The Strategic Petroleum Reserve:
Authorization, Operation, and
Drawdown Policy
Anthony Andrews
Specialist in Energy and Defense Policy
Robert Pirog
Specialist in Energy Economics
April 2, 2012
Congressional Research Service
7-5700
www.crs.gov
R42460
CRS Report for Congress
Pr
epared for Members and Committees of Congress

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Summary
Congress authorized the Strategic Petroleum Reserve (SPR) in the 1975 Energy Policy and
Conservation Act (EPCA) to help prevent a repetition of the economic disruption caused by the
1973-1974 Arab oil embargo. EPCA specifically authorizes the President to draw down the SPR
upon a finding that there is a “severe energy supply interruption.” The meaning of a “severe
energy supply interruption” has been controversial. The authors of EPCA intended the SPR only
to ameliorate discernible physical shortages of crude oil. Historically, increasing crude oil prices
typically signal market concerns for supply availability. However, Congress deliberately kept
price trigger considerations out of the President’s SPR drawdown authority because of the
question about what price level should trigger a drawdown, and the concern that a price threshold
could influence market behavior and industry inventory practices. International Energy Agency
member countries (which include the United States) have committed to maintaining emergency
reserves equal to 90 days of net crude oil imports, developing programs for demand restraint in
the event of emergencies, and agreeing to participate in allocation of oil deliveries among the
signatory nations to balance a shortage.
The Department of Energy (DOE) manages the SPR, comprised of five underground storage
facilities, solution-mined from naturally occurring salt domes in Texas and Louisiana. The 2005
Energy Policy Act authorized SPR expansion to a capacity of 1 billion barrels, but physical
capacity expansion of the SPR has not proceeded beyond 726.6 million barrels. The SPR’s
maximum drawdown capacity is 4.4 million barrels per day, based on the capacity of the
pipelines and marine terminals that serve it. Legislation restricts SPR sales to no more than 30
million barrels over a 60-day period for anything less than a severe energy supply interruption.
Congress initially appropriated funds to fill the SPR through crude oil purchases, but ended that
practice in 1994. In 2000, the Department of Energy began acquiring oil to fill the SPR through
the royalty-in-kind (RIK) program. In lieu of paying cash royalties on Gulf of Mexico leases,
producers diverted a portion of their production volume to the SPR. The Secretary of the Interior
terminated the RIK program in 2011.
Sales and loans of crude from the SPR have been carried out for several different reasons. The
1990 Energy Policy and Conservation Act Amendments expanded SPR drawdown authority to
include responding to short term supply interruptions stemming from situations internal to the
United States. U.S. Presidents have authorized emergency sale of SPR crude during the 1990
Persian Gulf War, in the aftermath of Hurricanes Katrina and Rita in 2005, and after a prolonged
disruption of Libyan crude in 2011. After civil unrest in Libya curtailed its crude oil production in
the spring of 2011, and speculative bidding began driving up global crude oil prices, President
Obama ordered an SPR auction to satisfy International Energy Agency treaty obligations. In
addition to these emergency sales, the Department of Energy, from time-to-time, has conducted
drawdowns to test the SPR system, make loans to help refiners bridge temporary supply
disruptions, and generate revenue for budget deficit reduction.
The 30.64 million barrel SPR sale in 2011 reduced the SPR’s inventory from 726.6 million
barrels to 695.9 million barrels. The SPR currently holds the equivalent of 80 days of import
protection (based on 2012 data of 8.72 million barrels per day of net petroleum imports).
Congressional Research Service

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Contents
Introduction...................................................................................................................................... 1
Background─Establishing the SPR ................................................................................................. 1
International Energy Agency Obligation ......................................................................................... 2
SPR Drawdown Authorities............................................................................................................. 3
Severe Energy Supply Interruption Emergencies...................................................................... 3
Severe Domestic Energy Supply Interruption ........................................................................... 3
Test Sale..................................................................................................................................... 4
SPR Sites ......................................................................................................................................... 4
Bryan Mound............................................................................................................................. 6
Big Hill ...................................................................................................................................... 6
West Hackberry ......................................................................................................................... 6
Bayou Choctaw ......................................................................................................................... 6
SPR Capacity............................................................................................................................. 7
SPR Releases ................................................................................................................................... 8
1990-1991 Severe Energy Supply Interruption─Desert Storm Desert Shield......................... 11
2005 Severe Domestic Energy Supply Interruption─Hurricanes Ivan, Katrina, and
Rita ....................................................................................................................................... 12
2011 IEA Coordinate Release in Response to Libyan Crude Oil Curtailment ........................ 12
Other Policy Considerations .......................................................................................................... 13
Refining Capacity vs. Crude Supply ....................................................................................... 14
Gasoline Price Increases 2012................................................................................................. 14
The Future of U.S. Imports of Crude Oil ................................................................................ 16
112th Congress SPR Legislation..................................................................................................... 16
Proposals in the 112th Congress ..................................................................................................... 17

Figures
Figure 1. Strategic Petroleum Reserve............................................................................................. 5

Tables
Table 1. Strategic Petroleum Reserve Inventory as of 2012 ............................................................ 5
Table 2. Strategic Petroleum Reserve History of Crude Oil Releases Summary............................. 9

Contacts
Author Contact Information........................................................................................................... 18
Acknowledgments ......................................................................................................................... 18

Congressional Research Service

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Introduction
As Iran threatens to block the Strait of Hormuz, rising crude oil prices have once again led to
calls for releasing oil from the Strategic Petroleum Reserve (SPR).1 The Strait of Hormuz is a key
artery of the global oil market. Persian Gulf oil exporters—Iraq, Kuwait, Saudi Arabia, Iran, the
United Arab Emirates, and Qatar—shipped about 17 million barrels a day (Mb/d) of oil through
the Strait in 2011, which is roughly 20% of the global oil market and 35% of seaborne trade.2 In
2010, the United States imposed economic sanctions that targeted Iran’s energy and banking
sectors, and have affected its ability to export crude oil and import refined petroleum products.3
Additional legislation prohibits expending SPR appropriations on anyone engaged in providing
refined product to Iran, or assisting Iran in developing additional internal capacity to refine oil.4
For further information on Iran’s threat, refer to CRS Report R42335, Iran’s Threat to the Strait of
Hormuz, coordinated by Kenneth Katzman and Neelesh Nerurkar.
Despite the recent rising prices and the blockade threat, markets have not experienced supply
shortages; considerable new capacity has come online, and adequate excess capacity exists
worldwide, particularly in Saudi Arabia. However, the fear is that excess capacity may not be
adequate to make up losses from a blockade; an event that U.S. Navy would not tolerate.5 New
resource development in North Dakota (Bakken Formation) and Ohio (Utica Formation) add to
U.S. capacity. Extending the southern section of the Keystone pipeline to the Gulf Coast would
increase world access to Canadian resources. Until the last quarter of 2011, the United States had
experienced both a drop in crude oil demand and reduced refining output. The United States has
also increased its exports of refined products. Auctioning SPR oil may have a short term influence
on global crude oil prices, but a limited (if any) influence on long term prices.
Background─Establishing the SPR
From the mid-1970s through the present day, the United States has had to absorb a number of
significant spikes in the price of crude oil and petroleum products.6 Whether driven by disruptions
in the physical supply of crude or refined fuels, unexpected demand growth, or by uncertainties

