Export Ban Be Damned: BHP Billiton to Start Exporting Texas Oil

The Federal Crude Helium Enrichment Unit near Amarillo, Texas Photograph by Joyce Marshall/Fort Worth Star-Telegram/MCT via Getty Images

Updated to reflect Bloomberg News coverage

The 40-year ban on oil exports is starting to crack without Congress or the Obama administration lifting a finger. On Tuesday evening, just as election results were starting to come in, Bloomberg News and the Wall Street Journal reported that BHP Billiton, the giant Anglo-Australian mining and energy company, would soon sell oil from Texas to foreign buyers without getting permission from the U.S. government.

According to the Journal, Billiton says it has agreed to sell about 650,000 barrels of ultralight sweet oil from Texas to undisclosed buyers in a deal worth about $50 million. It’s not clear what, if anything, the Obama administration, or Congress, for that matter, can do to stop them. As Washington is caught in a post-midterm election haze, with Republicans celebrating their gains and Democrats licking their wounds, Billiton’s move seems well-timed to go unnoticed. At least for a few days.

Over the summer, the Commerce Department gave two Texas oil companies permission to start exporting a type of ultralight oil called condensate without first sending it through the traditional refining process. That kicked off market chatter that the Obama administration was preparing to end the ban. But Commerce quickly came back and said that was not its intention. Some oil analysts and members of Congress have privately said they don’t think Commerce understood the full import of its ruling and the way the market would interpret it. In subsequent statements, Commerce said the ruling doesn’t open the door to abolishing the export ban.

But Commerce’s ruling clearly changed the conversation in the U.S. oil patch about the future of the ban, or at least the current willingness of the government to enforce it. That ruling has also led to a huge increase in the amount of crude that is being exported. Since May, U.S. crude exports have jumped from about 75,000 barrels a day (mostly to Canada) to more than 400,000.

Crude exports are up 400 percent since the summer
Bloomberg

With oil prices down more than 25 percent since June, U.S. oil producers are desperate to start selling their oil overseas and getting it out of the U.S., where the export ban, coupled with the shale boom, has lowered the price of oil to the point where it’s starting to threaten the profitability of drilling for it. By selling U.S. crude to foreign buyers, producers will probably be able to fetch higher prices than they would if it stuck in the U.S. The Commerce Department did not reply to requests for comment.

It’s unclear whether other oil companies will follow Billiton’s lead and start exporting oil without first getting approval. But as they say, sometimes it’s better to ask forgiveness than it is to get permission.

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