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[Congressional Record Volume 141, Number 73 (Thursday, May 4, 1995)]
[Senate]
[Pages S6144-S6146]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

       ADMINISTRATION'S PLAN TO SELL STRATEGIC PETROLEUM RESERVE

  Mr. MURKOWSKI. Mr. President, for the information of the Senate, I 
ask unanimous consent to have printed in the Congressional Record a 
letter from the Secretary of Energy to the President of the Senate that 
transmits administration-proposed legislation. The primary purpose of 
this legislation is to sell strategic petroleum reserve [SPR] oil to 
fund the decommissioning of the Weeks Island SPR storage facility. I am 
having the proposed legislation printed in the Record instead of 
introducing it because I disagree with the policy of selling SPR oil to 
raise money. Let me explain.
  The administration's legislation proposes three things. First, it 
authorizes the sale of up to 7 million barrels of crude oil from the 
SPR. Second, it earmarks the moneys from that sale for the 
decommissioning of the Weeks Island storage facility, and for other 
unspecified activities related to the SPR. Third, the administration's 
legislation allows the sale of the SPR oil to not count adversely under 
the budget rules. I will not speak to the asset sale issue because it 
is not central to my concerns.
  The key policy issue raised by this legislation isn't whether the 
Weeks Island SPR storage facility should be drained of oil and 
decommissioned; that must occur. Instead, the question facing the 
Senate is whether we should authorize the sale of SPR oil to fund this 
activity and a host of other unspecified SPR activities simply because 
the administration is unwilling to ask for the necessary money as a 
part of DOE's regular budget. In a nutshell the issue is: Should SPR 
oil be sold to make up for a budget shortfall, or should SPR oil be 
kept on hand in case of an energy emergency? Before I explain my 
concerns about the administration's proposal to sell SPR oil, let me 
first describe why the Weeks Island SPR storage facility must be 
emptied and decommissioned.
  Weeks Island is one of the five SPR crude oil storage facilities. 
Located in Louisiana, it holds 73 million of the total 592 million 
barrels of oil stored in the SPR. Weeks Island is unique among the SPR 
oil storage facilities. It was a commercial salt mine before being 
purchased by the Department of Energy and converted to an oil storage 
facility. The other four SPR facilities were created specifically to 
store oil.
  In May 1992, a sinkhole was discovered on the ground directly above
   Weeks Island. The cause of the sinkhole was determined to be a 
fracture in the salt formation. Over time, the fracture has enlarged as 
a result of water leaking through it and into the Weeks Island storage 
cavern. In February 1995, a second sinkhole was discovered over Weeks 
Island, but it has not yet been determined if this indicates a second 
leak.

  The water leaking into Weeks Island is accumulating at the bottom of 
the oil storage chamber and it is pushing the oil up. Although the leak 
is slow, water intrusion creates a risk of path enlargement and 
increased water inflow. This could ultimately result in a catastrophic 
water inflow, which would completely displace the oil stored in 
[[Page S6145]] the facility. Although a remote possibility, if that 
occurred the 73 million barrels of oil stored in Weeks Island could 
enter the underground water aquifer. That would be a major ecological 
disaster.
  After extensive engineering studies, DOE has concluded that the long-
term integrity of Weeks Island cannot be assured. Thus, the most 
prudent option is to remove the oil while the leak is manageable. Once 
emptied of oil, Weeks Island will then be decommissioned by filling the 
facility with salt brine. Plans are being made by DOE to move the oil 
to other SPR storage sites beginning in the fall of 1995. As part of 
this activity, DOE will put a freeze wall around the facility to 
prevent oil leakage. Full decommissioning of Weeks Island will take 2 
to 3 years.
  I agree with the Department of Energy that Weeks Island must be 
emptied of oil and decommissioned as soon as possible. I also agree 
that the life extension activities should take place. As I stated 
before, the issue facing the Senate is not whether these should occur, 
but rather how they are to be paid for. More specifically, should we 
authorize the sale of SPR oil to fund these activities, or should the 
money come from DOE's budget? In deciding whether or not SPR oil should 
be sold, it is worth reviewing why we have an SPR in the first place.
  The SPR was created by Congress in the aftermath of the 1973 Arab oil 
embargo. Recall that the oil embargo caused energy shortages, sharp 
price increases, long gasoline lines, double-digit interest rates, and 
economic stagflation. The SPR protects the Nation by having on hand a 
significant amount of immediately available crude oil.
  The function of the SPR is twofold. First, it discourages foreign oil 
exporting nations from using the oil weapon against the United States, 
as they did back in 1973. Second, it protects the United States from 
shortages and
 price spikes if a supply interruption does occur. In addition, the SPR 
is needed to satisfy the requirements of the International Energy 
Program, which requires member nations to maintain oil stocks 
sufficient to sustain consumption for at least 90 days with no net oil 
imports.

