Oil Reserve:

Some Concerns Remain About SPR Drawdown and Distribution

RCED-91-16: Published: Nov 28, 1990. Publicly Released: Jan 18, 1991.

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Pursuant to a congressional request, GAO examined the Department of Energy's (DOE) Strategic Petroleum Reserve (SPR) drawdown plans, focusing on: (1) DOE capability for withdrawing and distributing SPR oil; (2) SPR compliance with pipeline safety requirements; and (3) the status of DOE actions to correct problems previously identified by GAO.

GAO found that: (1) DOE estimated that it could withdraw and distribute SPR oil at a maximum sustainable rate of approximately 3.5 million barrels per day for 90 days; (2) if DOE withdrew SPR oil at the maximum achievable rate, the bulk of oil would be drawn down within 200 days; (3) DOE could not reach its downgrade goal of 4.5 million barrels per day until it completed planned drawdown and distribution enhancements and stored enough oil at one of its sites to support its planned drawdown rate; (4) crude oil prices could be almost $5 per barrel higher if the withdrawal rate were 2.5 million instead of 3.5 million barrels per day; (5) insufficient availability of U.S.-flag tankers could hamper SPR drawdown and distribution; (6) DOE and oil industry officials believed that there were not enough U.S. tankers available to move the amount of oil at the higher drawdown rates; (7) DOE voluntarily attempted to comply with Department of Transportation (DOT) pipeline safety standards; (8) pipeline operation problems during drawdown could have severe economic and environmental impacts; (9) SPR contractors failed to perform right-of-way and erosion control equipment inspections as frequently as required and to retain pipeline repair records; and (10) SPR was not in full compliance with DOT safety standards. In addition, GAO found that DOE implemented several prior GAO recommendations involving: (1) conducting 20 drawdown-related tests between 1986 and 1989; (2) completing automated controls to operate valves and pumps and monitor control equipment; (3) developing a program to identify pipeline conditions and needed corrective actions; and (4) developing a logistics support system to ensure an adequate supply of spare parts.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: After the report was issued, the President directed the Secretary of the Treasury to grant "blanket" waivers of the Jones Act when he authorized the drawdown of SPR in January 1991. The Maritime industry did not challenge the government's authority to grant blanket waivers. Also, Congress has not acted on this recommendation, and it may no longer be needed.

    Matter: Because of the likelihood that Jones Act waivers will be needed to move SPR oil expeditiously and the current uncertainties about whether the waiver review process will ensure prompt action on individual waiver requests, Congress may wish to consider granting standby blanket waiver authority that would allow the President to waive the Jones Act requirement if delays resulting from the case-by-case review process were limiting DOE ability to draw down SPR.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE asked for the formal views of MARAD and Treasury's Customs Service concerning the feasibility of developing a realistic test. The agencies were not in favor of conducting the test because they believed that maritime and petroleum companies would object to the costs associated with the test and that a general waiver of the Jones Act's requirement for future drawdowns would most likely occur.

    Recommendation: To examine the effectiveness of the expedited waiver review process, the Secretary of Energy should direct the Assistant Secretary for Fossil Energy to work with the Maritime Administration and the Department of the Treasury to develop a realistic test that would simulate agency actions to process the number and type of waiver requests expected during SPR drawdowns of various rates.

    Agency Affected: Department of Energy

  2. Status: Closed - Implemented

    Comments: As of December 31, 1991, the responsibility for ensuring SPR compliance with federal pipeline standards was assigned to the SPR pipeline manager and procedures and information systems needed to monitor contractor compliance had been put in place.

    Recommendation: To increase the certainty that SPR pipelines will operate safely and reliably as designed, the Secretary of Energy should direct the manager of the Oak Ridge Operations Office to assign specific responsibility for ensuring compliance with federal safety standards to the recently designated SPR Pipeline Manager and ensure that needed procedures and information systems are developed to monitor contractor operations.

    Agency Affected: Department of Energy


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