By Velda Addison, Hart Energy

It looks like U.S. shale producers are getting a late Christmas present. The U.S. has relaxed its stronghold on crude oil exports.

Though the ban, which was adopted in 1975 following the Arab oil embargo, remains in place, condensate can be exported if it is run through a distillation tower. Lease condensate, classified by the federal government as crude oil, is defined as a petroleum product if it has been processed via a crude oil distillation tower.

“Petroleum products are subject to few export restrictions,” the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) said on its website. “Most petroleum products … may be exported to most of the world without a license (the exception is exports to embargoed destinations).”

According to Export Administration Regulations (EAR), a license is required to export crude oil. Other instances in which a license can be secured include crude oil exports from Alaska’s Cook Inlet, oil exports to Canada, exports of certain California heavy crude oil and exports of foreign origin crude oil not comingled with domestic crude.

In addition, licenses may be granted for exports consistent with certain international agreements, exports consistent with presidential findings as well as exports in connection with refining or exchange of strategic petroleum reserve oil, according to BIS.

“BIS will consider applications on a case-by-case basis and generally will approve them if the proposed exports are consistent with the national interest and the purposes of the Energy Policy and Conservation Act,” the BIS said on its website.

The federal government’s latest move came as oil prices continued to fall to historic low levels. It also follows the Organization of Petroleum Exporting Countries’ decision not to lower its production target as production—mainly from U.S. shale plays—surge and saturate the market with bountiful supplies.

But oil and gas producers in the U.S. are looking for ways to further cut capex as lower oil prices and high costs continue to wreak havoc on budgets. Having the ability to export ultralight crude without government approval could add dollars to the industry’s coffers.

“U.S. producers are under the gun to reduce capital expenditures given lower prices,” Bloomberg reported citing a Citigroup report. “Now an export route provides a new lease on life that can further weaken crude oil markets and throw a monkey wrench into recent Saudi plans to cripple U.S. production.”

The news agency reported that U.S. export capacity is about 200,000 bbl/d; however, that could jump to 500,000 bbl/d by mid-2015, according to Citigroup.

While it might be tempting to ramp up production even more, Leah Rudnicki, a partner at Reed Smith in Houston, offered up these insights in a prepared statement.

“While BIS has provided additional tools for self-classification, exporters must take great care, utilizing the advice of counsel, to determine on a case-by-case basis whether the output of a given distillation process can be considered a petroleum product under the current regulatory definition,” Rudnicki said. “If a misclassification leads to an unauthorized export, exporters face serious civil and criminal penalties. The BIS guidance published today is helpful in this regard; however, in some cases, it may be necessary to request a BIS classification.

“Moreover, exporters are not the only parties exposed to penalties for violations of the Short Supply Controls. The EAR makes clear that ‘no person’ may ‘buy’ or ‘transport’ a product ‘with knowledge’ that it is being exported in violation of the EAR. Nor may a party act in such a way that is construed to be a solicitation, attempt, or action to ‘aid, abet, counsel, command, induce, procure or permit’ a violation,” she continued. “It is incumbent, therefore, on parties in the chain of export—including producers, sellers, exporters and purchasers—to take adequate measures to confirm the classification of a commodity prior to export.”

That is advice worth taking.

Contact the author, Velda Addison, at