United States to add oil to emergency petroleum reserves

The Associated Press

WASHINGTON, D.C. (AP) — The Clinton administration is moving to shore up the petroleum reserves the nation would tap in times of oil crisis with a plan to take 28 million barrels from a glutted marketplace.

The plan announced Feb. 11 by Energy Secretary Bill Richardson would add up to 100,000 barrels daily to the Strategic Petroleum Reserve, with the government accepting oil instead of cash from companies paying royalties for drilling on public lands in the Gulf of Mexico.

Richardson said the move has a dual purpose: to improve the nation’s energy security and refill the reserve with oil now selling at historic lows. “

Domestic producers who have been battered by depressed oil prices have been clamoring for help from Washington, with reserve replenishment one of the items on their agenda. While the replenishment plan does nothing for the small independent producers who have been among the most affected, Richardson pledged help for them in a series of announcements due the week of Feb. 15.

Oil-patch lawmakers welcomed the administration’s action to fill the reserves, which are stored in underground salt caverns in Texas and Louisiana.

“I’m very pleased the administration has taken this critical step,” said Sen. Jeff Bingaman of New Mexico, who is top Democrat on the Senate Energy and Natural Resources Committee. “With oil prices at an all-time low, now is the time to strengthen our national energy security by replacing the oil we’ve drained from the Strategic Petroleum Reserve. Failure to do so would have been a grave mistake.”

The administration’s plan, which does not require congressional approval, closely mirrors legislation introduced last week by Rep. Mac Thornberry, R-Texas.

At a recent Senate hearing on the state of the energy industry, senators and witnesses chided the administration for not replenishing the reserve at a time when prices are at their lowest level since 1986, and some say the lowest since the Depression when adjusted for inflation.

Since 1995, the government has sold 28 million barrels from the reserve as a revenue-producing measure to offset other federal spending. That oil, Bingaman noted, was sold for an average $19.50 a barrel and can be replenished now at a cost of less than $12 a barrel.

The reserve now holds 563 million barrels, more than 119 million barrels below capacity.