On December 30, 2014, the U.S. Department of Commerce's Bureau of Industry and Security ("BIS") issued answers to six FAQs regarding the longstanding U.S. crude export oil ban. In these FAQs, BIS stated that lease condensate that has been processed through a crude oil distillation tower is not considered "crude oil." Thus, it is not subject to the U.S. crude oil export ban, and U.S. producers can export it without first obtaining approval from BIS. This announcement marginally narrows the scope of the crude oil export ban by clarifying the ban's applicability to lease condensate, and it likely will result in increased U.S. oil exports.
Crude Oil Export Ban
After OPEC's oil embargo against the United States in response to the latter's support of Israel in the 1973 Arab-Israeli War and the resulting oil crisis, Congress passed the Energy Policy and Conservation Act ("EPCA") in 1975. The EPCA required the President to enact a rule "prohibiting the export of crude oil . . . produced in the United States" and authorized the President to enact limited exceptions. See 42 U.S.C. § 6212. True to the EPCA's mandate, the U.S. government enacted a rule (currently administered by BIS) that subjected crude oil to "short supply controls" and prohibited the export of crude oil produced in the U.S. without a license. See 15 C.F.R. § 754.2.
A key aspect of this rule is its definition of "crude oil." A company wishing to export the following crude oil products that are produced in the U.S. must first obtain a license from BIS:
"Crude oil" is defined as a mixture of hydrocarbons that existed in liquid phase in underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities and which has not been processed through a crude oil distillation tower. Included are reconstituted crude petroleum, and lease condensate and liquid hydrocarbons produced from tar sands, gilsonite, and oil shale. Drip gases are also included, but topped crude oil, residual oil, and other finished and unfinished oils are excluded.
15 C.F.R. § 754.2(a).
Ambiguity Concerning Lease Condensate
Although the text of this definition clearly classifies "lease condensate" as a crude oil product, the practical application of the definition introduces some ambiguity. As pointed out by the Congressional Research Service:
While "lease condensate" is included in the BIS crude oil definition, there is a potential contradiction within the definition. BIS defines crude oil as hydrocarbons that existed in liquid phase underground. However, condensate is generally in a gas phase underground and condenses to a liquid at atmospheric conditions. This apparent contradiction, along with other considerations, raises questions about the applicability of export restrictions to condensate. 
In addition, although the definition implies that lease condensate or another crude oil product that is processed through a crude oil distillation tower is no longer "crude oil," it does not explain how much processing is required.
As U.S. oil production boomed in recent years, producers began asking BIS for guidance on these questions and requesting approval to export condensate. Two producers – Pioneer Natural Resources and Enterprise Products Partners – successfully received rulings from BIS in 2014 that allowed them to export processed condensate to customers in Asia. In November 2014, news reports indicated that BHP Billiton planned to export processed condensate that had been processed through a distilling tower without first obtaining approval from BIS. The rationale for doing so, explained the company, was that "[t]he processed condensate that BHP Billiton plans to export is not crude oil under [BIS] regulations." 
Guidance from BIS
The FAQs published by BIS on December 30, 2014 confirmed that "lease condensate that has been processed through a crude oil distillation tower is not crude oil but a petroleum product. Petroleum products are subject to few export restrictions."  BIS also provided some guidance regarding the processing that transforms lease condensate from crude oil into a "petroleum product." According to BIS, "there must be material processing through a crude oil distillation tower." If lease condensate passes through no processing or de minimis processing in the distillation tower, BIS will continue to classify the product as crude oil. Furthermore, "[p]rocesses that utilize pressure reduction alone to separate vapors from liquid or pressure changes at a uniform temperature, such as flash drums with heater-treaters or separators, do not constitute processing through a crude oil distillation tower. Crude oil processed through such equipment remains classified as crude oil."
In addition to this guidance, BIS reminded companies that they may request a commodity classification from BIS in order to determine if their lease condensate has undergone sufficient processing in order to be considered a petroleum product. BIS also provided a non-exhaustive list of factors that it considers in making case-by-case determinations on whether lease condensate has been "processed through a crude oil distillation tower." The FAQs define these factors as:
- Whether the distillation process materially transforms the crude oil, by using heat to induce evaporation and condensation, into liquid streams that are chemically distinct from the crude oil input;
- The change in API gravity between the input of the process and the output of the process;
- The change in percentage of different types of hydrocarbons between the input and output of the process;
- Whether the streams resulting from distillation have purposes other than allowing the product to be classified as exportable petroleum products, such as use as petrochemical feedstock, diluent, and gasoline blendstock;
- Whether the distillation process utilizes temperature gradients and has significant internal structures, such as trays or packing, and differentiated output streams; and
- Whether the distillation uses towers with more mechanical complexity and heat, higher residence time, internal structures that promote condensation and better separation, and a consistent quality liquid streams (also called cuts or fractions) than equipment used to separate vapors and liquids for transportation needs.
Implications for Crude Oil Export Ban
Both opponents and supporters of the ban see this action as an initial, significant step that could lead to the eventual repeal of the crude oil export ban. Senators Edward Markey and Robert Menendez, consistent supporters of the crude oil export ban, expressed their concerns about this announcement in a letter to Secretary of Commerce Penny Pritzker.  According to Senators Markey and Menendez, BIS' decision
"weakens the oil export ban" and represents "a new interpretation" of the definition of "crude oil." Citing fears that the recent announcement will lead to higher oil prices and harm national security, Senators Markey and Menendez asked Secretary Pritzker to reverse BIS' announcement.
While the impact of BIS' announcement on the remaining crude oil export restrictions is unclear, it certainly narrows the scope of the crude oil export ban. The FAQs clarified that lease condensate, a product explicitly covered by the rule's definition of "crude oil," is not subject to the ban if it is sufficiently processed through a distillation tower. As a result, some analysts predict that U.S. exports of lease condensate could reach 1 million barrels per day by the end of 2015.