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 In conversations that may help clear the way for more overseas sales
of U.S. shale oil, the Commerce Department's Bureau of Industry and
Security (BIS) has told companies seeking clarification on the legal
status of so-called "processed condensate" that self-classification
– whereby companies export their product without any formal
authorization - could be a way forward, the people told Reuters.
An official familiar with the law said the agency's discussions did
not represent a change in policy since self-classification is
allowed under U.S. export controls and is a routine, common practice
for the majority of exports.
Yet the message, though carefully couched as an informal suggestion,
marks the first sign that the administration is becoming comfortable
about allowing companies to work around the nation’s
four-decades-old ban on exporting untreated crude oil.
Last month, BHP Billiton Ltd <BHP.AX> became the first company to
announce it would export lightly processed ultra-light U.S. oil
without explicit permission from the government. It said it was on
firm legal footing because its product was similar to what the
agency had already blessed for other companies in a landmark ruling
earlier this year.
But until recently, the government’s attitude toward the
self-classification for crude has been unclear. Officials have
repeatedly declined to comment on what has become one of the year’s
most contentious and controversial energy policy topics, beyond
saying that it is under review due to the surprising surge in U.S.
oil production.
"I would not characterize BIS’s position necessarily as one of
encouragement, but BIS has made clear that companies should not
overlook the option of self-classification," said Theodore Kassinger,
a partner at law firm O’Melveny & Myers, who had represented oil
producer Pioneer Natural Resources <PXD.N> in its dealings with the
agency.
Two other sources told Reuters that the agency has said
self-classification may be an expedient option for companies
confident their condensate has been adequately processed.
The agency did not respond to a request for comment.
PRIVATE PRECEDENT
In March, the agency told mid-stream firm Enterprise Product
Partners and Pioneer that condensate stabilized and processed
through a distillation tower met the legal criteria for exports.
Refined fuels and processed oil is not subject to the ban.
Because the earlier rulings were private, and the regulations
themselves are unclear on how much "processing" is required, other
firms have been hesitant to follow suit.
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Several dozen energy companies have applied for similar export
rulings, but the administration had put their clarification requests
on indefinite hold.
Over the summer, those companies were asked to fill out a one-page,
nine-question survey about their plans to export oil, including
basic questions about the type of oil used for feedstock, the
distillation process used and the characteristics of the output
after processing.
Getting companies to self-classify is likely preferable for the
agency than responding case-by-case to pending requests, Jacob Dweck,
a partner at the Sutherland law firm who has worked on behalf of
Enterprise and other firms, told Reuters.
"The BIS obviously is aware that self-classified exports of
processed condensate are and will be taking place. They have no
problem with such exports,” said Dweck, who has become one of the
most outspoken experts on the once-obscure energy laws that ban
crude exports.
It remains to be seen how many companies are now prepared to take
the leap and begin exporting processed condensate. With global oil
prices having halved since June, pushing U.S. crude down to nearly
$50 a barrel, exports are less alluring today than they were only a
few months ago.
Even so, political pressure to share the U.S. shale boom with the
rest of the world had been building domestically and from foreign
trade partners, such as South Korea, and is expected to become a
major energy issue in the new year.
Texas Congressman Joe Barton earlier this month proposed a bill that
would overturn the four-decade old ban and said he would continue to
press the issue in the new Republican-led Congress in 2015.
(Reporting By Valerie Volcovici; Editing by Tomasz Janowski)
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