Currently, there are several options for obtaining regulatory guidance and/or approval related to the export of crude oil and petroleum products:
- Meeting with the Agency – An informal meeting with relevant BIS officials can provide companies with the opportunity to discuss their concerns with the agency and get a better sense of their policy as it relates to a company’s operations, including potential avenues for expanding business opportunities. The outcome of the meeting could be actionable guidance that the company can put into immediate operation. Alternatively, it could provide insight into how best to proceed with one of the options discussed below.
- Classification Request (CCATS) – A CCATS is a regulatory filing requesting that BIS determine the export classification of an item under the Commerce Control List (CCL) within the Export Administration Regulations (EAR). Through this request, a company can obtain formal confirmation from BIS on whether the product obtained by processing petroleum in a specific way either qualifies as “crude oil” or as a “petroleum product.” BIS’s response will take at least two to three weeks, but may take longer (e.g., one or two months) given the political debate surrounding this issue. At least two energy companies have sought and obtained CCATS that give guidance on how to structure export operations. The CCATS determinations reportedly conclude that the product that results from processing crude oil through a “distillation tower” or “splitter” is no longer classified as crude oil. These rulings have sparked a potential political debate as two U.S. Senators questioned the legality of BIS’s rulings, requested copies of them, and demanded that BIS explain its rationale and process for reaching its conclusions that the subject condensate did not qualify as “crude oil” under the regulatory definition of that term.
- Advisory Opinion – Another option is to seek an Advisory Opinion. In approximately the same timeframe as a CCATS, BIS will provide more general guidance in an Advisory Opinion regarding its interpretation of the EAR, including principles for determining the classification of items on the CCL. Therefore, this request can be cast more broadly than a CCATS. For instance, a company could request clarification regarding what constitutes a “distillation tower” for purposes of the EAR definition of crude oil. However, unlike a CCATS, the determination does not have binding effect on the classification of specific items. The principles in the Advisory Opinion must thereafter be used to self-classify an item. In addition, BIS may release the Advisory Opinion to the public in redacted form.
- Self-Determination – A company can also self-classify commodities based on the existing regulations and guidance. Indeed, the EAR do not require that companies obtain formal classifications or opinions from BIS, but the companies are legally responsible for the accuracy of these determinations.
- License Request – Lastly, depending on the circumstances, a company could submit a license request to authorize the export of crude oil to one or more specific destinations. Despite the general ban on exporting crude oil, the EAR identify certain types of exports that may qualify for a license (e.g., certain exports from Alaska’s Cook Inlet, exports to Canada, exports of heavy California crude, etc.). If the proposed exports do not fit within one of these identified categories, applicants can nevertheless submit a license request arguing that the export is “consistent with the national interest and the Energy Policy Conservation Act.” Pursuant to this authority, BIS could approve requests in persuasive cases, such as certain types of swaps, particularly with adjacent countries, and applications that demonstrate compelling economic or technological reasons, beyond the control of the applicant, why the crude oil cannot reasonably be marketed within the United States. The average processing time for a BIS license request is one month; however, given the political debate surrounding this issue, the timeline could be extended by a month or more.
Conclusion
There are a number of pros and cons associated with the various options above and each option should be carefully reviewed in the context of your overall business strategy. We are happy to assist your company with any of the above and answer any questions that you may have:
