Sen. Murkowski Calls for Expanding Export of Crude Oil and Condensates

Senator Urges Broader Overhaul of Commerce Department Regulations

July 9, 2014

WASHINGTON, D.C. – U.S. Sen. Lisa Murkowski, R-Alaska, today released a report urging the Commerce Department to allow for greater condensate exports, aligning itself with the practices of other federal agencies.

The report – Terms of Trade: Condensate as an Exportable Commodity – shows that at least six energy-related federal agencies routinely differentiate between crude oil and condensate in resource assessments, production levels, environmental reviews, and other regulatory activity. The Commerce Department, which classifies condensate as “crude oil,” should align its policy with other federal agencies, allowing condensate to be exported alongside natural gas liquids and petroleum products.

“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.”

The report shows that:

  • Bureau of Safety and Environmental Enforcement tracks offshore condensate production separately from crude;
  • U.S. Geological Survey assesses onshore condensate resources as natural gas liquids, distinct from crude;
  • Bureau of Ocean Energy Management assesses offshore condensate resources separately from crude;
  • Office of Natural Resources Revenue tracks federal condensate production separately from crude; and
  • Bureau of Land Management and Bureau of Indian Affairs have also distinguished between crude and condensate in regulatory activity.

When conducting environmental reviews or assessing resources and production, many of these agencies routinely employ definitions of condensate that specify API gravity ranges; describe condensate as natural gas liquids (e.g., propane, butane, etc., which can otherwise already be exported); differentiate between crude, condensate, and gas; and classify crude and condensate under more expansive terms such as “liquid hydrocarbons.” The details vary among agencies, but not the general distinction that condensate is separate from crude.

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.

Last month, the Commerce Department confirmed that it had classified certain condensate that had been processed through a distillation tower as a petroleum product, which can be exported without a license. The decision was consistent with the Export Administration Regulations.

Murkowski’s report is available on the Senate Energy and Natural Resources Committee website.

Murkowski, the senior Republican on the energy panel, released a white paper in January on the need to revamp U.S. energy exports policy. Murkowski and her staff have also published four reports in the months since, on the use of executive power to authorize crude oil exports, the Commerce Department’s authority to allow condensate exports, the use of oil exchanges to increase efficiency, and the uniqueness of the ban within the advanced world.