Refiners & producers battling over exports

WASHINGTON — The battle between oil producers and refiners over exporting U.S. crude is heating up.

It started when four refiners blasted the government’s decision to green light some exports of minimally processed condensate, suggesting the private rulings ran afoul of the 1975 law that bars most U.S. crude from being sold overseas.

United as Consumers and Refiners United for Domestic Energy, the refiners Alon USA, PBF Energy, Monroe Energy and Philadelphia Energy Solutions asked the Commerce Department to effectively overrule the previous orders on the exportability of that ultra-light oil and send a warning to other companies that no more would be in the offing.

Read more: Refiners lobby Obama administration against condensate exports

On Monday, an association of oil producers fought back.

The Independent Petroleum Association of America blasted the CRUDE refiners group for mischaracterizing the Bureau of Industry and Security’s decisions on processed condensate in “a thinly veiled effort to limit competition.”

IPAA suggested the group’s motivation is preserving current policies that let them sell gasoline and other refined products overseas even though oil is largely barred from export.

“Its members are free to export as much petroleum products — like processed condensate — they can produce,” IPAA said. “CRUDE’s real complaint about the two BIS classification decisions thus is that potential suppliers have an alternative means to process crude oil and to sell the resulting products.”

“Ultimately, the motivation behind CRUDE’s letter to BIS should be seen for what it is – a bald attempt to position its members to take advantage of captive suppliers,” IPAA said.

In response, CRUDE then tried to cast doubt on IPAA’s motivations.

“It should surprise no one that a lobbying organization for oil producers supports crude oil exports,” said Jeff Peck, CRUDE’s lawyer in Washington. “Equally unsurprising is the group’s support for a government regulatory process that allows for more exports by letting one side advocate its position while shutting out any and all contrary views. A policy that the U.S. Congress set four decades ago should not be reversed by a thousand cuts under the cover of regulatory darkness.”

The two groups are also at odds over the technology being used to treat condensate flowing out of some wells — and whether that process is sufficient to count as having refined the oil into a new product, capable of being exported.  Language in Commerce Department export regulations defines crude oil as a liquid hydrocarbon that passes through surface separating facilities “and which has not been processed through a crude oil distillation tower.”

The independent producers association argues that some stabilization techniques involve distillation towers. When they do, IPAA says, the output products are plainly “not classified as crude oil,” under Commerce’s export regulations.

But CRUDE believes the field treatment blessed by the bureau falls short of “a true crude distillation process (that) separates out a full array of product streams.” The refiners assert that “the single purpose of stabilizing crudes and condensates is to remove very light hydrocarbons.”

Neither the Obama administration nor Congress is expected to make big changes to the crude export ban this year, especially ahead of the Nov. 4 midterm elections. But in the nation’s capital, the issue is getting more buzz as policymakers gather data and prepare for a bigger debate on the merits of those decades-old trade restrictions next year.

Related story: Ending oil export ban draws more talk on Capitol Hill

A leading refining group, the American Fuel and Petrochemical Manufacturers, has argued that any debate over oil exports should be comprehensive, including a close look at policies that limit energy companies’ ability to move crude among U.S. ports by requiring American tankers be used for the jobs.

IPAA Statement on CRUDE condensate exports letter

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