1 The Strait of Hormuz is the narrow waterway that forms the entrance to the Persian Gulf form the Gulf of Oman and
ultimately the Arabian Sea.
2 Energy Information Administration, U.S. Department of Energy, The Strait of Hormuz is the world’s most important
oil transit chokepoint, Today in Energy, January 4, 2012, http://www.eia.gov/todayinenergy/detail.cfm?id=4430#.
3 The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (P.L. 111-195).
4 The FY2010 Energy and Water Appropriations Act (P.L. 111-85).
5 Barbara Starr and Phil Gast, “U.S. Navy won't tolerate ‘disruption through Strait of Hormuz,” CNN U.S., December
28, 2012, http://articles.cnn.com/2011-12-28/middleeast/world_meast_iran-us-hormuz_1_strait-iran-hormuz?_s=
PM:MIDDLEEAST.
6 These have included the Arab oil embargo (1973-1974), the deposing of the Shah of Iran, followed by the Iranian
revolution (1979-1980), the first Gulf War (1990), and production cuts by the Organization of the Petroleum Exporting
Countries (OPEC) and a resurgence in world oil demand (early 1999 into the fall of 2000). Starting in 2003 with the
U.S. invasion of Iraq, crude oil and product prices began rising to a new nominal high reached in the summer of 2008
for a range of reasons, which are discussed in CRS Report R42024, Oil Price Fluctuations, by Neelesh Nerurkar and
Mark Jickling. Some of the dynamics behind more recent prices are linked to natural events (such as Hurricanes Rita,
Katrina, and Gustav) that disrupted Gulf Outer Continental Shelf (OCS) oil production and the 2010 BP Macondo well
blowout that resulted in a moratorium on OCS drilling permits. The latest rise, at the time of this paper, may depend on
how events in Iran play out.
Congressional Research Service
1

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

owing to international conflicts and instabilities, these price increases have consequences for the
United States. Elevated petroleum prices affect the balance of trade and siphon away disposable
income that might support local economies, investment, or savings.
Congress authorized the U.S. Strategic Petroleum Reserve (SPR) after the disruption of the 1973
Arab-Israeli War. In response to the United States’ support for Israel, the Organization of Arab
Petroleum Exporting Countries (OAPEC) imposed an oil embargo on the United States, the
Netherlands, and Canada, and reduced production. While some Arab crude did reach the United
States, the price of imported crude oil rose from roughly $4/barrel (bbl) during the last quarter of
1973 to an average price of $12.50/bbl in 1974. While no amount of strategic stocks can insulate
an oil-consuming nation from paying the market price for oil in a supply emergency, the
availability of strategic stocks can help mitigate the magnitude of the market’s reaction to a crisis.
One of the original perceptions of strategic stockpile’s value was that it would discourage the use
of oil as a political weapon. OAPEC intended to create a physical supply disruption with their
embargo. This explains, in part, why Congress’s motivation in creating the SPR focused
especially on a deliberate and dramatic physical oil supply disruption and on mitigating the
significant economic impacts of a shortage stemming from international events.
In response to the 1973 embargo, Congress authorized the Strategic Petroleum Reserve in the
1975 Energy Policy and Conservation Act (EPCA)7 to help prevent a repetition of the economic
disruption that the Arab oil embargo had caused. In the event of a supply interruption, proponents
reasoned that introducing oil into the market from the SPR would offset the lost supply and in
doing so help calm markets, mitigate sharp price spikes, and reduce economic disruptions. The
SPR would also buy time for the crisis to sort itself out or for diplomacy to seek some resolution
before a potentially severe oil shortage escalated the crisis. The SPR was to contain enough crude
oil to replace imports for 90 days, with a requirement initially of 500 million barrels in storage. In
May 1978, Congress authorized the SPR’s expansion to 750 million barrels, and in 2005
authorized an expansion to 1 billion barrels.8 The George W. Bush Administration unsuccessfully
attempted to persuade Congress of the need to expand the SPR to 1.5 billion barrels.
International Energy Agency Obligation
The Arab oil embargo also fostered the establishment of the International Energy Agency (IEA)
to develop plans and measures for emergency responses to energy crises. Strategic stocks are one
of the policies included in the agency’s International Energy Program (IEP). Signatories to the
IEA, including the United States,9 are committed to maintaining oil stocks (inventories)
equivalent to 90 days of its prior year’s net imports, developing programs for demand restraint in
the event of emergencies, and agreeing to participate in allocation of oil deliveries among the
signatory nations to balance a shortage among IEA members. In 2011 the United States
participated in a coordinated IEA drawdown in response to the shutdown of Libyan oil exports.

7 P.L. 94-163, Section 154 Strategic Petroleum Reserve Plan.
8 The Energy Policy Act of 2005, P.L. 109-58 Section 301 Permanent Authority to Operate the Strategic Petroleum
Reserve and Other Energy Programs.
9 IEA member countries are Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Japan, Republic of Korea, Luxembourg, the Netherlands, New Zealand,
Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. See
http://www.iea.org/about/membercountries.asp.
Congressional Research Service
2

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

(See below.) At full capacity, the SPR might afford the United States roughly 80 days or more of
net import protection, depending upon the pace of recovery of the domestic economy. These
measures of days of protection assume a total curtailment of oil supply to importing nations, a
scenario that is highly unlikely. This would be especially true for the United States, given that
Canada is currently the nation’s largest foreign source for crude oil.
Some IEA member nations require a certain level of stock holding by the private sector or by both
the public and private sectors. The private oil sector holds roughly 60% of IEA stocks, whereas
governments and supervisory agencies hold the remaining 40%.10 (The U.S. federal government
holds 100% of the SPR stock.)
SPR Drawdown Authorities
Presidential authority to authorize a drawdown depends on making the determination that a
severe supply interruption exists nationally or internationally (and the United States is under
obligation to the international energy programs) or is imminent. In the case of an international
interruption, the President may release an unlimited volume of crude oil (within the SPR’s
operational limits). In the case of a national interruption, statutory limitations apply. The
Secretary of Energy also has limited authority to release crude oil for a test drawdown.
Severe Energy Supply Interruption Emergencies
The Energy Policy and Conservation Act (EPCA, P.L. 94-163) authorized drawdown of the
Reserve upon a finding by the President that there is a “severe energy supply interruption.” By
the statute, such an interruption exists when the President determines that
1. an emergency situation exists and there is a significant reduction in supply which
is of significant scope and duration;
2. a severe increase in the price of petroleum products has resulted from such
emergency situation; and
3. a price increase is likely to cause a major adverse impact on the national
economy. 11
Severe Domestic Energy Supply Interruption
Congress enacted additional drawdown authority in the 1990 Energy Policy and Conservation Act
Amendments (P.L. 101-383) after the Exxon Valdez oil spill, which interrupted the shipment of
Alaskan oil, triggering spot shortages and price increases. The intention was to provide for an
SPR drawdown under a less rigorous determination than EPCA mandated. This provision
authorized the President to use the SPR for domestic energy supply shortages without having to
declare a “severe energy supply interruption” or the need to meet obligations of the United States
under the international energy program.12

