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Mexican oil swap sparks calls for full U.S. exports

U.S. clears oil trade request from Mexican oil company Pemex.

By Daniel J. Graeber
Sen. Heidi Heitkamp, D-N.D., says crude oil is the only North Dakota commodity banned for exports. The Commerce Department last week clears oil swaps with Mexico, which supporters say is a step to easing that ban. File Photo by Kevin Dietsch/UPI | <a href="/News_Photos/lp/8f15a6c8ffc999b8c4285947bc3fb807/" target="_blank">License Photo</a>
Sen. Heidi Heitkamp, D-N.D., says crude oil is the only North Dakota commodity banned for exports. The Commerce Department last week clears oil swaps with Mexico, which supporters say is a step to easing that ban. File Photo by Kevin Dietsch/UPI | License Photo

WASHINGTON, Aug. 17 (UPI) -- A decision to swap crude oil with Mexico is a much needed step toward a full easing of the ban on domestic oil exports, U.S. production groups said.

The U.S. Commerce Department last week granted a request from Mexican energy company Petroleos Mexicanos, known also as Pemex, to swap as much as 100,000 barrels of U.S. crude oil per day for refining into the nation. The deal requires Mexico to refine the crude oil at home and forbids re-export to other nations.

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Swaps are permissible under current legislation. Barrel Russell, president of the Independent Petroleum Association of America, said the decision is a long overdue step toward a full repeal of a U.S. crude oil export ban enacted in the 1970s.

"Not only is lifting export restrictions on America's energy surpluses consistent with President Obama's own broad free trade policies, it also spurs additional investment and economic growth, creates and protects American jobs and provides meaningful benefits to American consumers and our national energy security."

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Sen. Heidi Heitkamp, D-N.D., and Senate Energy Committee Chairwoman Lisa Murkowski called on the Commerce Department to approve the Pemex request in February. Both leaders have been vocal supporters of erasing the full ban on crude oil exports, arguing it would increase U.S. leverage overseas while stimulating the economy at home.

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For Heitkamp, lifting the full ban would create stimulus at a time when the energy sector is hurting because of lower crude oil prices.

"Oil is the only commodity in North Dakota that faces these sorts of export restrictions, and it's past time for that to change," she said in a statement.

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Critics of full exports say foreign refineries aren't designed to process the lighter forms of crude oil found in U.S. shale basins, which are behind the increase in production that's led to calls for repeal.

Last year, the U.S. Bureau of Industry and Security, a division of the Commerce Department, authorized two U.S. companies, Pioneer Natural Resources and Enterprise Products Partners, to ship an ultra-light form of oil called condensate from the U.S. market.

Legislation enacted in response to the 1970s oil embargo by Arab members of the Organization of Petroleum Exporting Countries bans the export of unprocessed crude oil, but products like gasoline and other fuel products aren't restricted.

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Condensate refined or processed in a certain way is not characterized as crude oil and is therefore not subject to the export ban.

"Given the mismatch between the crude oil produced in the U.S. – mainly light sweet crude – and our refinery configuration – which processes more medium and heavy crudes -- this decision by the Commerce Department was seemingly a no-brainer," George Baker, executive director of the Producers for American Crude Oil Exports, said in a statement. "That said, it is a very small step towards removing the crude oil export ban and allowing the United States to fully realize its status as a global energy superpower."

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