Strategic Petroleum Reserve

Floor Speech

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Ms. MURKOWSKI. Mr. President, I have come to the floor this evening to speak about our Nation's Strategic Petroleum Reserve, sometimes referred to as the SPR. It is a national security asset that has come into the news of late for a host of different reasons.

I am here this evening because of the concerns I have that others are potentially looking to our Strategic Petroleum Reserve--our strategic energy asset--as nothing more than a piggybank to fund some of the needs we have here in this Congress. I believe it is extremely shortsighted to raid our Nation's oil stockpile as an offset for the extension of the highway trust fund, and that is what we have had some conversation about today.

We had a vote earlier about whether to move forward on the highway trust fund. But as we have looked to find pathways forward for a multiyear highway trust fund reauthorization, which is something I support, it is important to know that not all pots of money are equal, that perhaps some are truly national security assets for which perhaps we need to show more considered respect.

I had an opportunity a few days ago--on Friday--to tour our Strategic Petroleum Reserve. I went to the Choctaw Bayou site near Baton Rouge, LA. It was an opportunity for me to get a firsthand look at some of the challenges that currently face our four Strategic Petroleum Reserves that we have down in the Louisiana, Texas area and to have a better understanding as to their operational readiness. Quite honestly, it is a trip I wish more of our Members were willing to take because I think it would become clear to many the potential mistake we would be making in forcing the sale of billions of dollars of our emergency oil solely to pay for unrelated legislation. It is akin to selling the insurance on your house in order to pave your driveway. It just doesn't make sense.

For some, the Strategic Petroleum Reserve may be a very unknown national security asset. They do not really know what it is. But the SPR is our Nation's insurance policy against global energy supply disruptions. The Strategic Petroleum Reserve was established by law back in 1975 under the Energy Policy and Conservation Act, and its mission is twofold: to ensure U.S. energy security by reducing the impacts of potential disruptions in U.S. petroleum supplies and secondly to carry out U.S. obligations under the international energy program.

We have about 700 million barrels of oil that are tucked away in underground salt caverns down in Louisiana and in Texas. We have a couple refined product reserves in other parts of the country, but our Strategic Petroleum Reserves are there in Louisiana and Texas. So if we have a major hurricane that takes out production in the Gulf of Mexico, as we saw with Hurricane Katrina back in 2005, we can turn to the SPR to help fill the gap. We did that in 2005. That is exactly the type of reason you would have the strategic asset.

But there are other times we have turned to the SPR. If there is a terrorist attack or a broader war disruption that alters the ability of other nations to send us oil, we can again turn to the reserve for help. We did this in 1991 with the Iraq war and then again in 2011 with the Libya supply disruption. So, again, when there was an emergency and we needed to ensure U.S. security, we had a ready reserve fund to turn to.

In the absence of policies that will allow our Nation to produce all of the oil it consumes every day, the Strategic Petroleum Reserve is really our best answer to the sudden absence of the energy we need, whether it is driving to work, whether it is powering our ships or our airplanes, moving our goods, or whatever that reason may be.

With the discussion we had today in terms of how we pay for this multiyear transportation bill, we are being asked to dramatically diminish the size of the Strategic Petroleum Reserve based again on the need to pay for the extension of the highway trust fund. It is totally unrelated--totally unrelated.

Those who would argue in favor of taking from the SPR, their argument is pretty simple. In fact, it is way too simple. They suggest that our international obligations require us to store enough petroleum to match 90 days of net imports. That is true. And they will say that given the growth we have seen in domestic oil production, we have enough now that we have a surplus within the Strategic Petroleum Reserve. Some have even suggested that an SPR is not even necessary anymore.

Well, I would be the first among us to suggest that changes need to be made to the Strategic Petroleum Reserve. Again, this was established back in 1975, and I think it is very fair to say the world has changed. It has changed dramatically since the 1970s. The global environment in which we are operating has changed dramatically. And the Department of Energy has said that today the impacts of an overall supply disruption of global oil markets would have the same effect on domestic petroleum product prices regardless of how U.S. oil import levels--or whether U.S. refineries import crude from disrupted countries.

So there is a recognition that we have to get to modernizing the SPR. We have to ensure that we have right-sized it, that we are in alignment when it comes to moving oil from the Strategic Petroleum Reserve at those times we have determined are appropriate.

So I think it is important to know we are not just sitting still on this. The Department of Energy has begun work on a comprehensive, long-term strategic review of the SPR. We had good discussion about this when I was down in Louisiana on Friday with the Deputy Secretary of Energy, Chris Smith, talking about what this review will entail. It is looking at future SPR requirements regarding the size; regarding the composition of it; the geographic location--it has been suggested that perhaps there might be regional approaches; determining where we have chokepoints within the system in terms of distribution; how we move it; determining the impacts of what we see globally and what is happening with our own domestic production; and again being smart in how we are making sure we have right-sized the SPR and, in fairness, modernized the Strategic Petroleum Reserve.

We have a committee, as you know, Mr. President, that likes to roll up our sleeves and get into the weeds on making sure our policies are current and are relevant.

We need a deliberative process that will provide us with the proper understanding of the stakes and our options when it comes to how we handle our Strategic Petroleum Reserve. What we do not need--what we do not need--is an arbitrary process that picks a number. Right now, for purposes of the offset of what they are coming to the energy committee for, they are picking a number of--let's sell 101 million barrels of oil to fund a portion of the highway trust fund. Again, where is the connection between ensuring that we don't erode our national energy security assets?