10 See http://www.iea.org/Textbase/subjectqueries/keyresult.asp?KEYWORD_ID=4103.
11 42 U.S.C. §6241 (a).
12 42 U.S.C. §6241 (h).
Congressional Research Service
3

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Under the additional authorities in P.L. 101-383, the President can initiate a drawdown in the
event of a circumstance that “constitutes, or is likely to become, a domestic or international
energy supply shortage of significant scope or duration” and where “action taken ... would assist
directly and significantly in preventing or reducing the adverse impact of such shortage.” This
authority limits SPR sales to no more than 30 million barrels over a maximum 60-day period only
when the SPR level is above 500 million barrels. The Bush Administration took advantage of this
authority when it offered 30 million barrels of SPR oil on September 2, 2005, as part of the IEA
coordinated drawdown in response to Hurricanes Katrina and Rita. These authorities also
provided for U.S. participation in emergency-sharing activities of the International Energy
Agency without risking violation of antitrust law and regulation.
Test Sale
By law, the Secretary of Energy must periodically evaluate SPR drawdown and sale procedures,
and is authorized to carry out a test drawdown and sale, or exchange of petroleum products from
the reserve, up to 5 million barrels. 13
SPR Sites
The SPR physically comprises four sites, two in Texas and two in Louisiana (Figure 1). The sites
offer access to both marine terminals and pipeline systems needed for moving crude oil to and
from the SPR. Each site consists of an underground salt dome (a naturally occurring geologic
structure), solution-mined to create storage caverns. Stored crude oil is removed by injecting
water to displace the oil. The cavern remains structurally intact as long as the stored oil remains
in place. In the event of a sale or exchange, repeated water injections will begin to compromise
the structural integrity of the caverns.14
The SPR’s storage capacity had expanded to 727 million barrels, and its inventory had reached
nearly 700 million barrels before Hurricanes Katrina and Rita in 2005. Following the storms,
DOE loaned some crude oil to refiners and sold some at auction. Borrowers of SPR oil repay their
loans “in-kind” with a premium, essentially returning a larger amount of oil than borrowed.15 The
SPR reached its maximum fill of 727 million barrels by 2010 (through royalty-in-kind
acquisition) and remained at the level until the 2011 drawdown to 695 million barrels.16 The SPR
currently holds the equivalent of 80 days of import protection (based on 2012 import data of 8.72
million barrels per day of net petroleum imports). Table 1 shows the current SPR inventory level,
accounting for the 30 million barrels sold in the summer of 2011.


13 U.S.C. §6241 (g).
14 Oil stored at a fifth SPR site, Weeks Island, LA, was transferred and the site was decommissioned in 1996 because of
problems with the structural integrity of the cavern unrelated to drawdown activity.
15 Details and current levels of SPR inventory are updated regularly at http://www2.spr.doe.gov/DIR/SilverStream/
Pages/pgDailyInventoryReportViewDOE_new.html.
16 DOE Notice of Sale DE-NS96-11PO97000.
Congressional Research Service
4

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Figure 1. Strategic Petroleum Reserve

Source: DOE Strategic petroleum Reserve Annual Report for Calendar Year 2010.
Table 1. Strategic Petroleum Reserve Inventory as of 2012
(million barrels)
Site
Sweeta Sourb Totalc
Bryan Mound, Brazoria County, Texas
67.5
176.4
253.9
Big Hill, Jefferson County, Texas
62.8
97.4
170.2
West Hackberry, Cameron Parish, Louisiana
109.7
108.0
227.8
Bayou Choctaw, Iberville Parish, Louisiana
21.7
51.8
73.6
Subtotal Underground Inventory
261.8
433.5
725.4
Tanks and Pipelines
0.7
0.4
1.2
Total Inventory
262.6
434.0
695.9
Source: DOE, Strategic Petroleum Reserve Annual Report for Calendar Year 2010 minus quantities noted in
DOE Notice of Sale DE-NS96-11PO97000.
Notes:
a. Sulfur content not exceeding 0.5%.
b. Sulfur content greater than 0.5%.
c. Total does not add due to rounding.
Congressional Research Service
5

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Bryan Mound
The Bryan Mound storage site is located in Brazoria County, TX, approximately three miles
southwest of Freeport. The site has 20 storage caverns with a total storage capacity of 254 million
barrels, and a cavern inventory of 253.9 million barrels. The Bryan Mound site began operation in
1986 and has remained operational since then.
Big Hill
The Big Hill storage site is located in Jefferson County, TX, approximately 26 miles southwest of
Beaumont. The site has 14 storage caverns, a combined storage capacity of 171 million barrels,
and a cavern inventory of 170.2 million barrels. The Big Hill site began full operation in 1991
and has remained operational since then.
West Hackberry
The West Hackberry storage site is located in Cameron Parish, LA, approximately 25 miles
southwest of Lake Charles. The site has 22 storage caverns with a combined storage capacity of
228 million barrels, and a cavern inventory of 227.8 million barrels. The West Hackberry site
began full operation in 1988 and has remained operational since then.
Bayou Choctaw
The Bayou Choctaw storage site is located in Iberville Parish, LA, approximately 12 miles
southwest of Baton Rouge. The site has six storage caverns, an authorized storage capacity of 74
million barrels, and a cavern inventory of 73.6 million barrels. The Bayou Choctaw site began
full operation in 1987 and has remained operational since then.
In October 2007, Bayou Choctaw’s authorized cavern capacity temporarily decreased from 76
million barrels to 73.5 million barrels. Bayou Choctaw Cavern 20 had crept to within 60 feet of
the salt dome’s edge and required replacement due to the risk of breaching the salt dome.17 The
cavern has passed all integrity tests and is not in any immediate danger of leaking, however. To
limit any risk, DOE reduced the oil stored in Cavern 20 from 7.5 million barrels to 3.2 million
barrels by using only the upper portion of the cavern. DOE temporarily stored Cavern 20’s oil in
the Big Hill and West Hackberry caverns. Instead of physically expanding the caverns, additional
storage space came from displacing the brine cushion at the bottom of the two caverns. The brine
cushions help counteract cavern creep that results from the salt dome’s geological deformation.
DOE is currently acquiring a 10-million-barrel replacement cavern in the Bayou Choctaw salt
dome. The replacement cavern would be available for oil storage in December 2012 and would
provide capacity for the 3.2 million barrels remaining in Cavern 20 and the 4.3 million barrels
temporarily stored at Big Hill and West Hackberry, and provide an additional 2.5 million barrels
of spare capacity. Plans call for emptying and abandoning Cavern 20.18

