Legal loopholes in U.S. crude export regulation.

• Author: Hurst, Isaak
• Position: OIL & GAS

On June 25, 2014, in an historic moment, the US Department of Commerce gave two Texas-based companies, Pioneer Natural Resources Company and Enterprise Products Partners, permission to load four hundred thousand barrels of condensate (a type of unrefined crude oil) onto the Singapore-flagged Bw Zambesi. The tanker's destination: Busan, South Korea. The value of the cargo: $40 million. This incident was historic in that it marked the first export of unrefined American oil to Asia since 1970.

However, the above incident has ignited a flurry of legal questions about whether or not the US government has changed its position on crude oil export regulations. Indeed, recent advances in oil and gas exploration and production technology have fueled arguments about whether or not the United States should start exporting its crude oil and other fossil fuels to foreign countries. Naturally, Alaska would benefit enormously from such exports. Unfortunately, however, exporting crude oil is highly restricted and politically polarized. Let's take a closer look at the key federal laws that govern the export of US crude oil in order to answer the question: Has the United States changed its position on crude oil exports?

Background

In 1975, Congress passed the Energy Policy and Conservation Act (EPCA). EPCA was originally enacted in the aftermath of the oil embargo imposed against the United States in 1973 and 1974 by certain petroleum-producing countries--OPEC. As one Congressional House Report commented:

"The 1973-74 Arab embargo resulted in a 2.2-million-barrel-per-day reduction on imports of crude oil and petroleum products--an interruption equal to about one third of the United States' imports and [to] about 12 percent of overall petroleum supplies. The embargo was accompanied by a 7 percent decrease in real Gross National Product for the first quarter of 1974, and an increase of unemployment of approximately 425,000 persons for that quarter. Dependence of the United States on petroleum products has risen since September 1973, from 33 percent to approximately 36 percent in December 1974 ... Continuing dependence on foreign petroleum, and the economic consequences of another embargo, requires that the United States take steps to effectively reduce its vulnerability to future import interruptions."

H.R. Rep. No. 340,94th Cong., 1st Sess. 20 (1975), the above Congressional Report, vividly illustrated the serious long-term economic and national security...