US House Energy and Commerce leaders ask GAO to examine SPR

US House Energy and Commerce Committee leaders asked the Government Accountability Office to investigate whether the US Strategic Petroleum Reserve is being managed effectively and if the US should continue its participation in the International Energy Agency.

“The SPR was established in 1975 and received its last major life extension between 1993 and 2000. Today, more than 70% of its equipment and infrastructure exceeds its serviceable life,” Chairman Fred Upton (R-Mich.) and Ranking Minority Member Frank Pallone Jr. (D-NJ) said in a Dec. 22 letter to GAO Comptroller General Gene L. Dodaro.

They said the US Department of Energy, which manages the 713.5 million bbl reserve’s four underground storage sites along the Louisiana and Texas Gulf Coast, concluded in a recent report to Congress that the SPR’s aging infrastructure and shifts in US midstream systems have reduced its ability to add incremental barrels of crude oil to the market.

“The report revealed that the effective distribution capacity of the SPR could be more than 2 million bbl below the design drawdown rate of 4.4 million b/d in certain oil disruption scenarios,” Upton and Pallone said. “These findings suggest that the SPR may have difficult meeting its energy supply mission.”

They asked GAO to assess options for the SPR to more efficiently and cost-effectively meet US energy security needs and comply with international obligations by May 31, 2017, concerning:

• The state of the reserve’s surface and subsurface infrastructure, and its ability to mitigate an energy supply disruption’s impact.

• DOE’s management of the SPR, and the quality of DOE’s analysis to support decision-making regarding the reserve’s long-term future.

• Cost-effective options to protect the US from energy supply shocks, including whether the reserve should be maintained and, if so, the optimal configuration, management, and operations, including commercialization and privatization of federal assets.

• Cost-effective compliance options to meet US obligations to the IEA, referring, as necessary, to other member countries’ stock-holding practices.

Since it was established, the SPR has had two emergency drawdowns: 17.3 million bbl were sold to 13 companies on Jan. 31, 1991, during the Operation Deseret Storm campaign against Saddam Hussein’s regime in Iraq; and 20.8 million bbl of loans and sales following Hurricane Katrina in 2005. There also have been test sales, exchanges, and non-emergency sales and coordinated releases.

Contact Nick Snow at nicks@pennwell.com.

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