Need a Cave to Stash Your Oil? Feds Might Soon Have a Deal for You
House panel advances bill to rent out excess space of the Strategic Petroleum Reserve
A bill that would allow the federal government to rent out space in the caves holding the nation’s emergency oil stockpile moved out of a House Energy and Commerce subcommittee last week with bipartisan support.
The legislation was advanced Thursday by the Energy Subcommittee in a voice vote and without any amendments. The bill would authorize the Energy Department to enter into lease agreements with private companies or foreign governments to store petroleum products in the excess space of the Strategic Petroleum Reserve that will result from congressionally mandated drawdowns set to occur over the next decade.
Lawmakers argue the additional revenue from the rental space could help offset some of the costs to modernize the reserve’s infrastructure, largely made up of storage facilities in salt caverns near the Gulf of Mexico.
“Using excess storage capacity through a leasing program is an innovative idea and it should be a win-win for the federal government,” said Subcommittee Chairman Fred Upton of Michigan. “At a minimum, DOE may be able to offset some of its maintenance costs and invest in new infrastructure that will ensure the long-term operations of the SPR.”
Over the next decade, about 300 million barrels will be sold to offset the cost of various legislative priorities. That would likely result in the SPR’s storage amount dropping by nearly half from the 660 million barrels of crude oil the reserve currently holds.
Combined with a U.S. energy landscape marked by high oil and natural gas production, policymakers, including Energy Secretary Rick Perry, have questioned how, or if, the SPR should continue operations in the future. The SPR was originally created in the 1970s to protect the country from future shortages or disruptions after the Arab oil embargo.
“As the U.S. has transformed from a heavy importer of foreign oil, to a global leader in oil exports, the SPR is now used more as a piggy bank to fund a vast variety of unrelated Congressional initiatives, rather than its initial purpose as an emergency energy backstop,” said Illinois Rep. Bobby L. Rush, the top Democrat on the subcommittee.
The Government Accountability Office initially suggested the legislation in a June report, arguing that “by not examining a full range of options, DOE risks missing beneficial ways to modernize the SPR while saving taxpayer resources.”
As to how much revenue the bill could generate, no official estimate was given. Under the bill’s language, the Energy Department would be authorized to launch a pilot program for up to 200 million barrels qualifying for the excess space. Republican Rep. Joe L. Barton, a bill sponsor, said that space already has the attention of oil companies in his home state of Texas. The bill has not been scored by the Congressional Budget Office.
“In my visits with some of the oil industry leadership in Texas during the August break, they’re very intrigued by the idea,” Barton said.
ICYMI: Markey Challenges New EPA Chief on Pollution Rules