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Natural Gas Reserve 'Problematic,' Says DOE Secretary

The Department of Energy has concluded that creating a natural gas reserve similar to what has been done with petroleum would be "problematic" because of the substantial number of privately owned gas storage fields already in operation throughout the country, Energy Secretary Samuel Bodman said during a media breakfast presentation hosted by Energy Daily.

Building government-owned stockpiles of natural gas, gasoline and heating oil was a consideration of the Bush administration last year when energy prices soared following production shut-ins due to hurricanes Katrina and Rita.

"The Energy Department did work on the prospect for a natural gas reserve as well as a refined product reserve," said Bodman. "The general sense that I have is that those were of lesser priority to the president. I wouldn't entirely rule them out, but they are problematic...for two different reasons.

"Natural gas already has substantial storage capability in this country. It is privately owned. It is managed privately and it's run pretty well. One question that we asked is if the government gets into this business would we be forcing the private sector, [which] is already undertaking this, out of that activity," said Bodman. "We believe that there are sufficient questions about it for that reason."

During a recent open roundtable discussion on natural gas issues sponsored by the DOE's Office of Fossil Energy in Washington, DC the issue of a strategic gas reserve was brought up as a tool to help reduce price volatility and lower prices during periods of shut-in production. An official with the Louisiana Department of Economic Development said he thought such a reserve would be an effective way to provide fuel to large gas consumers and power generators in the event of a supply curtailment.

However, other industry representatives believe that taking enough gas off the market to fill a reserve to a level that would provide such a benefit could have adverse consequences in a marketplace that already suffers from short supply.

Bodman also said a strategic refined products reserve would have problems because refined products, such as gasoline, heating oil and diesel fuel, have a limited shelf life of about a month or two, after which they lose some fuel requirements set of the Environmental Protection Agency and the companies that produce them.

"That's not to say this [proposal] couldn't come back at a future time, but other matters...[currently] have a higher priority," such as solar energy, biomass and reusing spent nuclear fuel for energy production.

Bodman said the administration's review left it "less than enthused about" the possibility of state-owned stocks.

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