In response to the experience of the embargo, Congress authorized the Strategic Petroleum Reserve in the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) to help prevent a repetition of the economic dislocation caused by the Arab oil embargo. The Department of Energy (DOE) currently manages the program. Physically, the SPR comprises five underground storage facilities, hollowed out from naturally occurring salt domes, located in Texas and Louisiana. The SPR has since been filled to its 727 million barrel capacity through royalty-in-kind acquisition, which this report discusses further below. 94-163 ) authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." Congress enacted additional drawdown authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. § 6241(h), has allowed the President to use the SPR for a short period without having to declare the existence of a "severe energy supply interruption" or the need to meet obligations of the United States under the international energy program. 110-232 ) enacted in May 2008 forbade DOE from initiating any new activities to acquire royalty-in-kind (RIK) oil for the SPR during the balance of 2008. The sharp decline in crude oil prices since spiking to $147/barrel in the summer of 2008 had spurred interest in resuming fill of the SPR. There were four components in the resumption of fill: (1) a purchase announced on January 16, 2009, of nearly 10.7 million barrels to replace oil that was sold after Hurricanes Katrina and Rita in 2005; (2) the return of roughly 5.4 million barrels of oil borrowed by refiners after Hurricane Gustav in 2008; (3) delivery of roughly 2.2 million barrels of RIK oil that had been deferred; and (4) resumption of RIK fill in May 2009 at a volume of 26,000 barrels per day, totaling over 6.1 million barrels to be delivered over a period from May 2009 to January 2010. These activities were intended to fill the SPR to its current capacity of 727 million barrels by early 2010. The FY2001 Interior Appropriations Act ( P.L. SPR Expansion

The Energy Policy Act of 2005 (EPAct) requires, "as expeditiously as practicable," expansion of the SPR to its authorized maximum physical capacity of 1 billion barrels. The FY2010 SPR budget, at $229 million, included $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks, as well as $25 million for expansion activities. DOE has evaluated a site in Richton, MS, as a possible location for an additional 160 million barrels of capacity. The Debate Over When the SPR Should Be Used

Historically, the use of the SPR has been tied to a physical shortage of supply—which normally will manifest itself, in part, in an increase in price. However, price was deliberately kept out of the President's SPR drawdown authority because of concerns about what price level would trigger a drawdown, and that any hint of a price threshold could influence private sector and industry inventory practices. As has been noted, the original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. As a result, European prices of crude oil have risen more than U.S. prices. 6899 proposal lay partly in an analysis by the Government Accountability Office (GAO), which observed that the proportion of grades of oil in the SPR was not as compatible as it could be with the trend of refineries toward being able to handle heavier grades of crudes. The Energy and Water Appropriations Act for 2010 ( P.L. 111-85 ) provided $243.8 million for development and operations and program management activities at the Strategic Petroleum Reserve facility, and $11.3 million for the Northeast Home Heating Oil Reserve. Firms providing, or insuring tankers carrying, refined product to Iran were also included in the prohibition.
Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-1974 Arab oil embargo. The Department of Energy (DOE) manages the SPR, which comprises five underground storage facilities, solution-mined from naturally occurring salt domes in Texas and Louisiana. The Energy Policy Act of 2005 (EPAct) authorized SPR expansion to a capacity of 1 billion barrels, but physical expansion of the SPR has not proceeded beyond 727 million barrels—its inventory at the end of 2010. In addition, a Northeast Home Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage.
EPCA authorized drawdown of the Reserve upon a finding by the President that there is a "severe energy supply interruption." Congress enacted additional authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383) to permit use of the SPR for short periods to resolve supply interruptions stemming from situations internal to the United States. The meaning of a "severe energy supply interruption" has been controversial. EPCA intended use of the SPR only to ameliorate discernible physical shortages of crude oil.
The government had ended the practice of purchasing crude oil to fill the SPR in 1994. In 2000, the Department of Energy began acquiring SPR oil through royalty-in-kind (RIK) in lieu of cash royalties paid on production from federal offshore leases. In May 2008, Congress passed legislation (P.L. 110-232) ordering DOE to suspend RIK fill for the balance of the calendar year unless the price of crude oil dropped below $75/barrel. Crude oil prices spiked to $147/barrel in the summer of 2008 and then sharply declined, allowing a resumption of fill. These activities have brought the SPR essentially to its current 727 million barrel inventory. The current Secretary of the Interior recently announced his intention to terminate the RIK program.
Congress approved $205 million for the SPR in FY2009, including $31.5 million to continue SPR physical expansion activities. DOE has evaluated a site in Richton, MS, as a possible location for an additional 160 million barrels of capacity, but set aside any further expansion plans. The FY2010 Energy and Water Appropriations Act (P.L. 111-85), which provides $243.8 million for the entire SPR program, included $25 million for expansion activities and $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks. The act also prohibits SPR appropriations from being expended to anyone engaged in providing refined product to Iran, or assisting Iran in developing additional internal capacity to refine oil.
Historically, the use of the SPR has been tied to a physical supply shortage, which normally would manifest itself, in part, as a price increase. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply. However, price was deliberately kept out of the President's SPR drawdown authority because of concerns about what price level would trigger a drawdown, and that any hint of a price threshold could influence private sector and industry inventory practices. The original intention of the SPR was to create a reserve of crude oil stocks that could be tapped in the event of an interruption in crude supply.
The Government Accountability Office recently observed that the proportion of crude oil grades in the SPR has been growing less compatible with the heavier grades of crude oil that U.S. refineries have been upgrading to handle. This finding has raised questions about the SPR's effectiveness during a long-term oil disruption involving heavy oil.