17 Personal communication with David Johnson, DOE Deputy Assistant Secretary for Petroleum Reserves, March 7,
2011.
18 On March 1, 2011, Senators Jack Reed and Sheldon Whitehouse urged President Obama to sell the oil from the
Bayou Choctaw cavern rather than move it to a new cavern as proposed by DOE.
Congressional Research Service
6

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

SPR Capacity
The Energy Policy Act of 2005 (EPAct) required expansion of the SPR to a maximum physical
capacity of 1 billion barrels “as expeditiously as practicable.” Advocates for expansion argued
that the SPR would need to be larger for the United States to be able to maintain stocks equivalent
to 90 days of net imports. DOE evaluated a site in Richton, MS, as a possible location for an
additional 160 million barrels of capacity. However, in FY2011, the Obama Administration
cancelled SPR expansion plans, citing an Energy Information Administration projection that
“U.S. petroleum consumption and dependence on imports will decline in the future and the
current Reserve’s projection will gradually increase to 90 days by 2025.” 19
The SPR is designed with a drawdown rate of roughly 4.4 million barrels per day for up to 90
days; thereafter, the rate would begin to decline. Drawdown is limited by the capacity of the
takeaway capacity of pipelines and marine terminals servicing the SPR. The first major
drawdown in early 1991 (the Persian Gulf War) confirmed SPR’s operability. A life extension
program, initiated in 1993, upgraded or replaced all major systems to ensure the SPR’s readiness
to 2025.
The SPR’s current capacity remains physically limited to 727 million barrels, with current
inventory at 696 million barrels. Refilling the SPR after an ordered drawdown remains a
presidential discretion, presumably at a time when the price of crude oil declines, or political and
market conditions make it economically advantageous to do so.
The initial crude oil that filled the SPR came from purchases paid though appropriated funds. As
an alternative to appropriated funds, DOE proposed accepting a portion of the royalties payments
for Gulf of Mexico oil leases in the form of oil (royalty in kind) rather than as revenues. While
RIK avoids the necessity of making outlays for purchasing oil, it also meant a loss of revenues in
settling royalties in wet barrels rather than in cash payments to the U.S. Treasury. DOI worked
out final details during the late winter of 1999. In mid-November of 2001, President Bush ordered
the SPR filled to 700 million barrels, principally through oil acquired as royalty-in-kind (RIK).
Between 2001 and 2007, RIK deliveries totaled roughly 140 million barrels and forgone receipts
to the Department of the Interior an estimated $4.6 billion. DOE had estimated deliveries of 19.1
million barrels of RIK oil during FY2008 and $1.170 billion in forgone revenues.20 In 2009,
Secretary of the Interior Ken Salazar phased-out the RIK program.21
Without the planned Richton site, even if the RIK program resumed, no additional capacity exists
to take on more crude beyond the maximum 727 million barrels.

19 President’s Budget Request FY2011.
20 Owing to suspension of RIK fill after the passage of legislation in May 2008, these figures will be significantly
lower. Annual figures for RIK deliveries through FY2006 may be found in the Strategic Petroleum Reserve Annual
Report for FY2006, p. 39: http://www.fossil.energy.gov/programs/reserves/publications/Pubs-SPR/
spr_annual_rpt_06.pdf. Estimates for FY2008 furnished in a communication from DOE.
21 Bureau of Ocean Management, Regulation and Enforcement. http://www.mrm.boemre.gov/AssetManagement/
default.htm
Congressional Research Service
7

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

SPR Releases
DOE auctions SPR oil through competitive bidding. It publishes a “notice of sale” that includes
the volume, characteristics, and location of the petroleum for sale; delivery dates and procedures
for submitting offers; as well as measures for assuring performance and financial responsibility.
Bids are reviewed by DOE and awards offered.22 DOE estimates that oil could enter the market
roughly two weeks after the appearance of a notice of sale.23
To date, the SPR has released over 160 million barrels for various purposes (Table 2). Presidents
have ordered releases on four occasions, some 63 million barrels in total, in response to severe
energy supply interruptions; the SPR’s originally intent. On eleven other occasions, DOE has lent
oil (nearly 68 million barrels in total) to mitigate temporary supply interruptions. The borrowers
repaid their loans by replacing the crude oil and added a small volume as a premium. On two
occasions, sales generated revenue as a budget deficit reduction tool, as did the initial 1985
Weeks Island test sale.
The Clinton Administration introduced a new dimension to SPR drawdown and sale with its
proposal in its FY1996 budget to sell 7 million barrels to help finance the SPR program. While
agreeing that a sale of slightly more than 1% of SPR oil was not about to cripple U.S. emergency
preparedness, some in Congress vigorously opposed the idea, in part because it might establish a
precedent that would bring about additional sales of SPR oil for purely budgetary reasons, as did
indeed occur. There were three sales of SPR oil during FY1996. The first was to pay for the
decommissioning of the Weeks Island site. The second was for reducing the federal budget
deficit, and the third was to offset FY1997 appropriations. The total of 28.1 million barrels sold
raised revenues of $544.7 million. Since then, the Obama proposed selling SPR oil to reduce
deficit spending in FY2011.
The original EPCA authorities permit “exchanges” of oil for acquiring additional oil for the SPR.
Under an exchange, a company borrows SPR crude and later replaces it, including an additional
quantity of oil as a premium for the loan. There were seven exchanges between 1996 and 2005.
The most recent one (with the exception of a test exchange in the spring of 2008) was in June
2006. After a temporary closure of a ship channel blocked crude oil shipments to two refineries,
ConocoPhillips and CITGO borrowed 750,000 barrels of sour crude and later replaced it and
added a premium.
Some of the events precipitating major releases are discussed below.

22 10 C.F.R. §625.
23 See http://www.fe.doe.gov/programs/reserves/spr/spr-facts.html. For more detail on the sales procedure, see U.S.
Federal Register, Department of Energy, Price Competitive Sale of Strategic Petroleum Reserve Petroleum; Standard
Sales Provisions: Final Rule, July 27, 2005, pp. 39363-39382; available at http://www.fe.doe.gov/programs/reserves/
spr/spr_rule_070705.pdf. DOE has a history of SPR drawdowns, sales, and exchanges on the web at
http://www.fe.doe.gov/programs/reserves/spr/spr-drawdown.html.
Congressional Research Service
8

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Table 2. Strategic Petroleum Reserve History of Crude Oil Releases Summary
(sale or exchange in barrels)
Budget
Deficit
Date Purpose
Sale
Reduction Exchange
1985 -
Test Sale
967,000

November
After extending the Energy Policy and Conservation Act
in June 1985, Congress authorized DOE to conduct test
sales of up to 5 million barrels to involve the private
sector in the competitive sales process.
1990 -
Desert Shield
3,900,000

