Oil export ban can be lifted piecemeal, analysis says

HOUSTON — President Barack Obama should follow the lead of previous commanders-in-chief by creating exceptions to the United States’ 39-year-old ban on exporting American crude, Sen. Lisa Murkowski argued Monday.

The once-absolute trade restrictions, first imposed in the wake of the 1973 oil embargo, have been softened over time, as presidents created exceptions for exports to Canada, oil flowing from Alaska and Californian crude, according to a 51-page white paper Murkowski released Monday.

The document, which traces the history of six separate presidential carve-outs to the oil export ban, revives the debate over the issue ahead of Murkowski’s planned Monday afternoon speech to the IHS CERAweek energy summit in Houston.

Read more: US oil glut stirs up political dilemma

And it helps make the case that the Obama administration can lift the crude export ban in a piecemeal fashion, perhaps beginning with small exceptions for the estimated 1 million barrels per day of lease condensates that flow along with crude out of U.S. oil wells.

That could relieve some of the pressure to find domestic markets for the lease condensate that flows out of the Eagle Ford formation and is blocked from foreign sales under the 1975 export ban, even though it is technically too light to be considered crude according to industry standards.

Such a discrete change also would also have big political advantages, allowing the administration to circumvent a big legislative battle on Capitol Hill and make a meaningful move to relax the ban without throwing it out entirely.

“Presidents from both political parties have found limited exports to be in the national interest on multiple occasions,” Murkowski said in her analysis. “The historical record is clear that the executive branch retains the authority to permit crude oil exports under certain conditions.”

Former President Ronald Reagan made the first major change to the  export ban in 1981, when he removed limits for gasoline, diesel and other refined petroleum products, but former Presidents Bill Clinton and George H.W. Bush directed subsequent exceptions.

Not everyone agrees with Murkowski’s analysis.

Sens. Ed Markey, D-Mass., and Robert Menendez, D-N.J., issued their own analysis in January concluding that the Commerce Department does not have “broad authority…to independently allow for exports.”

Related story: Battle lines drawn at crude export hearing

In each of the previous cases, presidents determined specific classes of exports were justified by the “national interest,” a standard written into the 1975 law.

Murkowski previously has urged Obama’s Commerce Department to exploit another provision in the export ban and conclude that the light, sweet crude flowing out of American fields cannot “reasonably be marketed” because many U.S. refiners are geared toward processing heavier varieties.

Although some U.S.-owned refiners are adapting facilities to take advantage of domestic light, sweet crude supplies, other foreign-owned facilities have few incentives to make the switch. For instance, Citgo — a U.S. subsidiary of Venezuela’s Petroleos de Venezuela– is likely to continue processing heavy crudes from that nation.