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U.S. Refiners Want Condensate Exports Halted

Maritime Activity Reports, Inc.

September 4, 2014

A lobbyist group for four U.S. oil refiners urged the federal government on Thursday to stop issuing approvals for energy companies to ship abroad a lightly processed crude oil, saying it is prohibited by a nearly 40-year-old ban on oil exports.

Consumers and Refiners United for Domestic Energy (CRUDE), wrote to Commerce Department officials five months after the department's Bureau of Industry and Security gave approval to Pioneer Natural Resources and Enterprise Product Partners to export certain condensates.

CRUDE, whose members include Alon USA Energy Inc and PBF Energy Inc, formed this year with the goal of preventing a hasty reversal of the export ban at a time sharply rising oil production has spurred calls for a change.

Ending the ban could mean some refiners lose money as it becomes harder for them to obtain crude supplies. Supporters of lifting the restriction say the drilling boom will soon create a domestic oil glut.

Running condensate through stabilizers does not turn the crude into a refined product, CRUDE argued, because it simply makes it fit for transportation and end-users would have to further refine it. Stabilizers, increasingly built in oil fields far away from refineries, are generally cheaper and use lower temperatures than distillate towers at refineries.

The government's interpretation - that stabilizers turn condensates into a refined product like gasoline, which can be exported freely - is "contrary both to the clear wording of the law and the common use of those words in the energy industry," CRUDE wrote.

The group also blasted the way the department conveyed the approvals in private letters to the companies.

News reports surfaced about the letters in June. But details on what kind of processing turns condensate into what the government considers a refined product remain private, a fact critics say clouds investment decisions.

Any such change in regulation "should occur through a proper and open review rather than by the stealth of private letter rulings," CRUDE wrote.

The group urged Commerce to rule that stabilizers do not turn crude into refined product, which, it said, would signal there would be no further "exemptions" granted.

A battle is brewing in Congress around the ban. Legislation to overturn it is not expected soon, although Alaskan U.S. Senator Lisa Murkowski has led a charge to do so.

Democrats Robert Menendez, from New Jersey, and Edward Markey, from Massachusetts, support a continued ban. The pair wrote to Commerce in July, saying that the two recent exemptions may have violated the law.

In the House of Representatives, Republican Joe Barton from Texas said last week he supports overturning the ban, putting him at odds with some Republican colleagues.

A first cargo of 500,000 barrels of condensate was loaded in Texas City, Texas, in late July and is expected to reach South Korea later this month. (Reporting by Timothy Gardner

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