The Rotten State of U.S. Oil Reserves
Bryan Mound, nestled in a 500-acre marshland south of Houston, is among the heavily guarded salt caverns on the Gulf Coast of Texas and Louisiana. There, the government keeps the national emergency oil stash, known as the Strategic Petroleum Reserve (SPR), stored more than 2,000 feet underground. The pipelines at Bryan Mound are capable of delivering 1.5 million barrels a day into the market to offset price or supply shocks if everything is in working order.
That’s a big if. In May 2015 the roof on a 1970s-era storage tank at Bryan Mound collapsed. It still hasn’t been repaired, because Congress hasn’t approved the funding. Corrosion ate through a water pipe at one of the Texas sites in April. Every day, salty, humid air gnaws at the network of pipelines and pumps that crisscrosses the wetlands. Thunderstorms put extra stress on the system. Changes in the earth’s pressure alter the capacity of the caves housing the reserves. “It’s a very complex infrastructure, and when you get to a point where it’s starting to age, then you just start to see problems,” says Robert Corbin, the U.S. Department of Energy’s deputy assistant secretary for the Office of Petroleum Reserves.
The reserve, created in the aftermath of the Arab oil embargo of the early 1970s, holds 695.1 million barrels of crude, the equivalent of three months’ worth of imports. The stockpile’s distribution system was designed with a 25-year life span, but it hasn’t been upgraded since the 1990s. A test sale of 5 million barrels from the reserve in 2014 uncovered bottlenecks that would hinder the government’s ability to release oil.
In April, President Obama requested $375.4 million to begin a $2 billion modernization program that will be funded with sales from the reserve and includes building three terminals for putting reserve oil in tankers. Department officials say a systemwide overhaul is needed to facilitate massive distributions from the reserve, including 124 million barrels that the Republican-led Congress scheduled to start selling in fiscal 2018 to help close the federal deficit and pay for highway maintenance. In 2005, when the department sold 20.8 million barrels to cushion the market after hurricanes Katrina and Rita, it took 20 days to start moving oil.
Some lawmakers may be worried about upsetting domestic oil producers battered by low market prices, says John Shages, a former deputy assistant energy secretary who used to oversee the oil reserve: “There are a lot of hurting companies out there who will not welcome the United States government becoming a competitor.” But Congress has only itself to blame for creating that conflict when it decided to use the SPR as a piggy bank for replenishing the highway trust fund, says Republican Lisa Murkowski of Alaska, who chairs the Senate Energy and Natural Resources Committee: “They didn’t care that it was bad timing. Boy, they shoulda listened.”
The bottom line: Congress voted to sell oil from U.S. reserves but hasn’t yet released money needed to get it flowing.