Exclusive: U.S. considering options if oil export ban challenged

Wed Sep 17, 2014 8:48am EDT
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By Timothy Gardner and Valerie Volcovici

WASHINGTON (Reuters) - Obama administration officials are concerned about the legality of a ban on oil exports and have begun discussing how to deal with potential challenges from nations that want to buy U.S. crude, two sources said.

Officials in the Office of the U.S. Trade Representative and the National Security Council have each held internal talks about potential free-trade challenges from South Korea and NATO allies, two sources familiar with the matter said.

The internal discussions, which are still at a preliminary stage, are the clearest sign yet that the Obama administration is weighing options for easing the contentious export ban, a move that could dramatically alter global oil trading flows and boost revenues for U.S. producers currently limited to selling their crude domestically.

EU's top trade official, Mexico's state-owned oil company and South Korea's president have all pressed Washington to relax the ban, enacted by Congress after the 1970s Arab oil embargo. There does not appear to be an imminent challenge to the ban, however, experts and officials said.

Washington long ago justified the ban on national security concerns and the need to protect against a domestic oil shortage.

"Not a single one of those exceptions is likely to be able to be successfully defended if somebody challenged it," said Alan Dunn, a lawyer at Stewart and Stewart who represented Washington at the talks that created the World Trade Organization (WTO).

"That puts the White House in a position where it has to figure out what it's going to do."

Oil exports also could offer a foreign policy opportunity, allowing the United States to aid NATO allies, for example, as a geopolitical check against energy-rich Russia, one of the sources said.   Continued...

A crude oil train moves past the loading rack at the Eighty-Eight Oil LLC's transloading facility in Ft. Laramie, Wyoming July 15, 2014.  REUTERS/Rick Wilking