Strategic Petroleum Reserve - A Congressional Research Service Issue Brief : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Strategic Petroleum Reserve

Robert Bamberger
Resources, Science, and Industry Division

October 18, 1999

Article Link



[the remaining chapters are at the Original Site]
Purchases of Crude Oil
Royalty-In-Kind Acquisition for the SPR
Drawdown of the Reserve
Drawdown Capability
Debate Over When to Use the Reserve
Sales of SPR Oil: The 104th Congress
First Session (1995)
Second Session (1996)
A Heating Oil Reserve or Swap?
The FY1998 and FY1999 Budget: Sales Are Trimmed
The FY2000 Budget
Budget Reauthorization of the SPR


The Strategic Petroleum Reserve (SPR) was authorized in late 1975 to protect the Nation against a repetition of the economic dislocation caused by the 1973-74 oil embargo. Three issues dominated SPR policy for years: when to use it, how fast to fill it, and whether it is adequate to the task. However, recent sales of SPR oil for the purpose of raising revenue has prompted some re-examination of SPR policy. The SPR currently holds nearly 575 million barrels.

Congressional attention to the SPR declined during the 1990s as a number of developments intersected: (1) the need to cut federal spending; (2) declining likelihood of prolonged and crippling oil supply interruptions; (3) unregulated oil markets that appear to operate efficiently in allocating and pricing oil; (4) a consensus that the SPR was probably at an adequate level and additional fill was not justified. In early 1994, the Administration proposed, and Congress agreed, to suspend further purchases for the SPR. Maintaining the Reserve's readiness and upgrading aging infrastructure became the major priorities.

Drawdown of the Reserve can be authorized by the President in the event or likelihood of a "severe energy supply interruption," to meet U.S. obligations to International Energy Agency allies for emergency oil-sharing, or in the event of a sharp increase in petroleum prices that would be likely to have "a major adverse impact" on the economy.

However, in recent years, SPR oil has been sold to pay for elements of the program or to reduce the deficit. The FY1996 budget request included $100 million to be raised by a sale of SPR oil to finance transferring oil stored at Weeks Island, Louisiana.

The proposal was controversial. Some Members argued that it would be a misuse of SPR oil and an inadvisable precedent. Approved by Congress in a continuing resolution, the sale of 5.1 million barrels, at an average price of $18.92/bbl, generated $96.4 million.

Another sale, for deficit reduction, was included in the Balanced Budget Downpayment Act II (P.L. 104-134). Sale of $227 million of SPR oil was completed in August 1996. The program's $220 million budget for FY1997 was paid for by a third sale.

A sale of another $209 million scheduled during FY1998 was canceled when oil prices fell sharply beginning in late 1997. Attention turned to finding ways to replenish the SPR. A Senate amendment to the FY1999 Treasury-Postal appropriations to purchase $420 million of oil for the SPR was stripped from this bill. A request to the Office of Management and Budget by Secretary of Energy Bill Richardson for $100 million in the FY2000 budget request for oil purchases was turned down. In May 1999, transfers of oil commenced to the SPR as payment of royalties from federal leases "in-kind." In lieu of cash paid to the Treasury, the producers are furnishing oil for storage in the SPR. The intention has been to replace the 28 million barrels sold in during the mid- to late 1990s.

At the same time, the sharp increase in oil prices during the spring and summer of 1999 brought forth a call from Senator Schumer for a sale of SPR oil to help blunt home heating oil prices during the coming winter.

The Administration's request of $159 million for the SPR in FY2000 has not been controversial.


During FY1995-97, the SPR program was funded through sales of SPR oil totaling a quantity of 28 million barrels. A sale of another $209 million scheduled during FY1998 was canceled when oil prices fell sharply in late 1997 and early 1998. Attention began to turn to finding ways to replenish the SPR, with some arguing that purchases of domestic oil for the SPR would also provide some support to U.S. producers hurt by low crude prices. A plan was settled upon to begin accepting oil for the SPR as an "in-kind" royalty payment for production on federal leases. The goal is to replace the 28 million barrels that were sold from the SPR during the mid-to-late 1990s. DOE is also leasing two pipelines to Exxon under a contract that would allow payment in-kind.

