Governor Urges Release of Oil Reserves

Governor Urges Release of Oil Reserves

August 8, 2006

AUGUSTA - Governor John Baldacci today wrote to President Bush to urge the President to release oil reserves to counteract the impact of the closure of the British Petroleum (BP) oilfield in Prudhoe Bay. The shutting down of that oil field, which occurred earlier this week, has already had an impact on the price of oil nationwide. The Governor is concerned about the long term impact of Prudhoe Bay on prices in Maine.

"I'm recommending the President take the prudent action of releasing the amount of crude a day that is lost from Prudhoe Bay production," said Governor Baldacci. "This is a step that will go a long way in offsetting the impact now and in the future of the loss of the oil supplied by BP. A solution is necessary to protect Maine and the nation against supply reduction and price increases."

The text of the letter the Governor sent to the President follows. Copies were sent to Energy Secretary Samuel Bodman and the Maine Congressional Delegation.

August 8, 2006

President George Bush

White House

Washington, D.C. 20500

Dear President Bush:

The recent announcement by BP (British Petroleum) that they are shutting their Prudhoe Bay oilfield, the biggest oilfield in the United States, due to the detection of severe pipeline corrosion is expected to have a large impact on oil prices. Shortly after it was announced, oil jumped to more than $77.00 per barrel on the spot market. The shutdown will reduce U.S. oil production by 400,000 barrels a day (or 8 percent), and BP officials don't know how long it will be off line. This is an added burden in an already volatile market. This situation demands immediate attention and prompt action. I write to urge you to act swiftly to counter the price and supply problems.

I recommend you release at least 400,000 barrels of sweet (low sulfur) crude a day from the Strategic Petroleum Reserve (SPR) into the oil markets to offset BP's lost Prudhoe Bay production, and continue this daily release for as long as it takes for BP to fix their pipeline problems. As of August 4, 2006, SPR currently holds 687.4 million barrels of crude oil, including 273.6 million barrels of sweet crude. At a withdrawal rate of 400,000 barrels per day, the SPR can make releases for more than 22 months without exhausting the available supply of sweet crude. This step will assure that the BP problem is being offset both in terms of its impacts on price and supply.

The consequences of the shutdown of the Prudhoe Bay oilfield will have significant effects on the people and businesses in Maine and the rest of the nation in reduced supplies and increased cost for gasoline and other petroleum products. There is an increasing level of worry and concern felt by our citizens about whether gasoline and heating fuels will be available to them when needed. Your quick and strong response to this significant energy problem can go a long way to reassure our citizens that the US government can and will act decisively to prevent its consequences from harming our economy and our people.

Sincerely,

John E. Baldacci

Governor

cc: Energy Secretary Samuel Bodman

Maine Congressional delegation

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