Bush urged not to enter into new SPR oil purchase contracts

A leading US House committee chairman urged President George W. Bush to direct Energy Secretary Samuel W. Bodman not to enter into new contracts to fill the Strategic Petroleum Reserve.

Nick Snow
Washington Editor

WASHINGTON, DC, May 9 -- A leading US House committee chairman urged President George W. Bush to direct Energy Secretary Samuel W. Bodman not to enter into new contracts to fill the Strategic Petroleum Reserve.

Energy and Commerce Committee Chairman John D. Dingell (D-Mich.) made his request in a May 8 letter to the president. Current contracts to fill the reserve end in July, he noted. The US Department of Energy issued a solicitation for new contracts on Apr. 4, with bids due May 13.

"I realize that if the department were to immediately halt SPR deliveries under existing contracts, as some have urged, it could face lawsuits for breach of contract, which might result in liability to the taxpayer. However, it is within the department's discretion not to enter into new contracts at this time, which would avoid this risk," Dingell said in his letter.

He said he is equally concerned about direct crude purchases from currently tight global markets and oil obtained through the federal royalty-in-kind program. "Under either approach, the department's approach would effectively remove oil from markets that otherwise could provide additional supply to ease current conditions," he told the president.

Bush has rejected calls to suspend SPR purchases when crude prices are near record levels. Buying crude for the reserve represents one-tenth of 1% of total global demand, he said in an Apr. 29 press conference. "I don't think it's going to affect price when you affect one-tenth of 1%, and I do believe it's in our national interest to get the SPR filled in case there's a major disruption of crude oil around the world," he maintained.

A full SPR is particularly necessary because Al Qaeda believes an attack on a major overseas oil production facility would disrupt US and other nations' economies, Bush continued. He said he does not see any cost benefits from suspending crude oil purchases for the reserve but feels "it costs you oil in the case of a national security risk."

Congressional support for halting SPR purchases continues to grow, however. It is the single common element in Democratic and Republican US Senate energy bills, on which voting is expected on May 13 as proposed amendments to flood insurance legislation.

Contact Nick Snow at nicks@pennwell.com.

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