US to formally OK new site in Miss. for oil reserve
Source: Reuters
(adds comments from Ed Lazear, paragraphs 10-11) By Tom Doggett WASHINGTON, Feb 12 (Reuters) - U.S. Energy Secretary Sam Bodman will travel to Mississippi this week to officially approve a new site for the country's emergency oil stockpile, the Energy Department said on Monday. The department in December selected a group of salt domes in the southeastern Mississippi town of Richton to hold about 160 million barrels of oil as part of the government's plan to expand the Strategic Petroleum Reserve, which aims to protect the country from supply disruptions. Bodman will sign the documents on Wednesday officially approving the site. Gov. Haley Barbour of Mississippi will join him in the ceremony. The oil reserve currently has a storage capacity of about 727 million barrels, but Congress directed the department to boost the stockpile's size to 1 billion barrels. Oil would be brought to the Richton site by pipeline from Pascagoula along the Gulf Coast. The department picked Richton because it is located inland, making it less vulnerable to hurricanes. To reach 1 billion barrels, the department will also expand three of the reserve's four existing storage sites in Texas and Louisiana. The sites that will get bigger are Big Hill in Texas, and Bayou Choctaw and West Hackberry in Louisiana. In the short term, the department plans to buy about 11 million barrels of crude for the reserve this spring to replace a similar amount of oil it sold to refiners for about $600 million after Hurricane Katrina disrupted petroleum supplies in autumn 2005. The rest of the oil for the reserve would come in the form of royalties. Oil companies turn over to the government a portion of the crude they drill on federal leases in lieu of paying cash royalties. President George W. Bush has asked Congress for $168 million in new funds in his 2008 budget request to help pay for expanding the reserve. Adding crude to the stockpile is "unlikely to have significant effects on oil (prices) in the short run," Ed Lazear, Chairman of the White House Council of Economic Advisors, told CNBC on Monday. With a bigger oil reserve, the United States "will have the ability to deal with things that come our way, unanticipated (supply) shocks....it's a good strategy," he said. Bush said in his State of the Union speech to Congress last month that he wants to eventually expand the oil stockpile even further, to 1.5 billion barrels over the next 20 years. Congress must approve that plan. The petroleum reserve was created by Congress in the mid-1970s in response to the Arab oil embargo. The stockpile now holds about 689 million barrels of crude oil.
| AlertNet news is provided by |  |