I was out-of-pocket yesterday.
I tend to be pretty liberal about sealing Class I, Division 2/unclassified boundaries. In fact, I believe seals are generally unnecessary at such boundaries. For heavier than air gases/vapors, the OP is one of the exceptions in my opinion. Section 501.15(B)(2) Exception 2 needs to be parsed a better.
From the OP description, Exception No. 2 doesn't apply to the Class I, Division 2 terminus; although moot, it would to the unclassified terminus. The problem is a raceway open to a Division 2 location, especially when the raceway is routed underground with heavier than air gases/vapors, permits entry of the gases/vapors involved. In the underground portion, ignitable gases/vapors can and will collect much as they do in explosionproof enclosures.
Exception No. 2
: Conduit systems terminating at an unclassified location
where a wiring method transition is made to cable tray, cablebus, ventilated busway, Type MI cable, or cable not installed in any cable tray or raceway system shall not be required to be sealed where passing from the Class I, Division 2 location into the unclassified location. The unclassified location shall be outdoors or, if the conduit system is all in one room, it shall be permitted to be indoors. The conduits shall not terminate at an enclosure containing an ignition source in normal operation.
The key issue here is: where is the Division 2/unclassified boundary? This has been a much debated issue in every Technical Committee I've ever been actively associated with. (NEC CMP14, NFPA 497, API RP500). Here a case can be made for an "open-ended" underground raceway terminating in a Class I, Division 2 location may either be in an unclassified OR Class I, Division 1 location if the gas/vapor involved is heavier than air. In any case is, it cannot be Division 2 below grade and a boundary must exist at grade. The general consensus (including me) is below grade is unclassified. However, there is a relatively strong minor consensus and parts of Articles 511 to 516 reflect that. Section 501.10(A)(1)(a) Exception more-or-less tips it's hat to that position, as well.
As I mentioned, I'm in the unclassified below grade camp where the "source" location is Class I, Division 2 even when heavier than air volatiles are involved. The theory being that if they do collect they become too rich to ignite because they displace oxygen. It seems to have worked for the 45 years I've been designing classified location installations.
Now the good part; the last sentence of the main text of 501.15(B)(2) permits non-explosionproof seals at the Class I, Division 2 boundary. As far as I'm concerned, a heavy packing of duct seal is sufficient.
Robert B. Alexander, P.E.
"I know that you believe you understand what you think the NEC says, but I am not sure you realize that what you read is not what it means." (Corollary to Charlie's Rule)