October
President George H. W. Bush, ordered a 5-million-barrel
test sale to “demonstrate the readiness of the [Reserve]
system under real life conditions.” Only 3.9 million barrels
sold because of the lack of bids for one of the six types of
crude oil advertised.
1991 -
Desert Storm
17,300,000

January
President Bush authorized a 33.75 million barrel
drawdown over a 45-day period under a coordinated
emergency response plan drawn up by the International
Energy Agency. DOE accepted bids from 13 companies
that bid on only 17.3 million barrels of Reserve oil
because industry offers for the higher-sulfur “sour” crude
oil were substantially lower than bids for the lower-sulfur
“sweet” crude.
1996 -
Weeks Island Sale
5,100,000

March
After becoming geological y unstable, DOE decided to
decommission the Weeks Island SPR Site, and offered 5.1
million barrels for sale.
1996 -
Pipeline Blockage, Seaway Pipeline System

900,416
April
During a pipeline blockage to Cushing, OK, ARCO paid a
fee plus a future price differential for leasing the oil, and
replaced the oil with an equivalent grade of crude within
six months under an emergency crude oil lease exchange
agreement.
1996 - May
Deficit Reduction
12,800,000

Omnibus Consolidated Rescissions and Appropriations
Act of 1996, P.L. 104-134.
1996 -
Deficit Reduction
10,200,000

October
Omnibus Consolidated Appropriations Act of 1997, P.L.
104-208.
1998 -
Maya Exchange

11,000,000
August
DOE exchanged 11million barrels of Maya crude for 8.5
million barrels of other higher value crude oil to improve
the SPR’s operational efficiency.
Congressional Research Service
9

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Budget
Deficit
Date Purpose
Sale
Reduction Exchange
2000 - June Calcasieu Ship Channel Closure

1,000,000
DOE exchanged 500,000 barrels each with CITGO and
Conoco, due to blockage of the ship channel that allowed
incoming crude oil shipments to those refineries. Action
taken in order to avert temporary shutdown of both
refineries.
2000 -
Establish NEHHOR

2,836,000
August
DOE exchanged 2.8 million barrels of crude oil to pay for
the first year of tank-storage and stocks for establishing a
2-million-barrel Northeast Home Heating Oil Reserve.
2000 -
Exchange 2000

30,000,000
October
DOE exchanged 30 million barrels in response to concern
over low distillate levels in Northeast.
2002 -
Hurricane Lilli

98,000
October
DOE exchanged 98,000 barrels with Shel Pipeline Co. to
secure Capline storage tanks in advance of Hurricane Lili.
2004 -
Hurricane Ivan

5,400,000
September
DOE exchanged 5.4 million barrels of sweet crude due to
disruptions in the Gulf of Mexico caused by Hurricane
Ivan.
2005 -
Hurricane Katrina
11,000,000
9,800,000
September
President George W. Bush issued a Finding of a Severe
Energy Supply Interruption as defined in section 161(d) of
the Energy Policy and Conservation Act (EPCA - 42
U.S.C. 6 241(d)) and directed DOE to offer 15 million
barrels of sweet crude and 15 million barrels of sour
crude as part of an IEA coordinated effort. 10.8 million
barrels of sweet crude and 200 thousand barrels of sour
crude sold.
2006 -
Barge Accident, Sabine Neches Ship Channel

767,000
January
DOE exchanged 767,000 barrels of sour crude with Total
Petrochemicals USA due to closure of the Sabine Neches
ship channel to deep-draft vessels after a barge accident in
the channel. Action was taken to avert temporary
shutdown of the refinery.
2006 - June Calcasieu Ship Channel Closure

750,000
DOE exchanged 750,000 barrels of sour crude with
ConocoPhillips and Citgo due to the closure for several
days of the Calcasieu Ship Channel to maritime traffic.
The closure resulted from the release of a mixture of
storm water and oil. Action was taken to avert temporary
shutdown of both refineries.
Congressional Research Service
10

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Budget
Deficit
Date Purpose
Sale
Reduction Exchange
2008 -
Hurricanes Gustav and Ike

5,389,000
September
Following Hurricanes Gustav and Ike, DOE loaned nearly
5.4 million barrel to Marathon, Placid, ConocoPhillips,
Citgo and Alon USA after their supplies had been cut off
due to shutdown of the petroleum industry in the Gulf
region. The companies repaid the loans with a premium
of 93,350 barrels.
2011 – July
IEA Coordinated Release

President Obama issued a Finding of a Severe Energy
Supply Interruption and directed DOE to offer 30 million
barrels of sweet crude as part of an IEA coordinated
effort to offset Libya’s production curtailment.
30,640,000

Total to date
68,907,000
23,640,000 67,940,416
Source: U.S. DOE http://fossil.energy.gov/programs/reserves/spr/spr-drawdown.html
Notes: Barrels rounded to thousands.
1990-1991 Severe Energy Supply Interruption─Desert Storm
Desert Shield
In the aftermath of the Iraqi invasion of Kuwait on August 2, 1990, escalating gasoline prices and
the prospect of a worldwide crude shortfall (approaching 4.5 million-5.0 million barrels daily)
prompted calls for an SPR drawdown. The debate focused on whether SPR oil should be used to
moderate anticipated price increases, before oil supply problems had become physically evident.
The George H. W. Bush Administration indicated that it would not draw down the SPR in the
absence of a physical shortage simply to lower prices. On the other hand, some argued that a
perceived shortage does as much immediate damage as a real one, and that flooding the market
with stockpiled oil to calm markets is a desirable end in itself. From this perspective, the best
opportunity to use the SPR came during the first months of the crisis, which some argued the
Administration squandered. It became clear during the fall of 1990 that in a decontrolled market,
physical shortages are less likely to occur. Instead, an expression of supply shortages comes in the
form of higher prices, as purchasers are free to bid as high as they wish to secure scarce supply.
Within hours of the first air strike against Iraq in January 1991, the White House announced that
President Bush was authorizing a drawdown of the SPR, and the IEA activated the plan on
January 17. Crude prices plummeted by nearly $10/barrel in the next day’s trading, falling below
$20/bbl for the first time since the original invasion. Oil analysts attributed the price drop to
optimistic reports about the allied forces’ crippling Iraqi air power and the diminished likelihood,
despite the outbreak of war, of further jeopardy to world oil supply. There appeared to be no need
for the IEA plan and the SPR drawdown to help settle markets, and there was some criticism of it.
DOE offered more than 30 million barrels of SPR oil for bid, but only accepted bids on 17.3
million barrels. Successful bidders took oil delivery in early 1991.
The Persian Gulf War drawdown provided an important example about ways to maximize the
SPR’s usefulness in decontrolled markets. Legislation enacted during the 101st Congress (P.L.
Congressional Research Service
11

