Washington, DC�The US Defense Energy Support Center, acting as the contracting agent for the US Department of Energy, on Wednesday issued a solicitation to establish an interim Northeast Heating Oil Reserve as an arm of the nation's Strategic Petroleum Reserve (SPR).
Also on Wednesday, DOE officials met with home heating oil distributors to explain how the reserve would affect their operations. Also attending were American Petroleum Institute and National Petrochemical & Refiners Association officials.
In the solicitation, companies are asked to submit offers by Aug. 1 to receive SPR crude in exchange for up to 2 million bbl of No. 2 heating oil and storage capacity in the New England and New York-New Jersey areas. Contracts will be for 1 year with the option of a 1-year extension. The minimum quantity of heating oil to be supplied by an offering company will be 500,000 bbl.
On July 10, President Clinton directed Energy Sec. Bill Richardson to establish the heating oil stockpile in the Northeast US to help protect against possible fuel shortages next winter. The administration�s goal is to have the temporary distillate stockpile established during October.
Separately, Congress is considering legislation to create a permanent home heating oil reserve. The House and Senate have passed differing bills that must be reconciled in a conference committee.
DOE said a 2-million bbl regional distillate reserve would provide relief from weather-related shortages for about 10 days, the time needed for ships to bring heating oil from Gulf Coast refineries to New York harbor.
On Wednesday API Pres. Red Cavaney repeated his association�s concerns about creation of the reserve.
Cavaney said, �There already are thousands of businesses that have their own reserves in the Northeast� during the winter. He said the presence of the government reserve could displace private stocks and discourage imports.
If the government releases its stocks during a shortfall, said Cavaney, �That is going to be a disincentive to bring additional supplies into the region.�
Caveney noted that last winter�s distillate price spike was caused when severe weather-halted shipments of the fuel into New England, not because there was a shortage of product.