Optional Development Strategies for the Strategic Petroleum Reserve

Pursuant to a congressional request, GAO analyzed the optional development strategies for the Strategic Petroleum Reserve (SPR) which the administration proposed to help reduce the budget deficit.

GAO found that, as the SPR size increases, so does the potential to meet domestic needs and to mitigate adverse economic impacts such as lost economic growth, increased inflation, and unemployment. GAO analyzed the administration proposed 489-million barrel SPR; budgetary implications for a 550-, 610-, and 750-million barrel SPR; and a 500-million barrel SPR since this is the legislatively mandated level for continued production at the Naval Petroleum Reserve (NPR). The Energy Security Act provides that unless the SPR is at least 500 million barrels, no crude oil in the NPR may be sold during any fiscal year. GAO analyses showed that: (1) a 489-million barrel SPR would require the lowest expenditures of any option but could result in revenue losses if NPR sales were restricted; (2) DOE could develop storage facilities and fill the SPR to the 500-million barrel level which would negate concern about continued NPR production and sales; and (3) large savings could result from continued storage facility development for 750 million barrels and from a flexible oil fill rate. GAO also found that it may not be possible to completely shut-in or stop NPR oil production without risking major damage to the oil field; however, production and sales could be reduced below present levels. GAO suggested that some NPR revenues could be set aside for use in filling the SPR since a larger SPR inventory would provide the capability for releasing large quantities of oil to meet short-term emergency needs and the NPR produces lower quantities over a longer time period.