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

101-383), as previously noted, had expanded SPR drawdown authority by allowing its use in
preventing minor or regional shortages from escalating into larger ones; for example, the
shortages on the West Coast and price jump that followed the Alaskan oil spill of March 1989. In
the 102nd Congress, omnibus energy legislation (H.R. 776, P.L. 102-486) broadened the
drawdown authority further to include instances where a reduction in supply appeared sufficiently
severe to bring about an increase in the price of petroleum likely to “cause a major adverse
impact on the national economy.” The original EPCA authorities permit “exchanges” of oil for
acquiring additional oil for the SPR. Under an exchange, a company borrows SPR crude and later
replaces it, including an additional quantity of oil as a premium for the loan. There were seven
exchanges between 1996 and 2005. The most recent one (with the exception of a test exchange in
the spring of 2008) was in June 2006. After a temporary closure of a ship channel blocked crude
oil shipments to two refineries, ConocoPhillips and CITGO borrowed 750,000 barrels of sour
crude and later replaced it and added a premium.
2005 Severe Domestic Energy Supply Interruption─Hurricanes
Ivan, Katrina, and Rita
Prior to 2005, growth in world wide oil demand had begun to constrain U.S. refinery production,
particularly as the demand for gasoline and refined products increased with an expanding
economy. Hurricanes Katrina and Rita had interrupted both Gulf of Mexico crude oil production
and Gulf Coast refinery operations. The gasoline and refined product price increases that
followed owed more to the shortages resulting from Gulf refinery shutdowns and marine product
transportation interruption than worldwide shortage of crude oil. Thus the sale of crude from the
SPR had relatively little effect in mitigating the damage caused by the hurricanes.
2011 IEA Coordinate Release in Response to Libyan Crude
Oil Curtailment
In its FY2012 Budget Request, the Obama Administration had proposed a $500 million sale of
petroleum from the SPR, proposed for completion by March 1, 2012, for deposit in the General
Fund of the Treasury. The House Energy and Water Committee recommended the $500 million
sale provided that the quantity sold would be replaced during FY2012 under paragraph (a)1 or 3
of Section 160 of the Energy Policy and Conservation Act (42 U.S.C 6240 (a)(1) or (3)), which
authorizes acquisition of crude oil produced from federal lands, or through purchase or exchange,
respectively.
However, political unrest that began in Tunisia and spread to Egypt and Libya in early 2011 had
led to the surge in oil prices observed during the first quarter of the year. To offset the loss of
Libyan exports, calm markets, and to moderate prices, some Congressional Members called for
releasing oil from the SPR. Some reasoned that an oil release from the SPR would dampen
speculative bidding that was driving the market, and would reduce prices in the short run.
By early March 2011, the price of West Texas Intermediate (a light sweet crude) traded on the
New York Mercantile Exchange (NYMEX) exceeded $100 per barrel. In Europe, the price of
Brent crude oil (a heavier and higher in sulfur crude than WTI) exceeded $115 per barrel. These
prices (approximately 20% higher than before the outbreak of political unrest) reflected at least
two important factors: first, expectations that the unrest could spread to other countries (some of
which could be major oil producers), and second, an actual curtailment of Libyan exports (to an
Congressional Research Service
12

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

uncertain extent and for an unknown duration). As an offset to the lost Libyan crude exports,
Saudi Arabia indicated that it would expand its exports to keep the world market supplied.
On June 23, 2011, the International Energy Agency (IEA) announced that its 28 member
countries would release 60 million barrels of crude oil and refined products into the global
market. As part of that action, the President directed the Department of Energy to auction 30.237
million barrels of light, sweet crude oil at a base price of $112.78 a barrel.24 The oil came from
the Bryan Mound, Big Hill, and West Hackberry SPR sites. DOE offered all 30 million barrels in
one bid round.
Other Policy Considerations
In a market where there is no physical shortage, oil companies may have limited interest in
purchasing SPR oil unless they have spare refining capacity to turn the crude into useful products,
or want to build crude oil stocks.25 The U.S. government bases its notice of sale on the running
average price of the grade of crude oil it intends to auction, and accepts bids it considers
responsive. If the notice itself does not prompt, or contribute to, a softening of prices, there may
be limited interest on the part of the oil industry in bidding on SPR supply. Although the
possibility exists that prices might decline if additional refined product is released into the
market, it is impossible to predict what quantitative effect an SPR crude drawdown would have.
For example, following the June 23, 2011, announcement of a 30 million barrel release of oil
from the SPR, daily oil prices briefly declined from $94.96 per barrel to $90.70, and then returned
to their previous levels within a week.
There are additional considerations. A unilateral drawdown on U.S. strategic stocks would
probably have less impact on the world oil market than a coordinated international drawdown of
the sort that occurred after the 2011 release to meet IEA obligations vis-à-vis Libya’s production
curtailment. Some might argue that it would be unwise under any scenario for the United States to
draw down its strategic stocks while other nations continue to hold theirs at current levels.
Additionally, it is always possible that producing nations will reduce production to offset any
SPR oil delivered into the market. In the setting of 2012, some might argue that the market is
already well supplied and that short-term supply concerns are not keeping prices high, but current
and anticipated geopolitical events are contributing to higher prices. Others argue that the oil
commodity futures market is behind speculative bidding that is driving prices higher and may be
adding as much as $23 to the price of barrel of oil.26
The SPR is perceived by some as a defensive policy tool against high oil prices. However, if used
without a discernible impact on oil prices, it is possible that the SPR will lose some of whatever
psychological advantage it exercises on prices when left as an untapped option.

24 Derived from the last five days of trading of Light Louisiana Sweet crude oil as assessed by energy pricing service
Argus.
25 Refining capacity utilization rates are 83.7% for the first quarter of 2012, about 1.3% higher than the same period in
2011 taking into account seasonal maintenance and other events that will take refinery units offline temporarily. See
Table 2 at http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html.
26 George Lobsenz, “Speculation Upping Prices by 56 Cents A Gallon—CFTC Member,” IHS The Energy Daily, vol.
40, no. 48 (March 9, 2012).
Congressional Research Service
13

