The Department of Energy’s Office of Policy yesterdayrecommended streamlining the federal government’s process forapproving new natural gas storage capacity and pipelines bound forthe Northeast in an attempt to reduce the region’s dependence onheating oil and prevent a recurrence of price spikes.

This was one of 14 initiatives that the policy office proposedas part of the second phase of a 60-day report commissioned byPresident Clinton in the wake of severe price hikes in theNortheast heating oil market last January. The recommendationsfollow the first phase of the report issued by DOE’s EnergyInformation Administration (EIA) in late May, which concluded that,among other things, the price aberrations were partly due to theconstraints on Northeast gas pipelines.

The DOE Office of Policy’s recommendations for the Northeastenergy market were delivered to President Clinton Wednesday. Thedepartment said further details of the office’s findings andrecommendations, which include both short- and long-terminitiatives, will be released today.

In addition to streamlining the pipeline review process, theOffice of Policy’s other long-term proposals include: jointfederal/state studies of regional storage opportunities for naturalgas; a review of changing the tax treatment of conversion/hookupcosts for consumers who switch from heating oil to gas;facilitating increases in the Northeast’s liquefied natural gas(LNG) infrastructure and supplies; developing alternative methodsof energy backup for large gas users in the region; reviewrecommendations for an interagency working group on natural gas;and resume annual energy meetings between the United States andCanada.

For the short term, the DOE office proposes improving seasonalinformation and forecasts for the Northeast energy market; studyingthe need for increased port dredging so heating oil supplies canget through to the Northeast; and improving consumer education.

President Clinton already has directed Energy Secretary BillRichardson to establish a heating oil component of the StrategicPetroleum Reserve (SPR) in the Northeast to shield consumers in theregion from a recurrence of price spikes and heating oil shortages.

The Defense Energy Support Center, acting as the contractingagency for DOE, began soliciting bids this week to establish theinterim reserve. Companies are being asked to submit their bids byAug. 1 to receive SPR crude oil in exchange for up to two millionbarrels of heating oil and storage capacity in the New England andNew York/New Jersey areas.

Contracts will be for one year with the option to extend themfor a second year. The minimum quantity of heating oil to besupplied by a company will be 500,000 barrels.

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