At the same time as the royalty-in-kind program is continuing, the sharp increase in oil prices during the spring and summer of 1999 brought forth a call from Senator Schumer for a sale of SPR oil to help blunt home heating oil prices during the coming winter. The Administration distanced itself from initial reports that the request was being considered, indicating that inventories appeared adequate.

The 105th Congress enacted $160.1 million for the Strategic Petroleum Reserve (SPR) in FY1999 as a conventional appropriation (P.L. 105-277). The Administration requested $159 million for FY2000, and an additional $5 million to be added to unexpended funds in the account that would pay for a drawdown were one necessary. These funds would pay for maintenance of the facilities and completion of a Life Extension Program. House and Senate Appropriations Committees have concurred in the $159 million level. However, rather than approving an additional $5 million for the drawdown fund, the Committees recommended language to permit a transfer of funds, if needed, to defray the costs of a drawdown. Release of the Interior appropriations conference report has been delayed.
[This is an Extract, please follow the link above for the entire article]

Here it is in Black-and-White, the under-the-table dealings with "Our" Emergency Oil Supplies has been going on for Years.
This is not a Democratic -vs- Republican or Executive branch squabble. All of them have been pilfering our emergency supplies. This leads me to distrust all of them equally when it comes to our nations security, what deals are hiding "out there" that we just don't know about.

-- Possible Impact (, February 02, 2000


Nice find Possible Impact! My attempts to find this type of info yielding the following tidbit:


The Big Hill storage facility has the capacity to store 170 million barrels of crude oil and currently contains 82 million barrels of oil. During 1998, the Department continued to offer to store foreign-owned oil of both consuming and producing countries in the underutilized caverns at Big Hill. The unused storage space provides an opportunity to increase world oil stockpiling, add oil to the U.S. Reserve in lieu of a lease fee, or generate additional revenue for the U.S. Treasury. The Balanced Budget Act of 1997 (Public Law 105-33), which was enacted on August 5, 1997, provides specific authority to store petroleum product owned by another country, or its representative, in the Strategic Petroleum Reserve, provided that the U.S. is fully compensated for all related costs of storage and that the ability to draw down U.S. oil is not impaired.

On September 22, 1998, the Big Hill storage site was activated as a foreign trade zone subzone. A foreign trade zone is a site within the United States, in or near a U.S. Customs port of entry, where foreign and domestic merchandise is considered to be in international commerce. This designation, which permits customers to store oil without paying customs fees and certain taxes, is expected to enhance the Department's offer to store oil for foreign governments, or their representatives. The Department of Energy is the first government entity to receive foreign trade zone designation for one of its facilities.

The Department worked closely with authorities of Port Arthur, the Department of Commerce and the United States Customs Service in seeking foreign trade zone subzone status for Big Hill.

My apologies if my 1st attempt to copy-paste are sloppy. I've been under the weather for several days and am not functioning at my best.This info is from the Dept. of Energy website. The SPR also has its own website, can be linked from

For some reason the "foreign trade zone subzone" just stuck out like ticks on a bald dog to me.

-- mellowdog (, February 02, 2000.

Thanks. This is really important information that is not widely known.
Your cut-and-paste did great, next step is to start posting new threads. You've got some good eyes to spot these little tidbits hiding in the data.

"store petroleum product owned by another country, or its representative, in the Strategic Petroleum Reserve" I wonder now how much of the stated amount (~575 Million barrels) is foreign owned.
The gold in Ft. Knox belongs to the US right? I am not so sure anymore.(frown)

-- Possible Impact (, February 02, 2000.

Thanx Possum!!!

"Possible"? Naaaah....I'd say "probable" is more like it.

Ur Friend,

-- stever (WhoCares@nymore.Right?com), February 02, 2000.

Thanks Possible Impact. I wonder the same thing. When I read it the first time at the DOE site, my 1st thought was perhaps they won't sell the reserves because they are not entirely ours to sell. Also on both DOE and SPR sites they say we had twice the amount in SPR in the 80s. They also have links which say we have not added to the reserves since 1990, then on another link they say since 1994.

I also wonder as a precedent has been established w/DOE being the first "foreign trade zone subzone" which gov entity will be the second.

-- Mellowdog (, February 02, 2000.

Moderation questions? read the FAQ