Exclusive: U.S. agency gives quiet nod to light oil exports - sources

Tue Dec 30, 2014 7:09am EST
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By Valerie Volcovici

WASHINGTON (Reuters) - The main U.S. export authority is telling some oil companies that they should consider exporting a lightly processed form of crude oil called condensate without formal permission, according to people familiar with the discussions.

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: Quote) 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: Quote) 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.   Continued...

An offshore oil platform is seen in Huntington Beach, California September 28, 2014. REUTERS/Lucy Nicholson