UPDATE 1-U.S. Commerce Dept seeks details, not delay, on oil export requests -sources

Tue Jul 29, 2014 9:23pm EDT

(Adds comment from Commerce Undersecretary Eric Hirschhorn in fourth paragraph)

By Valerie Volcovici

WASHINGTON, July 29 (Reuters) - The U.S. Commerce Department is holding requests for permission to export lightly processed crude oil for longer than the normal two-week period so it can gather more information, according to two sources familiar with the matter.

Reuters reported on Monday that at least three companies' requests for "commodity classification" decisions - effectively private interpretations of trade rules - had been marked as "held without action." That designation allows the agency to study the request beyond two weeks.

Sources who declined to be identified said on Tuesday they were told by officials from the Bureau of Industry and Security that the measure was not meant as a policy effort to slow down exports of U.S. shale oil but was an administrative step to allow time to get more technical specifications for each request.

"'Hold without action' is the categorization BIS uses when requesting additional information from applicants or awaiting responses," said Commerce Undersecretary Eric Hirschhorn in a statement. "It is a standard term used as part of a standard process to seek additional information."

As a surge in domestic shale oil production threatens to overwhelm U.S. refiners' demand for sweet crude, the drive for exports has accelerated swiftly this year as legislators, lawyers and oil firms seek loopholes, exceptions or gray areas in a four-decade ban on exports.

That effort has collided with vaguely worded legislation and an opaque process for administering export controls, stirring up a storm of confusion over what kind of oil can be exported and the degree to which it must be processed to do so.

It has also thrust a once-obscure bureau within the Commerce Department into the spotlight on a contentious issue that the Obama Administration has yet to weigh in on. Officials have said only that the White House is reviewing the issue.

"This is new and they (BIS) need to get their arms around the parameters and how the rules would apply in multiple scenarios," said one source who has knowledge of the matter.

The BIS is tasked with regulating the export of sensitive goods by issuing licenses or clarifying whether certain goods are exportable in a confidential process to protect the national and economic security interests.

In the cases pending before it now, energy companies are looking for a decision on how much processing is required to convert the crude oil into an exportable product, such as gasoline or diesel.

Because oil field technology and other factors can differ widely, the decisions are being made on a case by case basis.

Sources said the BIS is being more cautious as it answers such requests following last month's revelation that Pioneer Natural Resources Ltd and Enterprise Product Partners LP had been told in March that putting condensate through an advanced stabilizer - a relatively simple type of oilfield equipment used to strip light gasses out of oil - was sufficient processing to export it without a license.

U.S. crude oil exports have been essentially banned by law since the Arab oil embargo of the 1970s, unless they are sold to Canada or have somehow been processed.

(Reporting by Valerie Volcovici; Editing by Jonathan Leff and Cynthia Osterman)