Andrews Specialist in Energy and Defense Policy
Robert Pirog Specialist in Energy Economics
authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation
Act (EPCA) of 1975 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. As a member of the International Energy Agency—a coalition of
28 countries—the United States agrees to support energy supply security
through energy policy cooperation, commit to maintaining emergency reserves
equal to 90 days of net petroleum oil imports, develop programs for demand
restraint in the event of emergencies, and participate in allocation of
oil deliveries among the signatory nations to balance a shortage.
The Department of Energy (DOE) manages the SPR, which is comprised of 62
underground storage caverns that were solution-mined from naturally
occurring salt domes located at four sites in Texas and Louisiana. The
2005 Energy Policy Act directed SPR expansion to its authorized capacity
of 1 billion barrels, but the SPR’s physical expansion has not proceeded beyond
727 million barrels. The SPR’s maximum drawdown capability 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
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 administratively terminated the RIK program in 2009.
The DOE has conducted sales and loans of crude oil from the SPR 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 sales of SPR crude to meet IEA obligations
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. In
addition to these emergency sales, the Department of Energy has released
oil, from time-to-time, to test the SPR system, make loans to help
refiners bridge temporary supply disruptions, and sold oil at the direction of Congress
to 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).
Date of Report: June 18, 2012
Number of Pages: 22 Order Number: R42460 Price: $29.95
Document available via
e-mail as a pdf file or in paper form.
For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card
number, expiration date, and name on the card. Indicate whether you want e-mail
or postal delivery. Phone orders are preferred and receive priority processing.
Follow us on TWITTER at http://www.twitter.com/alertsPHP