Posted on 04/02/2014 11:31:58 AM PDT by thackney
A simple tweak by the Commerce Department would allow the U.S. to begin selling ultralight fossil fuels overseas, a significant first step in easing the 39-year-old ban on crude exports, a new report says.
The analysis released by Sen. Lisa Murkowski, R-Alaska, focuses on condensate, a natural gas liquid made up of light fuels such as propane and butane. The fuels generally flow as liquids at normal temperatures even if they’re gas underground.
Though it is chemically different than crude, condensate is swept under the oil export ban — at least as long as the light hydrocarbon is coming out of oil and gas wells. Under current regulations, condensate can be freely exported if it is produced at gas processing plants.
Murkowski’s report argues that it’s time for the Commerce Department to end the dichotomy by rewriting its 1985 definition for “crude oil” so condensate isn’t covered.
“The Department of Commerce retains the authority to allow condensate exports by modernizing its regulations, as it has done repeatedly since the 1970s,” the report says. “For example, the definition of crude oil could simply be updated, aligning the regulatory architecture with the new supply mix made possible by technological advancements.”
The change would help ensure a broader market for the estimated 1 million barrels of light condensate produced each day in the U.S. Most U.S. refineries are geared toward heavier crudes. And while some oil companies are steering their lease condensate to Canada’s oil sands, where it can be blended with the dense hydrocarbon bitumen for pipeline transport, there’s a limit to how much of it is needed as a diluent.
Crude export debate
Oil producers and the American Petroleum Institute have argued that exporting crude would help relieve supply bottlenecks and inefficiencies, allowing companies to sell more valuable light sweet U.S. crude overseas, while importing cheaper, heavier alternatives for refining.
Murkowski is the leading champion of the change on Capitol Hill, though Rep. Michael McCaul, R-Texas, introduced legislation Tuesday that would generally lift the crude export ban in most cases but allow it to be reinstated during national emergencies.
Some refiners are eager to preserve the current trade policy, which allows them to freely export gasoline, diesel and other petroleum products, even as lower priced American crude is widely blocked from escaping U.S. borders.
A middle ground
Altering the approach on condensate could be a kind of middle ground — even if it paves the way for bigger changes down the road. Since neither the Obama administration nor Congress is expected to make broad, wholesale changes to the crude export ban anytime soon, allowing foreign sales of lease condensate would help relieve some of the pressure.
Such a discrete step also would have political advantages — allowing the administration to make a smaller change with significant real-world meaning for oil producers, without the baggage of upending a crude oil export ban long cast as an essential safeguard for American consumers.
The government has taken similar steps before. When California oil production was shut in during the late 1970s, the Commerce Department temporarily allowed residual fuel oil to be sold overseas. And when domestic butane stockpiles climbed in 1978, the Commerce Department temporarily relaxed exports of the fuel.
Murkowski is expected to deliver her argument for easing the ban in testimony before a House Foreign Affairs subcommittee on Wednesday afternoon. HollyFrontier Corp. CEO Michael Jennings and Kenneth Medlock, director of the Center for Energy Studies at the James A. Baker III Institute for Public Policy, are also slated to appear.
Thanks thackney.
Obama needs to take the federal government controls off the American oil industry and lift the export ban entirely.
Each and every day Obama permits the ban to stay in place, American oil companies and industry workers are hurt by these regulations.
When Congress in the 1970s made it illegal to export domestically produced crude oil without a license, the goal of the legislation was to conserve domestic oil reserves and discourage foreign imports. In reality, the export ban did not help accomplish either of these objectives. It has now become more of a hindrance than a help. The opaqueness of the export approval process discourages would-be exporters from applying for licenses. Companies see a lack of legal clarity and fear inconsistent regulation. They are hesitant to incur negative publicity on Capitol Hill when they doubt they will be granted approval.
Two important elements of the U.S. oil export equation have changed in the past few years. First, exporting U.S. crude oil has become economically attractive to the energy industry. Crude oil exports have grown from next to nothing in 2007 to around one hundred thousand barrels per day in March 2013, all of which went to Canada. Second, the United States has become one of the world’s largest gross exporters of refined oil products, such as gasoline and diesel. Unlike crude oil, which is unprocessed, oil that has been refined can be exported freely under U.S. law. Roughly three million barrels per day of refined oil products were exported in December 2012, a major increase from prior decades. Until 2011, the United States had not been a consistent net exporter of oil products since 1949.
Restrictions on crude oil exports are already beginning to undermine the efficiency of the U.S. oil economy. Much of the country’s rapidly growing production of light crude oil, including lease condensates (i.e., ultra-light oil), comes from either areas where refiners are not interested in or able to process it, given that many U.S. refineries are configured to run lower-quality crude oil, or in parts of the country with inadequate transportation infrastructure. With few viable domestic buyers, producers are forced to choose between leaving oil in the ground and pumping it at depressed prices. These artificially low prices slow additional U.S. crude oil production. New refineries and pipelines currently under construction will help remedy some of these market distortions over time, but a simpler, more cost-effective solution would include allowing U.S. crude to be exported. Doing so will not raise gasoline prices. Prices at the pump will continue to be determined by the global market, regardless of whether the United States exports crude oil. Were the ban overturned today, crude exports would immediately rise by several billion dollars a year, according to industry executives, likely surpassing five hundred thousand barrels per day by 2017.
http://www.cfr.org/oil/case-allowing-us-crude-oil-exports/p31005
Sounds like Billy Carter's brother Jimmy.
Get propane back down to $1 a gal and we can talk about exports, until then they can KMA!
Because only the demand side curve of economics has any real meaning < /sarc>
The law goes back to 1975.
It has a “rich” history.
The primary laws prohibiting crude exports are the Mineral Leasing Act of 1920, the Energy Policy and Conservation Act of 1975, and the Export Administration Act of 1979.
As an aside, yes, I have been in cold enough weather for propane and butane to flow like liquid at atmospheric pressures, but that (thankfully) was temporary.
Propane got as high as $8 gal around here last winter, while it was being exported out of Texas.
That is BS!
Yeah, that price spike had to been caused by exports and not several problems in a region happening at the same time.
Oh wait:
Winter 2013-14 Propane Updates
http://www.freerepublic.com/focus/f-news/3120788/posts
It was not a case of not enough propane in the US. Total Production exceed Total Domestic Demand.
Propane Spot Price: Mt Belvieu Tx is $1.50; Midwest is $5
http://www.freerepublic.com/focus/f-news/3116869/posts
January 28, 2014
Same way they do today.
But it isn’t using DOT 111 rail cars.
Whatever the reason was, a ban on exporting it until it was fixed would trigger a focused effort to correcting it ASAP.
When those that support pipelines, refineries, and drilling get screwed over their support for the oil industry goes way down.
The industry should be using the Midwest propane shortage last winter to lobby Congress for changes to regulations so that the problem of shortages can be fixed.
I doubt the Rats would have the political will to block the changes in an election year. Use the propane crisis to get something passed while it is fresh in the minds of voters!
because we don’t have enough oil to provide for ourselves. Should we export food when we can not even feed ourselves?
this is all about globalizing the crude oil/gasoline market. Once the US market is globalized we here in the USA will pay the global price for gas or about 10 bucks a gallon for gasoline.
That seems to be the plan.
Yes it is the plan, sell to the highest bidder no matter where they are located and screw the US consumer.
because we don’t have enough...
Drill here, drill now and stop putting alcohol in the fuel and we would still have enough fuel to power several countries.
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