Push to export US oil gets staunch ally in Congress

With US energy production booming, Sen. Lisa Murkowski (R) of Alaska is leading the charge to overturn a decades-old ban on US crude oil exports. Murkowski met with the Obama administration this week to discuss oil condensate exports and the prospect of further loosening the oil export ban.

Now that the Commerce Department has cracked open the door to US crude oil exports in a recent ruling on condensates, advocates of oil exports are moving to push that door wide open.

In the US Senate, Lisa Murkowski (R) of Alaska is leading the charge to end the US's three-decade ban on crude oil exports. On Wednesday, she met with with Commerce Secretary Penny Pritzker to discuss the ban generally and condensates in particular.

"I am encouraged that Secretary Pritzker is engaged and that there are ongoing discussions within the department on this issue," Senator Murkowski said in a statement after their meeting. "Commerce’s recent action classifying processed condensate as a petroleum product under its existing regulations is a step in the right direction.” 

Earlier this year, the Commerce Department ruled that two companies, Enterprise Products Partners LP and Pioneer Natural Resources, could export minimally processed oil overseas rather than sending it to a US refinery. The move was a limited one and Pritzker said last week at the Aspen Ideas Festival that the two rulings do not signify a policy change – at least not yet. 

But some view the ruling as a harbinger of things to come. The approval to export the condensates, they believe, could be an incremental move toward a more complete lifting on the ban.

“Condensate exports are an easy first step on the road towards a wider lifting of the oil export ban,” Murkowski said in a statement e-mailed to the Monitor Tuesday. “Simply put, we are producing more condensate than we know what to do with, but customers overseas would be happy to take it off our hands."

With US oil production rivaling that of Saudi Arabia, critics of the ban say there is a need to revisit a policy developed in a time of scarcity. US crude oil imports declined 10.2 percent from 2012 to 2013, falling to 7.6 million barrels per day according to the US Energy Information Administration. That's the lowest level since 1996.

Still, the United States gets about a third of its oil and petroleum products from overseas. And lifting the ban, put in place after the 1970s oil shocks as an energy-security measure to protect against future supply disruptions, is controversial. Some say it would raise domestic energy prices and further expose the US economy to a turbulent global oil market.

On July 2, Sen. Edward Markey (D) of Massachusetts and Sen. Robert Menendez (D) of New Jersey sent a letter to the Commerce Department questioning the department's authority to allow for condensate export approval. Senators Markey and Menendez wrote in their joint letter that Commerce "does not appear to possess the authority to issue exemptions for condensates or some subset of condensates from the crude export restriction."

The fracking revolution, which has revitalized US production, has created a spectrum of petroleum-based products that might or might not be considered crude. Commerce weighed in on the condensate issue because it was unclear where condensates fell in the existing regulatory framework. Producers are drilling new and understudied types of oil, and Commerce must determine how old regulations and definitions map onto new and understudied products.

"The most basic question is: 'What is coming out of the ground?' " says Deborah Gordon, director of the energy and climate program at the Carnegie Endowment for International Peace, a Washington-based think tank.

"What are these oils? There’s just not good information," Ms. Gordon says in a telephone interview Tuesday.

Pritzker acknowledged as much last week, saying "technology is advancing faster than the existing regulations."

In a report released last Wednesday, Murkowski used news of the two permit approvals as a platform to urge Commerce to redefine "crude." Murkowski's report argues that the Commerce Department "should align its policy with other federal agencies, allowing condensate to be exported alongside natural gas liquids and petroleum products."

And there are indications that Pritzker may be mulling a change, though Commerce has taken no official action beyond allowing the two companies to export condensates.

"I think it's a mistake to think there isn't serious conversation going on within the administration about what we should do and figure out the right policy," Pritzker said in early July.

Still, Ms. Gordon cautions that the US should weigh possible ramifications before changing the policy to allow any and all oil exports. "That might not be the best environmental and economic solution here," Gordon said in a telephone interview Tuesday. 

For example, lifting the ban would make it more expensive to send Alberta oil sands through the proposed Keystone XL pipeline. That's because heavy oil sands have to be diluted with condensates to flow through the pipeline, and opening cheap US condensates to a global market would raise the price. 

"There are these perverse, weird fallouts for this," Gordon says. "It’s not to say we can't control anything, but there are more questions than answers right now."