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Murkowski Presses Commerce Department to Allow Condensate Exports

U.S. Sen. Lisa Murkowski (R-AK) has renewed her call for expanding exports of crude oil condensates, saying the U.S. Commerce Department should align itself with the practices of a half-dozen other federal agencies that differentiate between crude and condensate.

By recognizing that difference, Commerce would allow condensate to be exported alongside natural gas liquids and petroleum products, according to Murkowski, the ranking Republican member of Senate Energy and Natural Resources Committee.

At least six energy-related agencies -- the Bureau of Safety and Environmental Enforcement, U.S. Geological Survey, Bureau of Ocean Energy Management, Office of Natural Resources Revenue, Bureau of Land Management, and Bureau of Indian Affairs -- routinely differentiate between crude oil and condensate in resource assessments, production levels, environmental reviews and other regulatory activity, according to a report released by Murkowski on Wednesday. Details vary among agencies, "but not the general distinction that condensate is separate from crude," the report said.

"Plant condensate, derived from natural gas processing facilities, may already be freely exported. The current 30-year-old definition of 'crude oil' used by the Commerce Department includes 'lease condensate,' which effectively extends the general prohibition on crude oil exports to also include condensate produced in the field."

The report comes in the wake of separate private rulings last month in which Commerce's Bureau of Industry and Security confirmed that two companies may export processed condensate from the Eagle Ford Shale (see Shale DailyJune 25). The rulings are narrow and apply to only the two companies, but they could be a harbinger of more to come. By confirming that Pioneer Natural Resources Co. and Enterprise Products Partners LP may export condensate under existing regulations, the Obama administration was seen by some as cracking the door to potential wider export of liquid hydrocarbons.

"Condensate exports are an easy first step on the road toward a broader lifting of the oil export ban," Murkowski said. "We are producing more condensate than the U.S. market can use, but customers overseas would be happy to purchase it. Commerce's decision to classify processed condensate as a freely exportable petroleum product is consistent with the spirit and letter of the law, but it could go further. Global markets need the certainty that reclassifying condensates would provide."

Another report issued by Murkowski earlier this year concluded that Commerce has the authority to change its regulations and allow condensate exports (see Daily GPIApril 2). Murkowski said Commerce has changed its regulations several times since the 1970s, and she derided the regulations that currently govern condensate exports as "convoluted."

Murkowski has urged the U.S. Energy Information Administration to conduct an economic analysis of lifting the U.S. crude oil export ban (see Daily GPI, March 4). She also issued a 51-page white paper, urging the Obama administration to streamline regulations on condensate exports, and called for an end to restrictions on crude oil and condensate exports (see Daily GPI, Jan. 7).

The Obama administration has been seen as edging toward relaxing crude export restrictions, and condensate has been seen by many as the first step. Earlier this year, energy lawyer Jacob Dweck, a partner with Sutherland, Asbill & Brennan LLP, said at a Houston industry conference that "a compelling showing" could be made for allowing export of ultralight U.S. crude oil and condensate because it cannot be reasonably marketed in the United states due to a supply-demand imbalance (see Shale Daily, Jan. 23).

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