U.S. Refiners Attack Government Exemptions to Oil Export Ban

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Release: 2014-09-05 10:29

Four big U.S. oil refiners launched their first broadside on Thursday against Washington's decision to approve exports of lightly processed crude oil, urging U.S. regulators in a letter to stop issuing permits.

In the letter to the Commerce Department a lobbyist group called Consumers and Refiners United for Domestic Energy, or CRUDE, which represents the four U.S. refiners, blasted the government for allowing the shipments, saying they contravene a nearly 40-year-old ban on oil exports.

While CRUDE has been holding meetings with individual lawmakers on Capitol Hill over the last few months, the letter obtained by Reuters marked the first formal push back by refiners against lifting the export restriction.

It comes five months after the department's Bureau of Industry and Security, or BIS, gave approval to Pioneer Natural Resources and Enterprise Product Partners to export a crude called condensate that has been lightly heated to separate volatile gases.

CRUDE, whose members include Alon USA Energy Inc and PBF Energy Inc, formed this year with the goal of preventing a hasty reversal of the export ban at a time sharply rising oil production has spurred calls for a change.

Ending the ban could mean some refiners lose money as it becomes harder for them to obtain crude supplies. Several analyst reports have said lifting the restriction would lower gasoline prices for consumers because the prices are based off global fuel markets, which would get steady access to more oil.

The U.S. Energy Department is expected to release a report later this month on the effect on gasoline prices of lifting the ban.

Supporters of axing the restriction say the drilling boom will soon create a domestic oil glut that would slow down the shale revolution.

Running condensate through stabilizers does not turn the crude into a refined product, CRUDE argued, because it simply makes it fit for transportation and end-users would have to further refine it.

The government's interpretation - that stabilizers turn condensate into a refined product like gasoline, which can be exported freely - is "contrary both to the clear wording of the law and the common use of those words in the energy industry," CRUDE wrote.

An official at BIS, which issued the approvals, said his office had no comment. At least three applications to export condensate have been put on hold since June, but that could change at any time.

CRUDE also blasted the way the department conveyed the approvals in private letters to the companies.

News reports surfaced about the letters in June. But details on what kind of processing turns condensate into what the government considers a refined product remain private, a fact critics say clouds investment decisions.

A battle is brewing in Congress over the ban. Legislation to overturn it is not expected soon, although Alaskan U.S. Senator Lisa Murkowski has led a charge to do so.
A first cargo of 500,000 barrels of condensate was loaded in Texas City, Texas, in late July and is expected to reach South Korea later this month.


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