DOE to adopt new rules for acquiring crude for SPR

DOE to adopt new rules for acquiring crude for SPR

Washington (Platts)--9Nov2006

The US Department of Energy will adopt new rules for acquiring crude oil
for the Strategic Petroleum Reserves that would require the department to
consider the effects of its purchases on oil markets and prices.

The rules take effect December 8.

"We didn't have any regulation at all," John Shages, DOE's deputy
assistant secretary for petroleum reserves, said Thursday. "While we always
paid attention to the market and the impact [of the purchases], we didn't have
a checklist of things to consider before we did it."

The Energy Policy Act of 2005 required DOE to prepare the procedures,
which will include a stipulation that the department "avoid adversely
affecting current and futures prices, supplies and inventories of oil" when it
acquires supplies for the stockpile.

The department has not acquired oil for the SPR on the open market since
1994, but expects to do so again when it expands the stockpile to 1 billion
barrels. In recent years, DOE has relied primarily on royalty-in-kind oil from
the US Department of the Interior to supply the SPR, which held 688.5 million
barrels as of November 3.

DOE proposed the new rules on acquiring SPR oil in April and received
just three comments in response. The final rules are "substantially the same"
as those proposed, the department said.

The new rules come as DOE nears completion of an environmental impact
statement that will serve as the basis for its plans to expand SPR from its
current capacity of 727 million barrels to 1 billion barrels, as required
under the 2005 law. Shages said DOE is likely to release the EIS "very soon."

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