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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). The capacity of the SPR is 727 million barrels, and it currently holds slightly more than 700 million barrels of crude oil. In addition, a Northeast Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage. At issue in recent years has been whether SPR capacity should be expanded and whether the reserve should continue to be filled. During the period FY1999-FY2007, roughly 139 million barrels of royalty-inkind (RIK) oil were 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. 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. However, the Bush Administration has continued RIK fill. With gasoline prices exceeding, on average, $3.60/gallon, and approaching $4.00/gallon in some regions, some policymakers are proposing that Congress take action to halt RIK deliveries. During the week of April 28th, reports surfaced that an energy bill prompted by high prices was under development by the Majority and that it would include such a provision. A Republican-sponsored bill, S. 2958, introduced on May 1, 2008, the American Energy Production Act of 2008, would suspend fill of the SPR for 180 days. There were reports as well of an amendment suspending fill that might be added in the Senate to the Federal Aviation Authority Reauthorization Bill (H.R. 2881). Legislation to suspend RIK fill (H.R. 5146, S. 2598) was also introduced early in the Second Session of the 110th Congress. 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 refinery production, have added new complexities to decision making on when to fill and to use the SPR. 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. Further environmental assessment of the site is underway.
