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
Purchases totaling 591.7
million barrels were completed by the end of 1994. However, beginning in
FY 1995 until January 2009, direct purchase of crude oil was suspended in
order to devote budget resources to refurbishing the SPR equipment and
extending the life of the complex through at least the first quarter of
the 21st century.
Fill was resumed in 1999
using a joint initiative between the Departments of Energy and the
Interior to supply royalty oil from Federal offshore tracts to the
Strategic Petroleum Reserve. This arrangement is known as the
Royalty-in-Kind (RIK) program and continued in phases from 1999 through
2009, when the Department of the Interior discontinued its RIK program.
The first direct purchase
of crude oil since 1994 was conducted in January 2009 using revenues
available from the 2005 Hurricane Katrina emergency sale. DOE purchased
10.7 million barrels at a cost of $553 million.
The Desert Storm
Stockpiling crude oil in
the SPR reduces the nation's vulnerability to economic, national security,
and foreign policy consequences of petroleum supply interruptions. The SPR
proved its value in 1991 when a partial drawdown, coupled with a
coordinated international supply response, help restore stability to world
oil markets during the Persian Gulf War.
On January 16, 1991,
coinciding with the international effort to counter the Iraqi invasion of
Kuwait, President George H.W. Bush ordered the first-ever emergency
drawdown of the SPR. The Department of Energy immediately implemented a
drawdown plan to sell 33.75 million barrels of crude oil, the United
States' portion agreed to by the International Energy Agency.
The drawdown proceeded on
schedule and without major complications. Between the initial
authorization and the final sale, however, world oil supplies and prices
stabilized, and the United States reduced the sales amount to 17.3 million
barrels which were sold to 13 companies.
The SPR's second emergency
drawdown occurred after Hurricane Katrina caused massive damage to the oil
production facilities, terminals, pipelines, and refineries along the Gulf
regions of Mississippi and Louisiana in late August 2005. All Gulf of
Mexico production was shut in initially, which equated to about 25% of
domestic production. Gasoline prices spiked nationwide in reaction to the
disruptions, and the supply levels of gasoline and other refined products
action with the
International Energy Agency, President George W. Bush issued a Finding of
a Severe Energy Supply Interruption and directed the Secretary of Energy
to draw down and sell crude oil from the SPR. Secretary Samuel W. Bodman
immediately authorized a Notice of Sale for 30 million barrels of crude
oil to the U.S. markets. The on-line sale was held from September 6-9,
2005. DOE evaluated each bid and determined that five companies had
submitted acceptable offers for 11 million barrels.
In announcing the sale
results, Secretary Bodman stated, "This sale ensures that refineries
have the petroleum they need to keep gasoline and diesel fuel flowing to
American consumers while production facilities in the gulf region regain
their capacity. As we move forward, we will continue to minotor the
overall supply of petroleum available and the needs of the nation as we
determine next steps."
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
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 aexpand to one billion barrels
nd conducted a site selection process to construct additional storage
Reserve Storage Sites
Emergency crude oil is
stored in the Strategic Petroleum Reserve in salt caverns. Created deep
within the massive salt deposits that underlie most of the Texas and
Louisiana coastline, the caverns offer the best security and are the most
affordable means of storage, costing up to 10 times less than aboveground
tanks and 20 times less than hard rock mines.
Storage locations along the
Gulf Coast were selected because they provide the most flexible means for
connecting to the Nation's commercial oil transport network. Strategic
Reserve oil can be distributed through interstate pipelines to nearly half
of the Nation's oil refineries or loaded into ships or barges for
transport to other refineries.
An aerial view of the Bryan Mound storage site of the
Strategic Petroleum Reserve
Photo: U.S. Department of Energy
Strategic Petroleum Reserve
caverns range in size from 6 to 35 million barrels in capacity; a typical
cavern holds 10 million barrels and cylindrical in shape with a diameter
of 200 feet and a height of 2,000 feet. One storage cavern is large enough
for Chicago's Sears Tower to fit inside with room to spare. The Reserve
contains 62 of these huge underground caverns.