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Refining Capacity vs. Crude Supply
The number of U.S. refineries that process crude oil into fuels (this includes three refinery
complexes each made up of two formerly independent refineries) is decreasing. In 2010, CRS
reported 124 refineries operating with over 18 million barrels per day in capacity. Since then four
refineries have closed, or will close, in the United States. The closures would decrease U.S.
refining capacity by more than 1 million barrels-per-day. HOVENSA announced in January 2012
that it is permanently closing its 350,000 barrel-per-day refinery in St. Croix, Virgin Island.27
Sunoco announced plans to close two Pennsylvania refineries, the 175,000 barrel-per-day Marcus
Hook refinery and the 335,000 barrel-per-day Philadelphia Refinery if it can’t find a buyer.
ConocoPhillips has also announced plans to sell or shutter its 185,000 barrel-per-day Trainer
refinery in Pennsylvania.28 Most of the country’s gasoline is refined in the Gulf Coast region
(Petroleum Administration for Defense District 3), which makes up nearly 45% of the U.S.
refining capacity through 45 refineries processing more than 8 million barrels per day. These
refineries also represent some of the largest and most complex refineries in the United States, if
not the world. Over the last 25 years, the ºAPI gravity of imported crude oils has been decreasing,
while average sulfur content has been increasing. ºAPI gravity, a measure developed by the
American Petroleum Institute, expresses the “lightness” or “heaviness” of crude oils on an
inverted scale. With a diminishing supply of light, sweet (low sulfur) crude oil, U.S. refineries
have had to invest in multi-billion dollar processing-upgrades to convert lower-priced heavier,
sour crude oils to high-value products such as gasoline, diesel, and jet fuel.
The Government Accountability Office (GAO) has observed that the proportion of grades of oil
in the SPR was not as compatible as it could be with the trend of refineries toward being able to
handle heavier grades of crudes.29 GAO observed that 40% of the crude oil refined by U.S.
refineries was heavier than that stored in the SPR. Refineries that process heavy oil cannot
operate at normal capacity if they run lighter oils. Refiners reported to GAO that running lighter
crude in units designed to handle heavy crudes could impose as much as an 11% penalty in
gasoline production and 35% in diesel production. The agency reported that other refiners
indicated that they might have to shut down some of their units. The types of oil currently stored
in the SPR would not be fully compatible with 36 of the 74 refineries considered vulnerable to
supply disruptions. (A majority of the refineries that have pipeline access to the SPR are located
in the Gulf Coast region and the Midwest region.) GAO cited a DOE estimate that U.S. refining
throughput would decrease by 735,000 barrels per day (or 5% of total U.S. refining capacity) if
the 36 refineries had to use SPR oil—a substantial reduction in the SPR’s effectiveness during an
oil disruption, especially if the disruption involved heavy oil.
Gasoline Price Increases 2012
Over the first two months of 2012, retail gasoline prices increased by over 15%. The price of
gasoline rose from an average price of $3.21 per gallon in late December 2011 to a price of $3.64

27 HOVENSA, “HOVENSA Announces Closure of St. Croix Refinery,” press release, January 12, 2012,
http://www.hovensa.com/.
28 Jeffrey Kerr and Anna Driver, “Conoco to sell or shut Pennsylvania Refinery,” Reuters, September 27, 2011,
http://www.reuters.com/article/2011/09/27/us-conocophillips-trainer-idUSTRE78Q5R320110927.
29 U.S. Government Accountability Office, Strategic Petroleum Reserve—Options to Improve the Cost-Effectiveness of
Filling the Reserve, GAO-08-512T, February 26, 2008, http://www.gao.gov/new.items/d08521t.pdf.
Congressional Research Service
14

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

in late February. Prices continued to go up, rising to a U.S. average of $3.92 per gallon as of
March 26. 30 With these higher prices came calls for, and against, the release of crude oil from the
SPR as a way to control price increases. For further information on gasoline prices, refer to CRS
Report R42382, Rising Gasoline Prices 2012, by Neelesh Nerurkar and Robert Pirog.
Although there is recognition that a release from the SPR would likely only provide temporary
relief from rising prices, some view it as a signal to the market that a continuing spiral of prices
would be met by resolve and policy action by the United States. The judgment that a release of
crude oil from the SPR provides only temporary relief from rising prices seems well founded. On
June 23, 2011, when gasoline prices were at $3.60 a gallon, President Obama announced a 30
million barrel release from the SPR under IEA obligation. The price of gasoline declined by about
2% over the next two weeks following the SPR release announcement, but by July 8, 2011, the
price had again reached $3.61 per gallon, approximately the same level as before the release.
Gasoline prices continued to rise through the first week of August, before declining later that
month. Gasoline prices averaged about $3.60 per gallon in August, declining to $3.40 per gallon
in October and $3.21 per gallon in December. The gasoline price reductions in the 4th quarter of
2011 are likely related to the reductions in crude oil prices between August and October 2011,
given the lag between acquiring title to crude oil and the oil becoming available as retail gasoline,
as well as refineries switching production from summer to winter grade gasoline.
Crude oil prices also responded immediately to the release of oil from the SPR. The price of oil
was $94.96 per barrel on June 22, 2011.31 On June 23, the day President Obama announced the
SPR release, the price fell to $90.70 per barrel. By June 30, 2011, the price had risen to $95.73
per barrel, exceeding the price before the announcement. The initial market response to the SPR
release lasted about one week. However, the announcement of the SPR release promised to
deliver the oil to market by the end of August. The price of oil began to decline in August 2011
and generally declined during August and September, until reaching $75.40 per barrel on October
4, 2011. Thereafter, prices began to rise, exceeding $100 per barrel later in the year.32
The gasoline price increases of 2012, like virtually all previous price increases, stem from an
increase in the price of crude oil. Crude oil price increases generally result from actual, or
anticipated market tightening: an increase in demand, a reduction in supply, or both. For example,
many viewed the price increases of 2008 as related to the rapid expansion of petroleum demand
in China, India, and other emerging markets. In 2011, the price increases were thought to be
largely attributable to the loss of Libyan production during the revolution in that country. In 2012,
although there are some reductions in supply due to instability in South Sudan, Yemen, and other
areas, the primary driver of higher prices seems to be tensions with Iran and related policy
responses by both sides in the controversy over Iranian nuclear capability.
This environment, where current supplies are uninterrupted but speculation concerning future
availability is active, would appear to many observers to be a situation that a release from the
SPR would do little to mitigate. For example, if Iranian military action succeeded in blocking the

30 Gasoline prices in this section are for Energy Information Administration, conventional regular gasoline. Available at
http://www.eia.doe.gov.
31 The price of crude oil used in this section is the West Texas Intermediate spot price. The data is available at
http://www.eia.doe.gov.
32 Definitive conclusions concerning the relationship between the release of oil from the SPR, changes in the price of
oil, and changes in the price of gasoline are imprecise. Many other factors may have also affected the prices during the
period, either reinforcing or moderating the effect of the SPR release.
Congressional Research Service
15

