New Page 1WASHINGTON WATCHStrategic Petroleum Reserve
May Be Tapped For Hurricane ReliefWASHINGTON (August 29, 2005) - As Hurricane Katrina made landfall, the eyes of the government and the public were watching closely. The severe storm threatened people and property, forced the shut down of 25 percent of the nation's oil refining capacity and at least one nuclear reactor, and is cutting right through the country's major petroleum storage reserve. In a current climate of ever-increasing fuel costs, there may be relief coming to offset coming shortages and the upward price pressures that accompany them.
In the United States, the U.S. Department of Energy (DOE) is the lead federal agency responsible for energy assurance. Through its Office of Electricity, Delivery and Energy Reliability, the DOE works with the Federal Energy Management Administration as well as other federal, state and local government agencies and the private energy sector to prepare for and respond during and after events such as Hurricane Katrina.
The DOE's Office of Electricity, Delivery and Energy Reliability issues regular situation reports during hurricanes and other natural disasters, which can be viewed in full by
clicking
here. The most recent situation report indicated that:
* Actual damage estimates from the hurricane and possible restoration times will not be available for some time.
* Oil prices spiked in response to Hurricane Katrina reaching almost $71 a barrel, before falling back slightly.
* The U.S. Department of the Interior's Minerals Management Service (MMS) stated that the U.S. offshore Gulf of Mexico daily production provides 30 percent of domestic oil and 21 percent of domestic natural gas needs. As well, the region accounts for 25 percent of the nation's total refining.
In cases like Hurricane Katrina, for safety reasons, companies may "shut-in" production, which is essentially taking producing wells offline. The MMS reported late Monday afternoon that 92 percent of oil production and 83 percent of natural gas production in the Gulf of Mexico region was shut-in. Note that the risk of shutting-in production is that once the threat has passed, future flow rates may not be as strong as beforehand because of fluctuations in the pipe pressures.
The Strategic Petroleum Reserve (SPR) shut down all operations in New Orleans and personnel were evacuated. Operations at Bayou Choctaw were shut down and personnel evacuated as well. West Hackberry, Bill Hill, and Bryan Mound remain operational. A storm watch team is currently at the Stennis site.
Fuel deliveries to gas stations are expected to resume within three to nine days.
The Nuclear Regulatory Commission reports that all plants have taken precautions and have contingency plans in place based on operating procedures. Riverband in Louisiana and Grand Gulf in Mississippi are reporting normal operations. The Waterford 3 Nuclear Power Plant, operated by Entergy and located near Taft, LA, in St. Charles Parrish, declared an "Unusual Event" due to the hurricane warning. Waterford 3 commenced a plant shutdown on Aug. 28, 2005.
In a related statement, U.S. Secretary of Energy Samuel W. Bodman conveyed concern and said that restoring normal electricity and fuel services, and doing so safely, is a priority, both locally and in other affected areas.
Bodman pointed out that the SPR can be used to lend petroleum to refineries if they experience shortages and are therefore unable to maintain their production and delivery of shipments. The SPR consists of 700 million barrels of crude oil stored in underground salt caverns in Louisiana and Texas.
From a national perspective he said, "Looking at the broader impacts on the nation, we are mindful that the affected region contributes a significant amount of our oil, gas and refined product supply. As we assess damage, we will take the appropriate response. The administration has been clear that the Strategic Petroleum Reserve is a national security asset that can be used to protect American consumers and our economy in the event of a major supply disruption, including natural disasters."
During Hurricane Ivan in 2004, for example, the U.S. government loaned 5.4 million barrels of crude oil from the SPR last year following to alleviate supply disruptions. Bodman added that if circumstances warrant, the president also can direct that petroleum be withdrawn from the SPR and sold. "Over the next few days, we will continue to gain more information on the specific needs and then be able to make a better determination on how we can help."
With the devastation wrought by Katrina, there will be impact at the gas pumps, homes and throughout petroleum dependent segments of the economy. Many states have already issued warnings to service stations and energy companies regarding price-gouging. Yet, wholesale and consumer prices are bound to surge in the wake of the hurricane, driven by the demands of available supply and delivery.
It's a reality that even politics can't halt the tide of.
(Source: DOE)
