In a determination rendered last week, the Commerce Department provided guidance to two companies on the application of export controls to processed condensate that could mark a potential thaw in the long-standing ban on exports of crude oil. Condensate is an ultra-light oil that has seen increasing domestic development alongside the recent boom in shale oil production. However, there is little domestic demand for the product, and the United States has substantially restricted the export of domestic crude oil since the 1970s.
Early reports on the decision, which was limited to the two companies and was not made public, suggested that the Department had partially lifted the ban on crude oil exports. But as more details emerged, it became apparent that the Department had not officially altered these rules. Instead, its decision was based on a more expansive interpretation of what constitutes a “refined” petroleum product. Unlike crude oil, refined petroleum products (such as a gasoline or diesel) are eligible for export with minimal restrictions. The Department reportedly concluded that processing condensate through a stabilizer could suffice in certain circumstances to convert condensate into a refined product. Since this is a relatively unobtrusive procedure, the decision should make it easier to convert unprocessed condensate into a product eligible for export.
As noted, the decision—which reportedly took the form of a classification determination under the export control regulations—is not public and limited to the two particular energy companies. As a result, it is unclear how far it extends or the degree to which it marks a material change in oil export policy. While Commerce Department officials denied that there had been any alteration to the ban on crude oil exports, the Department also indicated it was working on industry-wide guidelines that might further clarify any new opportunities that may exist for exporting oil products. Pending such guidelines, a wave of similar classification requests involving processed condensate is likely. Two Senators have written to Commerce Secretary Pritzker questioning the decision.
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