part because of the White House's opposition. Two Senate committees have approved similar measures lifting the ban, but few Senate Democrats appear willing to engage on the issue, and Senate Majority Leader Mitch McConnell (R., Ky.) hasn't shown a willingness to move similar legislation to the floor.

The House vote on Friday, and the broader debate in Congress about changing the decades-old policy, could also have an impact on markets, already experiencing volatility fueled by a glut of supply and weaker-than-expected demand in Asia.

Due in part to a U.S. oil boom over the last decade, the monthly average price for a gallon of gasoline in September—$2.46—is the lowest such average for that month since 2004, according to government data.

Some refineries with business primarily in the U.S. and consumer groups oppose oil exports, saying they could raise gasoline prices for U.S. drivers. Many environmental groups also oppose lifting the ban, arguing that doing so could further stimulate production of fossil fuels.

"Lifting the oil export ban is a giveaway to the oil industry that would undermine the progress our country is making to use more clean energy and fight climate change," said Franz Matzner, director of the Natural Resources Defense Council's anti-oil initiative.

Exporting oil was unthinkable to most energy industry experts until the past couple of years as U.S. production has increased. Support on Capitol Hill also has been growing faster than many observers thought, given concern about how exporting oil could, or could be perceived to, raise gas prices.

The U.S. Energy Information Administration in September found that exporting oil would actually not increase gas prices and could even help lower them.

In response to industry requests, the Obama administration has taken some initial steps in the past year to ease the growing glut of domestically produced oil. Last year, the Commerce Department began allowing companies to export ultralight oil after minimal processing, and in August it said it would begin allowing companies to exchange U.S. crude with Mexico.

The U.S. is also already exporting more than a half-million barrels of crude a day to Canada, the biggest exemption under the ban. That is 14 times as much as in 2007, but still just roughly 5% of U.S. oil produced every day.

Backers of the effort in the House, including Speaker John Boehner (R., Ohio), and House Energy and Commerce Committee Chairman Fred Upton (R., Mich.), added a provision to the bill late in the legislative process authorizing the Defense Department to boost payments to the shipping industry as a way to entice "yes" votes from Democrats who would be more likely to listen to shipping companies and their unions than the oil industry.

During floor debate on the bill, the House rejected an amendment that would have stripped the maritime provision from the bill and adopted two others, one that would prohibit U.S. oil exports to Iran and another that would prohibit the exports to any state sponsors of terror.

Write to Amy Harder at amy.harder@wsj.com

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(END) Dow Jones Newswires

October 09, 2015 13:55 ET (17:55 GMT)

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