Contracts for Heating Oil Reserve In Place Ahead of Schedule

Richardson Says Accelerated Pace Helps Assure
"Energy Insurance" Will Be Available this Winter

Secretary of Energy Bill Richardson today announced that Morgan Stanley Capital Group, Inc. will provide the final one million barrels of heating oil for the Administration to hold in storage to assist consumers should fuel shortages strike the Northeast again as they did last year.

The fuel will be stored in Amerada Hess Corporation's First Reserve Terminal in Woodbridge, N.J.

Last Thursday, the Energy Department accepted a bid from Equiva Trading Company to provide one million barrels of heating oil for storage in two New Haven, Conn., terminals.

"Locking these contracts in place, nearly two weeks earlier than we had planned, gives us greater assurance that the heating oil reserve will be functional in time for the coming winter heating season," said Richardson. "We remain concerned for the approaching winter, but we are well on our way to having some measure of energy insurance in place for Northeast consumers."

When President Clinton directed that the heating oil reserve be established in July, the Energy Department estimated that it would take until early September to complete the storage and fuel contracts.

Terminals to hold the emergency heating oil for the 2000-01 winter season were placed under contract earlier this month when the government completed storage agreements with Equiva Trading Company, Morgan Stanley Capital Group, Inc., and Amerada Hess Corporation.

Under today's contract, Morgan Stanley will transfer one million barrels of heating oil to the Amerada Hess terminal in October. The terminal, on the Raritan River near Perth Amboy, N. J., is part of the New York Harbor terminal complex and distributes heating oil by barge throughout the New York and New England area.

Equiva Trading Company, under the agreement reached last week, will supply 500,000 barrels to the Motiva Storage Terminal which the company operates in New Haven, and another 500,000 barrels to the Wyatt New Haven Terminal, also in New Haven, which is leased by Morgan Stanley Capital Group, Inc. Both terminals can distribute heating oil by tanker, barge, tank truck and pipeline. Both also have connections to the Buckeye Pipeline serving Hartford, Conn. and Springfield, Mass.

Terminal operators have committed to supply the stockpiled heating oil to the market within 10 days or less, should the government direct the reserve be used to counter a fuel shortage this winter.

The companies were selected in a competitive process conducted for the Energy Department by the Defense Energy Support Center, the fuel purchasing arm of the Department of Defense.

To set up the initial reserve for this winter, the Energy Department offered to exchange oil from the Strategic Petroleum Reserve to companies willing to supply the heating oil and interim storage facilities. Exact details of the transactions, including the amount of crude oil to be exchanged, will be released when the heating oil reserve is fully operational in October.

To establish the reserve on a permanent basis, the Energy Department will require funding from the Congress to enter into longer-term leases for storage tanks. The Senate has included $4 million in its pending appropriation for a permanent reserve, and the matter will likely be part of a Senate/House budget conference deliberation when Congress returns in September.

-End of TechLine-

For more information, contact:
Robert C. Porter, DOE Office of Fossil Energy, (202) 586-6503, e-mail: robert.porter@hq.doe.gov

Media Contact: Drew Malcomb, U.S. Department of Energy, 202/586-5822
SPR Program Contact: David Johnson, U.S. Department of Energy, 202/586-4733