Sec. Abraham expects decision soon on filling US strategic oil reserve

Energy Sec. Spencer Abraham Tuesday said the Bush administration is near a decision on whether to fill the nation's crude oil stockpile to capacity. But Congress must pass a comprehensive energy bill this session that would further ensure national security, he said.

Oct. 30, 2001

3 min read

Maureen Lorenzetti
OGJ Online

WASHINGTON, DC, Oct. 30 -- Energy Sec. Spencer Abraham Tuesday said the Bush administration is near a decision on whether to fill the nation's crude oil stockpile to capacity.

"We hope to have a decision in the near future," Abraham told reporters at a United States Energy Association meeting in Washington, DC.

The Strategic Petroleum Reserve, which holds 544 million bbl in salt caverns along the Texas and Louisiana coast, is 80% full.

Industry sources say the White House has decided to fill the SPR, although it has not determined when and how to do it.

Abraham would not confirm those reports but acknowledged that the interagency SPR task force had finished its meetings.

Filling the stockpile to its 700 million bbl capacity could be expensive, depending on market prices.

The administration is weighing several proposals. An industry-supported plan would take royalty oil from federal lands to fill the reserve. But some oil-producing states fear allowing lease holders to fulfill royalty obligations under the "royalty in-kind" method could reduce their revenues. Under US law, federal royalties are split 50-50 with Lower 48 states.

The US Minerals Management Service collects royalties mostly in cash and has said RIK should not be used indiscriminately, because some markets are not transparent enough to use RIK instead of traditional cash payments.

One idea being considered would direct the Department of Energy to fill the SPR with RIK oil from Gulf of Mexico leases. MMS has conducted successful RIK pilot programs in the gulf and could be reasonably sure it is getting fair market value.

Time is also a factor in an SPR fill program. Using RIK oil may take longer than some policy makers want, given the rationale for filling the SPR is the immediate national security threat. One option that Congress may consider is to order DOE to buy the oil immediately. A spending measure could be attached to a pending appropriations bill, but the cost would be at least $3 billion.

In other energy news, Abraham said President George W. Bush still wants energy policy legislation passed this session.

"Time is of the essence," Abraham said. "From first week of this administration we have been very clear and since Sept. 11 more so. We are concerned about the connection between energy security and national and economic security, and while some in the past have not appreciated this link, now it's self-evident."

The House passed an energy bill in August that mirrored many of the White House energy policy recommendations, including a controversial provision to lease a portion of the Arctic National Wildlife Refuge. Senate Democratic leaders oppose ANWR leasing and have stalled the bill.

Republican leaders are circulating a proposal to craft an energy bill that contains both an ANWR leasing provision and a renewable fuel standard that would ensure ethanol use in reformulated gasoline. That plan has not been proposed in legislation yet.

Senate Majority Leader Tom Daschle (D-SD) is a long-time ethanol supporter and would be more likely to support such legislation.

Some Democrats are skeptical that the attempted compromise could work. They say enough farmbelt Republicans support expanded ethanol use that such a compromise isn't needed for passage of an energy bill.

Abraham declined to comment on whether the administration would be willing to accept an energy bill that did not include an ANWR leasing provision.

Contact Maureen Lorenzetti at [email protected]