WASHINGTON - The U.S. Interior Department said on Wednesday it would continue selling to small refiners crude oil turned over to the government as royalties and start developing a new 5-year leasing plan for offshore drilling.
The royalty-in-kind would be sold to small refining companies that have less than 125,000 barrels a day in refining capacities and fewer than 1,500 employees.
The next sale is set for August 7, when about 21,000 barrels of oil a day over a one-year period will be offered by the government. Deliveries would begin this October 1
By law, the department can give preference when selling royalty oil to small refiners that don't have their own supply of crude when sufficient supplies of oil are not available in the open market.
The department in January asked for comment on whether oil sales to small refiners were still needed. Three small refiners urged the government to keep the program going.
"In today's extremely tight market and high fuel prices, it is important that we do all we can to encourage the ability for all refiners to operate efficiently," said Randall Luthi, director of the department's Minerals Management Service.
He said many small refiners face market challenges in locating and acquiring adequate crude oil supplies, which places them at a competitive disadvantage to larger refiners.
In many cases these small refiners provide specialized products, including jet fuel for the U.S. military. Continued...
The oil the department plans to sell comes from energy companies that turn over a portion of the crude they drill on federal leases as royalties in-kind, instead of paying cash royalties.
Separately, the department also on Wednesday began the initial steps for setting up a new 5-year oil leasing program that would offer more federal offshore tracts for drilling, including areas where energy exploration is now banned.
The department's plan could give the next administration a two-year head start in expanding energy production in federal offshore waters, including some areas where a congressional ban had prevented oil and gas development.
The government's current leasing plan runs from 2007 to 2012 and includes 21 lease sales in eight of the 26 exploration areas in the Gulf of Mexico, Alaskan waters and the Atlantic.
"Clearly, today's escalating energy prices and the widening gap between U.S. energy consumption and supply have changed the fundamental assumptions on which many of our decisions were based," said Interior Secretary Dirk Kempthorne.
"Areas that were considered too expensive to develop a year ago are no longer necessarily out of reach based on improvements to technology and safety," Kempthorne said.
The department is seeking comments from the public, oil companies, environmental groups and all 50 state governors on what a new 5-year program should consider. The department's request for comments will published in the Federal Register this Friday and comments would be due during the next 45 days.
The royalty-in-kind would be sold to small refining companies that have less than 125,000 barrels a day in refining capacities and fewer than 1,500 employees.
The next sale is set for August 7, when about 21,000 barrels of oil a day over a one-year period will be offered by the government. Deliveries would begin this October 1
By law, the department can give preference when selling royalty oil to small refiners that don't have their own supply of crude when sufficient supplies of oil are not available in the open market.
The department in January asked for comment on whether oil sales to small refiners were still needed. Three small refiners urged the government to keep the program going.
"In today's extremely tight market and high fuel prices, it is important that we do all we can to encourage the ability for all refiners to operate efficiently," said Randall Luthi, director of the department's Minerals Management Service.
He said many small refiners face market challenges in locating and acquiring adequate crude oil supplies, which places them at a competitive disadvantage to larger refiners.
In many cases these small refiners provide specialized products, including jet fuel for the U.S. military. Continued...
The oil the department plans to sell comes from energy companies that turn over a portion of the crude they drill on federal leases as royalties in-kind, instead of paying cash royalties.
Separately, the department also on Wednesday began the initial steps for setting up a new 5-year oil leasing program that would offer more federal offshore tracts for drilling, including areas where energy exploration is now banned.
The department's plan could give the next administration a two-year head start in expanding energy production in federal offshore waters, including some areas where a congressional ban had prevented oil and gas development.
The government's current leasing plan runs from 2007 to 2012 and includes 21 lease sales in eight of the 26 exploration areas in the Gulf of Mexico, Alaskan waters and the Atlantic.
"Clearly, today's escalating energy prices and the widening gap between U.S. energy consumption and supply have changed the fundamental assumptions on which many of our decisions were based," said Interior Secretary Dirk Kempthorne.
"Areas that were considered too expensive to develop a year ago are no longer necessarily out of reach based on improvements to technology and safety," Kempthorne said.
The department is seeking comments from the public, oil companies, environmental groups and all 50 state governors on what a new 5-year program should consider. The department's request for comments will published in the Federal Register this Friday and comments would be due during the next 45 days.
