Did the US Commerce condensate export rulings mean nothing?

Two US Commerce Department rulings giving a pair of Eagle Ford players legal backing to export processed condensate have been viewed as a dramatic loosening of America’s 40-year ban on crude exports, or at least a sign that long-awaited export policy changes were near.

But what if these private letter rulings really only impact the companies that received them and nothing more?

Is it possible that the much ballyhooed Commerce decisions permitting Enterprise Product Partners and Pioneer Natural Resources to export processed lease condensate will mean relatively nothing in the overall export debate?

According the lawyer for Enterprise, the effect of these decisions has been vastly overstated. The rulings impact a very specific type of condensate, processed through very specific facilities, and really nothing more.

And the idea that these rulings could open the door to the export of hundreds of thousands of barrels of very lightly processed crude oil to Asia and other foreign markets is debatable, but ultimately wrong.

Enterprise and Pioneer have declined to comment in detail on the rulings and Commerce has said little, outside of the fact that these rulings do not represent a shift in US crude export policy.

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But at this week’s US Energy Information Administration conference in Washington, Jacob Dweck, a partner at Sutherland Asbill & Brennan who filed Enterprise’s request for the ruling, offered arguably the most detailed explanation of the decisions yet.

The effort to get this ruling was not a precedent-setting effort but a “technical and legal exercise” which merely confirmed that Enterprise’s reading of existing statute was correct.

“In short, the ruling was issued because we asked for it, and we happened to ask first,” Dweck said.

The issue centers on Commerce’s long-standing definition of crude oil, which stipulates that crude “has not been processed through a crude oil distillation tower.”

This caveat is central to the ongoing debate on the impact Commerce’s recent rulings since the agency has no definition of distillation tower and has offered no details on what technically needs to occur for crude to be deemed distilled.

Some engineers and analysts have argued that the rulings are ambiguous and could open the door for “lightly-touched” crude to be approved for export.

But Dweck asserts that the rulings only apply to lease condensate processed through condensate distillation facilities where it is fractionated into separate petroleum products. These products are not covered by US export restrictions.

In his presentation, Dweck indicated that Enterprise received its ruling because its distillation process was “substantial” and produced “separate and different streams” of petroleum products. In addition, the lease condensate which was fed into the distillation facility is “markedly different” from the processed condensate which would be exported and this different product can be sold, marketed and has potential uses, such as a petrochemical feedstock or diluent.

Dweck indicated that these three conditions–a substantial distillation process, different product streams and a different and marketable product from the condensate feedstock–are necessary to meet Commerce’s export approval.

Dweck’s views, however, set off a fiery debate (by EIA conference standards, obviously) over what needed to take place for a product to be deemed distilled and OK for export.

Finding out where the truth lies, however, may be a challenge.

The application process for export at Commerce is done largely in secret so if someone gets a different type of crude approved for export–distilled in a different way–few may know about it until it hits the market. At the same time, if a company wanting to export lightly distilled crude gets rejected, few may ever know.

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Comments

  1. The Trade, Shipping and Finance Wizard at July 18, 2014 9:45 pm

    Castleton Commodities International owned by Paul Tudor are loading a 1.15 Mbbls light-virgin-naphta cargo from Houston bound for Singapore next week.

    Dunno what is the exactly definition of oil exports for you but one thing I know is that a condensate splitter’s naptha yield is more than 45%…

     

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