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Summary:
Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-1974 Arab oil embargo. The program is managed by the Department of Energy (DOE). Physically, the SPR comprises five underground storage facilities, hollowed out from naturally occurring salt domes in Texas and Louisiana. EPCA authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." Congress enacted additional authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383), to permit use of the SPR for short periods to resolve supply interruptions stemming from situations internal to the United States. The meaning of a "severe energy supply interruption" has been controversial. A spike in crude and product prices often stirs calls to use the SPR. However, the statute intends use of the SPR only to ameliorate discernible physical shortages of crude oil. The dynamics of world oil markets, and price sensitivity to planned or unplanned events that temporarily reduce production from the refining sector, have added new dimensions and complexities to decision making on when to fill and to use the SPR. The capacity of the SPR is 727 million barrels, and it currently holds about 698 million barrels of crude oil. In addition, a Northeast Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage. The SPR could be drawn down initially at a rate of 4.3 million barrels per day (mbd) for up to 90 days; thereafter, the rate would begin to decline. At issue in recent years has been whether SPR capacity should be expanded and whether the reserve should continue to be filled. The Energy Policy Act of 2005 (EPACT, P.L. 109-58) permanently authorized the SPR and permits fill only if it can be established that adding to the SPR is not placing upward pressure on prices. During the period FY1999-FY2007, roughly 139 million barrels of royalty-inkind (RIK) oil have been added to the SPR, with an estimated 19.1 million barrels to be acquired during FY2008. This is oil turned over to the U.S. government in lieu of cash royalties on offshore oil production from federal leases that would otherwise be paid to the Treasury. Legislation has been introduced during the 110th Congress (H.R. 5146, S. 2598) to suspend RIK fill. The legislation enacted in 2005, EPACT, also requires, "as expeditiously as practicable," expansion of the SPR to its authorized maximum of 1 billion barrels. Congress approved $25 million in the FY2008 budget for land acquisition for a site in Richton, Mississippi, that would add 160 million barrels of capacity, but rejected spending for any other expansion work. In FY2009, the Administration is again seeking funds for this purpose, for which there still appears to be limited support. The FY2008 request was $331.6 million; Congress approved spending of $186.8 million. The FY2009 request is $346.9 million. The Administration has requested $9.8 million for the Northeast Heating Oil Reserve in FY2009.
