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By Ari Natter
Dec. 30 — Condensate, a type of lightly processed crude oil, is a petroleum product and not subject to a law banning the export of crude oil, the Commerce Department said in a notice posted Dec. 30.
“Lease condensate that has been processed through a crude oil distillation tower is not crude oil but a petroleum product,” the department's Bureau of Industry and Security said in updated guidelines posted on its website. “Petroleum products are subject to few export restrictions.”
The update comes as the Commerce Department has allowed some companies to export condensate. It also comes amid growing calls to change a 1975 law banning the export of crude oil as U.S. oil production skyrockets because of improved drilling techniques.
While the updated guidelines make clear the export of condensate still will be considered by the bureau on a case-by-case basis, the document will likely make it easier to export the product, Charles K. Ebinger, a senior fellow in the Energy Security and Climate Initiative at the Brookings Institution, said.
“I think the effect will be they will probably be willing to take more requests for exports on a case-by-case basis and leave it to companies to prove their case,” Ebinger said in an interview. “It really doesn’t change anything but is designed to bring some clarity to new technologies,” such as hydraulic fracturing and horizontal drilling.
The Energy Policy and Conservation Act of 1975, which was put in place in the wake of the Arab oil embargo, bars crude oil from being exported except in limited cases, such as crude oil that is exported to Canada.
According to the guidelines, liquid hydrocarbons that have not been processed through a crude oil distillation tower are classified as crude oil, while liquid hydrocarbons processed through a crude oil distillation tower are classified as petroleum products.
“In order for liquid hydrocarbons to be classified as petroleum products, there must be material processing through a crude oil distillation tower,” the bureau wrote in the guidance. “If there is no processing in the distillation tower, or the processing is de minimis, the liquid hydrocarbons will not qualify as petroleum products.”
The process must materially transform the oil, by “using heat to induce evaporation and condensation, into liquid streams that are chemically distinct from the crude oil input,” and the oil’s density also must be changed by the process, according to the department posting.
Condensate, an ultralight oil that has been stripped of lighter gases to make it less volatile for transport, has been growing swiftly as more oil from the U.S. is produced from shale. Production of condensate has increased from 173 million barrels in 2008 to 311 million in 2013, according to the Energy Information Administration.
The Commerce Department approved petitions by Pioneer Natural Resources Co. and Enterprise Products Partners LP to export condensate earlier this year, and Commerce Secretary Penny Pritzker over the summer said the department is re-examining its policy on crude oil exports and will be conducting an interagency review.
The Bureau of Industry and Security did not respond to a request for comment.
Backers of lifting the ban, such as Lisa Murkowski (R-Alaska), the incoming chairwoman of the Senate Energy and Natural Resources Committee, have said allowing the export of condensates is a good first step in changing the prohibition.
Production of crude oil in the U.S. is expected to reach 9.42 million barrels a day in 2015, surpassing a previous record of 9.6 million barrels per day set in 1970, according to the EIA.
The Bureau of Industry and Security guidelines on condensates is available at http://1.usa.gov/1zugXRF.
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