How the SPR Storage
Sites Were Created
Salt caverns along the Gulf
Coast have been used for storage for many years by the petrochemical
industry. When the U.S. Government decided to create the Strategic
Petroleum Reserve in the mid-1970s, it acquired previously created salt
caverns to store the first 250 million barrels of crude oil. This was the
most rapid way to begin securing an emergency supply of crude oil
following the oil shocks of the 1970s. To stockpile oil beyond the first
250 million barrels, the Department of Energy created additional caverns.
Salt caverns are carved out
of underground salt domes by a process called "solution mining."
Essentially, the process involves drilling a well into a salt formation,
then injecting massive amounts of fresh water. The water dissolves the
salt. In creating the SPR caverns, the dissolved salt was removed as brine
and either reinjected into disposal wells or more commonly, piped several
miles offshore into the Gulf of Mexico. By carefully controlling the
freshwater injection process, salt caverns of very precise dimensions can
be created. For every barrel of crude oil to be stored in the SPR's salt
caverns, it took 7 barrels of water to create the storage space.
Besides being the lowest
cost way to store oil for long periods of time, the use of deep salt
caverns is also one of the most environmentally secure. At depths ranging
from 2000 to 4000 feet, the salt walls of the storage caverns are
"self-healing." The extreme geologic pressures make the salt
walls rock hard, and should any cracks develop in the walls, they would be
almost instantly closed.
An added benefit of deep
salt cavern storage is the natural temperature difference between the top
of the caverns and the bottom, a distance of around 2,000 feet. The
temperature differential keeps the crude oil continuously circulating in
the caverns, maintaining the oil at a consistent quality.
The fact that oil floats on
water is the underlying mechanism used to move oil in and out of the SPR
caverns. To withdraw crude oil, fresh water is pumped into the bottom of a
cavern. The water displaces the crude oil to the surface. After the oil is
removed from the SPR caverns, pipelines send it to various terminals and
refineries around the nation.
Here’s a brief history of
the Strategic Petroleum Reserve, world's largest emergency supply of crude
- 1944: Secretary of the
Interior Harold Ickes advocated the stockpiling of emergency crude
- 1952: President Truman's
Minerals Policy Commission proposed a strategic oil supply.
- 1956: President
Eisenhower suggested an oil reserve after the Suez Canal crisis.
- 1970: A Cabinet Task
Force on Oil Import Control recommended a similar reserve.
- 1973-74: The cutoff of
oil flowing into the US from many Arab nations sent economic
shockwaves throughout the nation.
- 1975: President Ford
signed the Energy Policy and Conservation Act on December 22,
establishing a reserve of up to one billion barrels of petroleum.
- 1977: The government
acquired several existing caverns in salt domes to serve as the first
storage sites. Sandia’s involvement in the reserve begins.
- 1977: On July 21 the
first oil — approximately 412,000 barrels of Saudi Arabian light
crude — was delivered to the reserve.
- 1991: On January 16,
coinciding with the international effort to counter the Iraqi invasion
of Kuwait, President George H.W. Bush ordered the first-ever emergency
- 1995: Officials
suspended filling the reserve to devote budget resources to
refurbishing equipment and extending the life of the complex.
- 1999: Filling resumed
with royalty oil from federal offshore tracts.
- 2001: In November,
President George W. Bush ordered the SPR to be filled to approximately
700 million barrels by producers, who operate leases on the federally
owned outer continental shelf.
- 2005: On August 8,
President Bush signed the Energy Policy Act of 2005 directing the
Secretary of Energy to fill the reserve to its authorized one billion
- 2005: In late August,
the SPR's second emergency drawdown occurred after Hurricane Katrina
caused massive damage to the oil production facilities, terminals,
pipelines, and refineries along the Gulf regions of Mississippi and
SPR by the numbers
- Current storage capacity
— 727 million barrels
- Current days of import
protection in SPR — 59 days
- Average price paid for
oil in the reserve — $27.73 per barrel
- Maximum drawdown
capability — 4.4 million barrels per day
- Time for oil to enter US
market — 13 days from presidential decision
- Investment to date —
$22 billion ($5 billion in facilities; $17 billion for crude oil)
- Number of people
employed by SPR — about 1,050 including contractors