Bush administration submits SPR expansion bill to US Congress

Washington (Platts)--20Mar2007

The Bush administration is moving forward with its plan to expand the US
Strategic Petroleum Reserve by submitting to Congress Monday draft legislation
to raise the capacity from the 1 billion barrels currently authorized by the
2005 Energy Policy Act to the 1.5 billion barrels proposed by President George
W. Bush.

"Increasingly, internationally traded oil originates from unstable
regions of the world," US Energy Secretary Samuel Bodman wrote in a letter
accompanying the draft to the Senate Energy Committee, released Tuesday.

"The United States' economic and national security are threatened by
vulnerability to disruptions in world oil supply and volatility in oil prices.
The nation's transportation sector, military and major industries are largely
dependent upon petroleum, and so it is crucial top minimize the effect of
disruptions in the world oil supply," he said.

Bush proposed the expansion of the SPR in his January State of the Union
address, citing similar concerns.

The SPR currently holds 689 million barrels of crude oil, and has the
capacity to hold 727 million barrels.

Bodman said the current inventory represents the equivalent of 56 days of
net imports.

"The United State's obligation to the member countries of the
International Energy Agency requires it to maintain the equivalent of 90 days
of net petroleum imports," Bodman said.

"While the inclusion of private inventories allows the US to satisfy the
IEA obligation, increasing the authorized capacity of the SPR to 15 billion
barrels will help ensure the United States meets its obligations in the long
term, regardless of commercial inventory trends," he said.

The Department of Energy last week began the process of filling the
reserve to its current capacity, issuing a solicitation to buy up to 4 million
barrels of crude for May delivery into the strategic stockpile.

It intends to use royalty-in-kind crude -- crude obtained by companies
wishing to pay their royalties in product rather than cash -- for the balance.

--Cathy Landry, cathy_landry@platts.com