Republican News

WASHINGTON, D.C.–Legislation that would extend the authority for the Strategic Petroleum Reserve (SPR) for three years passed the Senate tonight under unanimous consent with an amendment by Chairman Frank H. Murkowski. The measure, H.R. 2884, also authorizes the Secretary of Energy to create a home heating oil reserve in the Northeast, and retains a House-passed provision to purchase oil for the SPR from marginal wells. The Chairman said, “The SPR was created in response to the difficulties Americans faced as a result of the 1973 Arab oil embargo. This legislation sets forth the method and circumstances for its draw-down and distribution in the event of a severe energy supply interruption.” The SPR currently contains about 571 million barrels of oil and has a total capacity of 700 million barrels. That is just under a 50-day supply for this nation–compared to a 118-day supply in 1985. “For the most part, we have used the reserve sparingly–as it was intended–to deal with severe supply interruptions. For instance when supplies were potentially going to be choked off during the Gulf War, President Bush made SPR oil available,” explained the Chairman. But Murkowski cautioned those who would use the reserve for unintended purposes like manipulating the price of crude oil. In fact his amendment strengthens the defense aspects of SPR by requiring the Secretary of Defense to affirm that a draw-down would not have a negative impact on national security. Murkowski agreed to a two million barrel Northeast heating oil reserve only after assuring that the threshold for releasing the heating oil was high enough that the reserve would not be misused to inappropriately manipulate the market price of heating oil. The Chairman’s amendment sets a workable trigger mechanism that allows the Secretary to make a recommendation for release if a severe energy supply disruption occurs. This is defined in two ways: (1) a regional supply shortage of “significant scope and duration exists;” or (2) the price differential between crude oil and heating oil increases by more than 60 percent over its five-year rolling average for the winter months, for seven consecutive days. An important distinction between Administration suggestions and Murkowski’s final language is that only entities customarily engaged in the sale and distribution of petroleum distillate can acquire this oil. Under an earlier Administration proposal, oil would go to the highest bidder. The Chairman’s initial concerns about creating the heating oil reserve were alleviated to some extent by the trigger mechanism language. He explained a reserve could actually act as a disincentive to marketers to keep adequate supplies of oil on hand for fear that the price could drop out of their market at any time. “A government operated reserve of two million barrels could actually tie up storage capacity that private marketers would fill and deplete usually 4 or 5 times a season,” said Murkowski. Other provisions added to the bill by the Murkowski amendment include: Strengthening of the Department of Energy Weatherization program by expanding the eligibility and increasing the amount of per home assistance. Authorizing a state-led education and outreach effort to encourage consumers to avoid seasonal price increases and minimize heating fuel shortages by filling tanks in the summer and signing up for fuel budgeting programs with utilities. Directing the Secretary of the Interior in conjunction with the Secretaries of Energy and Agriculture, to undertake a national inventory of the onshore oil and gas reserves and identify the extent and nature of any restrictions or impediments to the development of such resources. Allowing the State of Alaska to assume the licensing and regulatory authority over hydro projects less than five megawatts. Requiring the Federal Energy Regulatory Commission to review policies on licensing hydroelectric projects to determine how to reduce the time and cost of obtaining a license. Requiring a yearly report from the Secretary of Energy on the outlook for the coming home heating oil season and steps the states and federal government can take to prevent or alleviate sharp price increases. Establishing the National Oil Heat Research Alliance Act (NORA), which authorizes the oil heat industry to conduct a referendum to set up a fund within the industry for research and development, safety and training. ###