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DOE - Fossil Energy Techline - Issued on: April 24, 2006 DOE Announces Proposed Procedures for the Acquisition of Petroleum for the Strategic Petroleum ReserveWashington, DC – The Department of Energy (DOE) today proposed procedures for the acquisition of petroleum for the Strategic Petroleum Reserve (SPR). The procedures include provisions for acquisition of oil through several means. Oil may be obtained by direct purchase, by the transfer of royalty oil from the Department of the Interior, and by receipt of premium barrels resulting from deferral of scheduled deliveries of petroleum for the SPR. Comments on the procedures are due to the Department by May 24, 2006.
The Energy Policy Act of 2005 (P.L. 109-58) directs the Secretary of Energy to develop procedures for the acquisition of oil for the SPR in appropriate circumstances. In developing the procedures, the DOE is directed to take into account the need to maximize the overall domestic supply of crude oil, avoid incurring excessive cost or appreciably affecting the price of petroleum products to consumers, minimize costs in acquiring the oil, protect national security and avoid adversely affecting market forces and supply levels. The procedures define the direct purchase, royalty in kind and deferral methods of acquisition and set forth criteria for commencing acquisition in a manner which will reduce the potential for negative impacts that may result from market participation. The Energy Policy Act of 2005 generally directs the Secretary of Energy to acquire petroleum to fill the SPR to one billion barrels as expeditiously as practicable, without incurring excessive cost or appreciably affecting the price of petroleum products to consumers. Crude oil for the Reserve was originally acquired by direct purchases on the open market using monies appropriated by the Congress. In addition, from 1981 to 1990, approximately 220 million barrels of oil were acquired under four country to country contracts with Petroleos Mexicanos (PEMEX), the state owned oil company of Mexico. In 1999, DOE initiated a program to transfer to DOE crude oil royalties collected by the Department of the Interior in-kind on production from Federal leases in the Gulf of Mexico Outer Continental Shelf. The oil has been transferred either directly or by exchange for other crude oil meeting SPR quality specifications. In November 2001, the Administration announced it would extend the royalty-in-kind program to fill the SPR to a level of 700 million barrels. At various times, when prices for future barrels in the oil market have remained consistently low relative to near term prices, suppliers of oil in the SPR exchange and royalty-in-kind programs have requested that contractually scheduled deliveries to the SPR be delayed. When approved, DOE granted these deferral requests through negotiations for the future return of the originally scheduled barrels plus additional premium barrels. - End of Techline -
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