I have said many times that the Strategic Petroleum Reserve is not an ATM. It is certainly not the petty cash drawer for Congress. We have a responsibility. A decision to sell substantial volumes of oil will increase our vulnerability to future supply disruptions at a time when we are still importing oil. We are importing about 5 million barrels a day.

Think about this. Think about the timing of this. It simply could not be worse. When you talk about volatility in the world, think about the news you read about today, what is happening in Iran, Iraq, and Syria. Now is the time for us to say that our national energy security assets are not that important; it is OK to nibble around the edges or worse and take significant amounts to put out on the market?

Let's consider a few facts to put things into perspective. First of all,

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you talk about the market. It is a buyer's market out there. The International Energy Agency warns of a massively oversupplied balance sheet. The Energy Information Administration shares that assessment in its latest monthly outlook, noting that production continues to exceed consumption across the globe. Of course, now as we are seeing the outcome from the negotiations with Iran, they are going to be in a position soon to put their oil out onto the world market.
Oil prices are sitting right now around $50 a barrel. Think about it. Not all of the oil that is in the Strategic Petroleum Reserve was perhaps bought high, but think about it. Selling it now is the very definition of selling low.

We are at $50 a barrel right now. The sales that are envisioned in this highway bill would shortchange taxpayers in terms of emergency protection because you are eroding the fund, but think about the proper stewardship of taxpayer dollars. Effectively, we bought high and we are going to sell low.

Second, drawing down barrels from the SPR would put the Federal Government in a position of direct competition with domestic producers. That may be temporarily defensible during a severe interruption, but let's remember where we are right now. The midcontinent is already awash in crude. Our outdated ban on oil exports, which should be fully repealed and fully repealed soon in my view, has not been repealed yet. It is sitting there in place, and what it is doing is keeping oil that is trapped in the United States, threatening productions and jobs at the same time.

What you are talking about with this proposal to sell off the oil from SPR is you are going to sell it first very low and then you are going to put it into a market that is already oversupplied.

I was in the Gulf of Mexico this weekend at a place called Port Fourchon, where truly you think about the part of the country that is supporting an oil and gas industry, robust, ready to go to work, but what we saw there were supply vessels that were sidelined and drill ships that were waiting. You tell those hard-working men and women there who aren't working as hard as they would like that perhaps somehow it is a good idea that they should be taking money from our savings account--taking the oil from our savings account and dumping that into the market.

Third, our Nation's energy security cannot depend on commercial stocks alone. They rise and fall based on market expectations, not on the strategic environment, and are not tethered to our Nation's energy security. Since the passage of the Energy Policy and Conservation Act in 1975, there was a bipartisan consensus that maintained that it is the Federal Government, not private industry, that will ensure that our obligations are met. Clearly, not much has changed in that calculation, certainly in my mind.

Fourth, threats to global security continue to abound and they seem to worsen. As Iran, ISIS, and other threats destabilize the Middle East, some 17 million barrels per day still flow through the Strait of Hormuz. The Suez Canal and its accompanying pipeline carry just under 5 million barrels per day, despite a budding insurgency that fired a rocket at an Egyptian Navy vessel earlier this month. Instability in Venezuela, which produces about 2 1/2 million barrels per day, would also directly impact the major American refining center in the Gulf of Mexico.

You have all of this volatility and instability, and this is the time again that we are going to take our insurance policy and we are going to erode it? We are going to make us less energy secure? It makes no sense.

By way of comparison, the drawdown rate of the Strategic Petroleum Reserve is about 4.4 million barrels a day, probably a little bit less. But, seriously, any number of disruptions could arise and make those barrels very precious. Secretary Moniz gave a speech about a month ago, and he stated that the distribution rate is probably much lower than our drawdown capacity of 4.4. The distribution rate is compromised because of some of the issues we talked about earlier, which are changes in midstream, infrastructure, and congestions in the system. When you talk about our ability to respond, we are limited.

If Congress is going to sell any oil from the SPR--and I am not suggesting this is a good idea--one of the things we must do is we should agree that any proceeds would first be used to pay for upgrading the reserve itself, pay for the modernization, help to ensure it has the ability to do that which we have tasked it to do.

It needs significant modifications to preserve its long-term viability and to ensure that it can truly move the oil in the event of an emergency, whether it is a natural disaster or whether it is a terrorist threat or war. But it would be a travesty if we were to dramatically reduce the size of the Strategic Petroleum Reserve while we continue to ignore its maintenance and its operational needs.

The Strategic Petroleum Reserve must be modernized for the 21st century. Its size, its geographic disposition, the quality of the oil it stores--right now it is about one-third to two-thirds distribution between sweet and sour crude--the desirability and understanding is we need to move more into a refined product storage or holding instead of the crude. These are all issues that merit further attention, but we need to have a deliberative process. We need the review that the Department of Energy is conducting. We need the review that committees such as ours will advance and consider. What we do not need is a spur-of-the-moment deal that would sacrifice our energy security and perhaps much more.

I know this conversation will continue about how we move a highway bill forward. Count me as one who wants to ensure that we are doing right by our highway systems. Our infrastructure is key, but we also have key energy infrastructure. Part of that key infrastructure lies with the security asset, the Strategic Petroleum Reserve that we have. Let's focus on that word ``strategic'' before we move too quickly and in a manner that is shortsighted and will jeopardize our security and our inability to respond.

I yield the floor.

I suggest the absence of a quorum.

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