- The Washington Times - Wednesday, October 18, 2000

The Department of Energy is soliciting new bids for 7 million barrels of oil from the Strategic Petroleum Reserve after two of the companies that won the original bids failed to show the necessary financial backing.

The new deadline is Monday, said Drew Malcolm, a spokesman for the Department of Energy.

Because the first two bidders failed to produce the necessary documents, the Department of Energy now is requiring bidders to post a bond for the oil before they will be considered. They must post a bond of $3 million or 5 percent of the oil for which they are bidding.

The 7 million barrels originally were awarded to Euell Energy Resources and Lance Stroud Enterprises Inc.

Euell, a small Denver company, pulled out of the process Thursday when it realized it would not be able to produce the required letters of credit.

The bid for Lance Stroud, a one-man brokerage firm operating out of a New York City apartment, was dropped yesterday when it also failed to line up financial backers.

President Clinton on Sept. 22 called for a "swap" arrangement, under which 30 million barrels of oil from the Strategic Petroleum Reserve would be released to help quell an 18-month run-up in prices before the winter heating season.

The first 500,000 barrels from the reserve began moving Saturday.

Lance Stroud, who had said he wanted the oil because he cared about rising gasoline prices, had been awarded the second-largest amount of oil from Energy: 4 million barrels worth $133 million at current market price.

The largest bids went to well-known oil companies, such as BP Oil Supply Co., an arm of BP Amoco PLC, which was awarded 6 million barrels, and Marathon Ashland Petroleum LLC, a division of USX-Marathon Group, which will get 3.9 million barrels.

Some of the bid awardees were not well known to the industry: Lance Stroud is a one-man show, Euell is small, and Burhany Energy Enterprises Inc., of Tallahassee, Fla., is new.

Officials from the Energy Department have conceded that in the rush to release the oil reserve, they did not make the proper checks on some of the bidders to verify their experience.

Although Lance Stroud and Euell dropped out, Burhany, which incorporated only two months ago, did present the required paperwork by deadline. The company was awarded 3 million barrels of oil.

The nine companies that won the bidding will have 23 million barrels from the reserve by the end of November. The companies that win the bid for the remaining 7 million barrels will get them by the end of December.

The companies then resell the oil, as New York financial giant Morgan Stanley Dean Witter did over the weekend, or refine it and distribute it to gas stations.

The messy bidding process has prompted a congressional investigation. Last week, Sen. Frank H. Murkowski, Alaska Republican and chairman of the Senate Energy Committee, demanded the Energy Department provide information about how the bids were selected and explain why it selected some inexperienced companies.

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