House Republicans are throwing up new roadblocks to a Russia and Iran sanctions bill over concerns from the energy industry that a provision could block U.S. companies from lucrative foreign oil deals.
A section of the legislation would prevent U.S. companies from doing business anywhere in the world with Russian interests, causing consternation in the capital-intensive energy industry where foreign partnerships are common. That prompted Republicans to push for a fix to the version passed by the Senate before the bill moves forward in the House.
“You’re empowering Russia more based upon the way they wrote it, that you can give Russia greater energy power over Europe and everywhere else,” House Majority Leader Kevin McCarthy, a Republican from California, said in an interview Wednesday evening. “So yes, we do need to change that.”
Republicans previously said the measure was stalled over complaints from Democrats that changes to the bill would weaken lawmakers’ authority to block the Trump administration from lifting sanctions on Russia. The delay gave time for companies to scale up their lobbying on the energy provision, even as lawmakers from both parties are pushing hard for new constraints on President Donald Trump’s ability to ease penalties on the Russian government.
This new fight comes amid controversy over the release of emails related to Donald Trump Jr. accepting a meeting last year with a Russian lawyer who he was told had information from the Russian government that could prove damaging to Democratic presidential candidate Hillary Clinton.
The sanctions measure, S. 722, passed the Senate last month in an overwhelming 98-2 vote, in an effort to punish Iran and get tough on Russia for its efforts to interfere in the U.S. election.
As the measure stalled in the House, several House Republicans said they have been hearing from energy companies with complaints about a provision that would allow the president to penalize someone who invests in or helps build Russian energy export pipelines.
Representative Bill Flores, a Republican from Texas, said he’s been approached by “five or six of the majors” based in his state. The energy companies have told him they worry the bill as it stands is overly broad.
“You could restrict the sanctions of those activities within the borders of Russia, that might be a quick fix and also the national security carve out as well,” Flores said when asked how the sanctions bill might be changed to address those concerns. “Most of us are fine with having sanctions on U.S. interests operating inside Russia, with Russian companies, but then going outside of Russia is too broad.”
House Rules Chairman Pete Sessions said the Senate passed the bill before lawmakers understood its potential consequences and that whoever wrote the energy provisions wasn’t familiar with the industry.
“I appreciate my friends in the Senate but this was rushed through,” the Texas Republican said in an interview late Wednesday.
The possibility of the pipeline curbs sent a jolt through the traditional oil industry, as well as a broader group of related companies, including equipment providers, tubular piping manufacturers and oilfield services companies, that worry they wouldn’t be able to supply projects in which sanctioned Russian companies are involved.
Current sanctions already block oil and gas companies from doing deals in Russia. But the Senate-passed bill would extend the reach of those prohibitions, barring U.S. companies from partnering with sanctioned Russian firms to develop energy projects anywhere around the world.
Richard Sawaya, who studies the impact of sanctions for the Washington-based National Foreign Trade Council, estimated the provision may mean U.S. oil and gas firms could be shut out of as much as $100 billion worth of projects over 10 years. Also at risk may be high-earning jobs and lost investment income, he said. His group advocates against unilateral U.S. sanctions in most cases.
“In any place where Russian companies have a position — U.S. companies couldn’t be there,” Sawaya said. “It loses sight of the shape of the forest.”
Democrats complain that Republicans are stalling, pointing to remarks from White House legislative affairs director Marc Short that the administration is opposed to the bill’s provisions that would allow Congress to block some sanctions-related decisions by the president.
Three House Democrats, Minority leader Nancy Pelosi, Minority Whip Steny Hoyer of Maryland and Representative Eliot Engel of New York, ranking member of the Foreign Affairs Committee, introduced their own measure, which is identical to the Senate version, in an effort to circumvent GOP procedural objections. Republican leaders said that certain revenue-related provisions in the bill meant that it had to originate in the House.
The fight over the energy provision, however, threatens to delay the bill further. The oil industry is warning of potentially widespread consequences — some unintended — that could put U.S. companies at a disadvantage globally, even when they aren’t actively collaborating with sanctioned Russian firms.
“This has far-reaching impacts to a variety of companies and industries,” said Jack Gerard, president of the American Petroleum Institute. “It has the potential to penalize U.S. interests and advantage Russia.”
That broader approach could imperil at least one of Exxon Mobil Corp.’s major exploration projects, a joint venture with Rosneft that’s producing oil and gas in waters off Russia’s eastern shore. Oil fields there are estimated to contain 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas. The project, called Sakhalin 1, doesn’t fall under current U.S. sanctions that bar U.S. companies from producing oil in Russian deep-water, Arctic or shale areas.
If the legislation passes without changes, Exxon Mobil would likely have to obtain a special waiver from the U.S. government to maintain production at the site, slated to stretch until 2050.
Industry officials warn that the Senate-passed bill could also jeopardize oil and gas projects far from Russia that have only tangential ties to the country. For instance, they say it could preclude U.S. oil companies from proceeding with offshore projects where sanctioned Russian companies hold neighboring leases because there may be pooled collaboration on pipelines and other infrastructure to support the developments.
“We will continue to comply with all applicable laws, including trade controls and sanctions regulations,” said Royal Dutch Shell spokesman Curtis Smith. “We believe that this bill, if endorsed, would be contrary to the objective of providing international markets with reliable access to energy at competitive prices.”
The fear is that Russian companies may invest in leases located next to U.S. energy projects as a way to help edge out their American competitors.
Oil industry lobbyists are circulating alternative language on Capitol Hill aimed at addressing these concerns and others. Most of the changes aim to narrow the legislation’s reach. They are also seeking a 180-day ramp-up period to ensure companies have adequate time to comply, a narrowed definition of affected pipelines to zero in on oil export pipelines and to change the timeline for prohibitions on dealings in new debt to avoid a jolt to oil and gas trading.
The Senate-passed legislation would also place new penalties on Iran over its ballistic missile program. The bill directs the president to impose sanctions on any entity that knowingly contributes to Iran’s ballistic missile program or other programs to develop vehicles to deliver weapons of mass destruction. Those who are sanctioned would have their assets within U.S. jurisdiction frozen and would be barred from entering the country.