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October 13, 2011

Northeast Home Heating Oil Reserve now focuses on New England

graph of Northeast Home Heating Oil Reserve now focuses on New England, as described in the article text
Source: U.S. Energy Information Administration, Weekly Petroleum Status Report.
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The Northeast Home Heating Oil Reserve (NHHOR) will be reduced to one million barrels, half its original size, as the stockpile's holdings are converted to ultra-low-sulfur distillate (ULSD) fuel that will be stored only in New England States. The Department of Energy (DOE) chose to end leasing storage space for the reserve in New York harbor because that area is well supplied with commercial ULSD inventories. There are also several nearby refineries and a major pipeline that could quickly provide heating fuel this winter.

The reserve is switching to ULSD because several Northeast States will require the use of very low-sulfur fuel within the next few years. New York has already approved a reduction in the maximum sulfur content of heating oil from the current 2,000 parts per million (ppm) to 15 ppm by July 2012. New Jersey, Pennsylvania, Maine, Connecticut, and Rhode Island have legislation pending.

DOE awarded contracts to Hess Corporation to store 500,000 barrels of ULSD at the company's terminal in Groton, Connecticut and to Global Companies LLC to store 500,000 barrels in Revere, Massachusetts. DOE plans to sign contracts later this month for purchasing the one million barrels of ULSD that now will be delivered to the reserve by the end of November.

NHHOR was authorized in 2000 to provide the region with two million barrels of backup heating oil in case of a disruption in winter heating fuel supplies. The Northeast is the biggest heating oil market in the world, where 69% of U.S. households that use heating oil are located.

DOE earlier this year sold the two million barrels of heating oil in the reserve and decided to replace it with one million barrels of ULSD that will be stored at locations in New England to protect six States—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont—that are most vulnerable to supply problems.

Total distillate fuel inventories for the central Atlantic region—Delaware, Maryland, New Jersey, New York, Pennsylvania, and the District of Columbia—were 35.4 million barrels at the end of September, down 19.4% from a year earlier. Similar distillate inventories for New England were much smaller at 12.2 million barrels, down 12% from a year ago.