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

Strait of Hormuz, it would prevent over 17 million barrels per day of crude oil from reaching the
market. This quantity is almost four times the size of the maximum drawdown capacity of
the SPR.
As the nature of the response to Iran’s nuclear development project evolves, and especially if it
results in reduced actual supplies of oil on the world market, a drawdown from the SPR might
become more effective in reducing oil prices. However, until an actual reduction in supply
materializes, releases from the SPR are unlikely to resolve speculative concern on the oil markets.
For more on the increase in gasoline prices, including causes and related issues, see CRS Report
R42382, Rising Gasoline Prices 2012, by Neelesh Nerurkar and Robert Pirog.
The Future of U.S. Imports of Crude Oil
The ability of the SPR to supplement the domestic U.S. supply of crude oil and effectively
replace imports depends on the size of the reserve as well as its drawdown capabilities. Its
effectiveness also depends on the needed level of U.S. imports and the level of U.S. consumption.
Crude oil imports are the difference between U.S. demand and domestic production. If either
demand falls, or domestic production rises, the need for imports declines. Because of a number of
factors, some temporary, including the recession, high prices, and conservation, U.S. consumption
of petroleum products has declined since 2005 by about 9.5%. This decline in consumption has
reduced the demand for crude oil. Over the same period, U.S. production of crude oil increased
from 5.18 million b/d to 5.67 million b/d, an increase of 9.5%. The combination of falling
consumption and increasing production has reduced the share of imports in total consumption
from 49% in 2005 to 45% in 2011. In addition, Canada increasingly provides the United States
with crude oil imports, and arguably represents a secure source of supply.
If the trends of the last six years continue, the U.S. will rely less on crude oil imports.
Consequently, the SPR, even if its capacity and contents remain fixed, may be better able to meet
U.S. requirements in times of supply shortage on the world market.
112th Congress SPR Legislation
The FY2011 Continuing Resolution (P.L. 112-10) had funded the SPR at $123.1 million,
including a rescission of $71.0 million from prior year appropriations. For FY2012, the
Administration requested $121.7 million. The Administration also proposed a sale of $500
million in petroleum from the SPR no later than March 1, 2012, for deposit in the General Fund
of the Treasury. The House Appropriations Committee recommended the $500 million sale
provided that the quantity sold was replaced during FY2012 under paragraph (a)1 or 3 of Section
160 of the Energy Policy and Conservation Act (42 U.S.C 6240 (a)(1) or (3)), which authorizes
acquisition of crude oil produced from federal lands, or through purchase or exchange,
respectively. Both recommendations preceded the Administration’s June 24, 2011, announced sale
of 30 million barrels.
The Consolidated Appropriations Act, 2012 (P.L. 112-74) makes appropriations for FY2012 to
DOE for energy and science programs, including the SPR as well as the SPR Petroleum Account
and the Northeast Home Heating Oil Reserve. The House Appropriations Committee
recommended $192.7 million for FY2012 ($69.5 million above FY2011 and $71 million above
Congressional Research Service
16

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

the budget request). The Senate Appropriations Committee recommended the same funding, and
the final bill appropriated that amount. The final bill also included a rescission of $500 million,
rather than the proposed sale of reserves.
Proposals in the 112th Congress
In the 112th Congress Members have introduced a number of bills that, among other things,
propose expanding the SPR to include refined petroleum product reserves. Arguments in favor of
establishing a refined product reserve are that U.S. oil imports include refined products and that it
could be more efficient and calming to markets if it were not necessary to first draw down SPR
crude and then refine it into needed products. The effect that SPR crude might have on
moderating price increases could also be offset if refineries themselves or oil pipelines carrying
crude to refineries were compromised. The availability of refined product reserves would address
that scenario. Having a regional product reserve would also lessen the likelihood that delivery of
crude or product from the stocks of IEA signatories might overwhelm U.S. port facilities; this
happened in the wake of the European response that followed Hurricanes Rita and Katrina.
Arguments against a product reserve include the prospect that the availability of supplemental
supplies of gasoline from abroad may increase as European demand for diesel vehicles displaces
gasoline consumption there. Additionally, storage of refined product is more expensive than for
crude. Storage of crude in salt caverns is estimated to cost roughly $3.50/barrel per year while
aboveground storage of product in tanks might cost $15-$18/barrel per year. Refined product will
also deteriorate and would need to be periodically sold and replaced to assure the quality of the
product held in the product reserve. Many states and regions also use different gasoline blends,
adding to the complexity of identifying which blends should be stored where, and in what
volume.
H.R. 142, National Strategic Gasoline Reserve would require the Secretary of Energy to set
aside 10 million barrels of refined gasoline products similar to the Northeast Home Heating Oil
Reserve.
H.R. 1017, Enhanced Supply and Price Reduction Act of 2011 or Enhanced SPR Act would
amend the Energy Policy and Conservation Act to require the Strategic Petroleum Reserve (SPR)
to contain at least 30 million barrels of refined petroleum products. It would direct the Secretary
of Energy (DOE) to: (1) sell at least 30 million barrels of light grade petroleum from the SPR and
acquire refined petroleum product; (2) deposit the cash proceeds from such sales into the SPR
Petroleum Account; and (3) from such deposited proceeds withdraw the amount necessary to pay
for the direct administrative and operational costs of the sale and acquisition, including for
acquisition and maintenance of, and improvements to, storage facilities.
H.R. 1861, Infrastructure Jobs and Energy Independence Act among other provisions would
require the Secretary of Energy (DOE) to “… publish a plan to exchange a specified amount of
light grade petroleum from the Strategic Petroleum Reserve for heavy grade petroleum plus
additional cash bonus bids that reflect the difference in market value; and (3) set aside net
proceeds from such exchange for the Energy Independence and Security Fund (to be established
by this act).
H.R. 1914, Gas Price Stabilization Act of 2011 would direct the Secretary of Energy to publish
a plan to (1) sell light grade petroleum from the Strategic Petroleum Reserve (SPR) and acquire
Congressional Research Service
17

---

The Strategic Petroleum Reserve: Authorization, Operation, and Drawdown Policy

an equivalent volume of heavy grade petroleum, (2) deposit the cash proceeds from such sales
into the SPR Petroleum Account established under the Energy Policy and Conservation Act, and
(3) withdraw from such cash proceeds the amount necessary to pay for the direct administrative
and operational costs of the sale and acquisition.
H.R. 1748, Taxpayer and Gas Price Relief Act of 2011 among other provisions would amend
the Energy Policy and Conservation Act to authorize the Secretary of Energy (DOE) to sell at
least 30 million barrels of petroleum from the Strategic Petroleum Reserve (SPR) and acquire
refined petroleum products. It would require the Secretary to deposit the cash proceeds from such
sales into the SPR Petroleum Account. It also would authorize the President to instruct the
Secretary to draw down and sell or exchange petroleum product in a specified amount from the
SPR if a circumstance exists of such significance and scope that action would be warranted to
address market manipulation or otherwise be in the public interest.
H.R. 1807, Enhanced Supply and Price Reduction Act of 2011 or Enhanced SPR Act would
amend the Energy Policy and Conservation Act to require the Strategic Petroleum Reserve (SPR)
to include refined petroleum products within its required capacity of 1 billion barrels of petroleum
products. Furthermore, it would authorize the Secretary of Energy (DOE) to sell at least 30
million barrels of petroleum from the SPR and acquire refined petroleum products; prescribe a
schedule for such transactions; and direct the Secretary to deposit the cash proceeds from such
sales into the SPR Petroleum Account. It would also authorize the President to instruct the
Secretary to draw down and sell or exchange petroleum product from the SPR if a circumstance
exists of such significance and scope that action would be warranted to address market
manipulation or otherwise be in the public interest.

Author Contact Information

Anthony Andrews
Robert Pirog
Specialist in Energy and Defense Policy
Specialist in Energy Economics
aandrews@crs.loc.gov, 7-6843
rpirog@crs.loc.gov, 7-6847



Acknowledgments
Beth A. Roberts, Information Research Specialist
Neelesh Nerurkar, Specialist in Energy Policy


Congressional Research Service
18

---