Crude oil pipes at SPR Bryan Mound site near Freeport, TX.
The Strategic Petroleum Reserve (SPR) is the world's largest supply of emergency crude oil. The federally-owned oil stocks are stored in huge underground salt caverns along the coastline of the Gulf of Mexico.
Decisions to withdraw crude oil from the SPR are made by the President under the authorities of the Energy Policy and Conservation Act. In the event of an energy emergency, SPR oil would be distributed by competitive sale. The SPR's formidable size (capacity of 727 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy.
The SPR has been used under these circumstances only three times, most recently in June 2011 when the President directed a sale of 30 million barrels of crude oil to offset disruptions in supply due to Middle East unrest. The United States acted in coordination with its partners in the International Energy Agency (IEA). IEA countries released all together a total of 60 million barrels of petroleum.
Authority for limited releases in the form of time exchanges also exists and has been used on several occasions.
The need for a national oil storage reserve has been recognized for at least five decades.
Secretary of the Interior Harold Ickes advocated the stockpiling of emergency crude oil in 1944. President Truman's Minerals Policy Commission proposed a strategic oil supply in 1952. President Eisenhower suggested an oil reserve after the 1956 Suez Crisis. The Cabinet Task Force on Oil Import Control recommended a similar reserve in 1970.
But few events so dramatically underscored the need for a strategic oil reserve as the 1973-74 oil embargo. The cutoff of oil flowing into the United States from many Arab nations sent economic shockwaves throughout the Nation. In the aftermath of the oil crises, the United States established the SPR.
President Ford set the SPR into motion when he signed the Energy Policy and Conservation Act (EPCA) on December 22, 1975. The legislation declared it to be U.S. policy to establish a reserve of up to one billion barrels of petroleum.
The Gulf of Mexico was a logical choice for oil storage sites. More than 500 salt domes, known to be an inexpensive and secure means of petroleum storage, are concentrated along the coast. Also, the Gulf Coast is the location of many U.S. refineries and distribution points for tankers, barges and pipelines. In April 1977, the government acquired several existing salt caverns to serve as the first storage sites. Construction of the first surface facilities began in June 1977.
On July 21, 1977, the first oil - approximately 412,000 barrels of Saudi Arabian light crude - was delivered to the SPR. Fill of the Nation's emergency oil reserve had begun.
In managing the Strategic Petroleum Reserve Program, the Office of Fossil Energy's overriding objective is to maintain the readiness of the oil stockpile for emergency use at the President's direction.
From 1993-2000, the Department of Energy's top priority was to ensure the continued readiness of the Reserve through at least the year 2025 by conducting a major life-extension program. This included replacing or refurbishing pumps, piping and other key components at the SPR's Gulf Coast sites. The program was completed in March 2000 on schedule and below original cost estimates.
On November 13, 2001, President George W. Bush ordered the SPR to be filled to approximately 700 million barrels by continuing to use the royalty-in-kind program carried out jointly between the Department of Energy and the Department of the Interior. The royalty-in-kind program applied to oil owed to the U.S. government by producers who operate leases on the federally-owned Outer Continental Shelf. The producers are required to provide from 12.5 percent to 16.7 percent of the oil they produce to the U.S. government. Under the royalty-in-kind program, the government could either acquire the oil itself or receive the equivalent dollar value. (Note: in September 2009, the Department of the Interior announced the cancellation of the royalty-in-kind program but honored its commitments in existing contracts. The SPR's final cargo of December 25-27, 2009, was royalty-in-kind crude oil.)
In 2005, Congress directed the SPR to take actions to fill to its authorized size of one billion barrels. Because the Reserve currently has a physical capacity of 727 million barrels, the SPR prepared a plan to expand to one billion barrels and conducted a site selection process to construct additional storage facilities. An environmental impact statement was also prepared. However, efforts to expand the SPR to one billion barrels were terminated in 2011.