Using Elk Hills and Alaskan North Slope Oil To Supply the Strategic Petroleum Reserve

GAO was requested to determine why the domestic sources of crude oil from the Alaskan North Slope and Elk Hills Naval Petroleum Reserve were not used to fill the Strategic Petroleum Reserve (SPR), whether they could be used for the SPR, and what effect such purchases would have on the U.S. balance of payments. The review covered the period May 4, 1980 to October 7, 1980, and assessed the feasibility of acquiring the oil from these two domestic sources. It also discussed some factors to be considered in using these sources, such as supply potential and quality, transportation requirements, and impact on refiners.

The Energy Security Act requires the resumption of filling the SPR at an average rate of at least 100,000 barrels a day (bbl/d) for fiscal year 1981 and succeeding years. The Department of Energy (DOE) has taken action to fill the act's minimum oil fill requirements by soliciting 100,000 bbl/d of oil for the SPR in exchange for Elk Hills oil. This is an assured, high quality source of oil that may adversely affect the small and independent refiners in California. Recently, DOE included a specification in an exchange solicitation which would allow suppliers of Alaskan North Slope oil to respond. However, DOE officials would prefer to store higher quality oil, if possible. DOE has not completed its analysis of oil supply options for the SPR and has not demonstrated that exchange of Elk Hills oil is the most effective means of meeting the minimum requirements of the act. The current Elk Hills exchange limits potential offerors to those: (1) willing to acquire Elk Hills oil; and (2) having access to a guaranteed source of crude oil for exchange.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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