  Congress intended SPR oil to be used only if there is an energy 
emergency. The 1975 Energy Policy and Conservation Act specifies that 
SPR oil can be sold only if the President finds that ``it is required 
by a severe energy supply interruption or by obligations of the United 
States under the international energy program.''
  The SPR has been tapped only once--other than for test purposes--but 
when used it was important that the oil be on hand. In January 1991, 
because of the Desert Storm war with Iraq, President Bush declared an 
energy emergency and sold 17 million barrels of SPR oil. Had he not 
done so, oil prices would have spiked, consumers would have suffered, 
and our economy would have been harmed.
  Given declining U.S. oil production and the corresponding increase in 
foreign dependence, if anything we need more oil stored in the SPR--not 
less. Since the Arab oil embargo in 1973, U.S. crude oil production has 
declined by 28 percent and U.S. dependence on foreign oil has grown to 
more than 50 percent. Notwithstanding additions of oil to the SPR, 
because of our growing foreign dependence, the SPR is increasingly less 
capable of offsetting a supply interruption. In 1985, the SPR contained 
493 million barrels of crude oil--then the equivalent of 115 days of 
net U.S. oil imports. Today, the SPR contains 592 million barrels of 
crude oil--the current equivalent of 74 days of net oil imports. 
Although we have added nearly 100 million barrels of crude oil to the 
SPR, due to our growing foreign dependence it is 41 days less capable 
of handling a supply interruption. Thus, I am very concerned that 
selling SPR oil--even as little as 7 million barrels as proposed by the 
administration--reduces the protection the SPR will provide in case of 
an energy emergency.
  Let me again say that I am convinced that the Weeks Island facility 
must be emptied and the oil moved to other SPR storage sites. We cannot 
afford an ecological disaster of the magnitude posed by a catastrophic 
rupture of Weeks Island. But I want to point out that those actions do 
not require the amount of money that would be generated by the sale of 
7 million barrels of SPR oil, as is proposed by the administration's 
legislation.
  At current market rates of $20 per barrel, the sale of 7 million
   barrels of SPR crude oil will generate about $140 million. Yet the 
Department of Energy needs only $89 million to move the Weeks Island 
oil to other SPR storage sites and to decommission the facility. 
Possibly much less if lower cost transportation options were used. 
Moreover, only about $38 of the $89 million is actually required in 
fiscal year 1996 because decommissioning will take several years to 
complete. Even if the entire $89 million were required in fiscal year 
1996, that still leaves $51 million from the $140 million sale. What 
does DOE plan on doing with that money? They plan on spending a large 
share on SPR life extension activities that need to occur, but more 
properly should be part of the regular DOE budget.

  DOE could have proposed to use part of its budget for Weeks Island, 
but it elected not to. For fiscal year 1996, DOE asked for $17.833 
billion, a $337 million increase over fiscal year 1995. $89 million is 
only .005 of the DOE's total budget, and only one-quarter of just the 
proposed budget increase. Surely, the administration could have found 
the necessary moneys within its existing budget if it really wanted to.
  A fair question is where will DOE get the money it needs if we do not 
authorize the sale of SPR oil as requested? I say again, DOE should 
have asked for the money as a part of their fiscal year 1996 budget 
request; I believe that we would have approved it. So I turn the 
question around and ask the administration: If it really is so 
important to undertake these activities, what are the lower priority 
DOE programs that you are willing to forgo? You tell us which programs 
you want to cut.
  I am also very concerned that selling SPR oil simply to raise money 
sets a very dangerous precedent. I greatly fear that there will be no 
end once we start doing this. Every time DOE's budget is put in a 
squeeze, there will be pressure to sell a few barrels of SPR oil to 
protect this or that cherished program. How will we be able to say no 
to other raids on the SPR piggy bank, if we allow it here?
  Mr. President, the strategic petroleum reserve is this Nation's 
energy emergency insurance policy. I do not believe that we should cash 
part of it in just because DOE is unwilling to use even the tiniest 
fraction of its $18 billion budget to address the SPR's problems. We 
may need the SPR some day if another supply disruption occurs. After 
all, Saddam Hussein is still with us. It is for these reasons that I 
oppose the sale of SPR oil as proposed by the administration and I will 
not introduce their legislation.
  There being no objection, the bill and letter were ordered to be 
printed in the Record, as follows:
                                 S. --

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled, That--
       (a) Notwithstanding section 161 of the Energy Policy and 
     Conservation Act, the Secretary of Energy may draw down and 
     sell up to seven million barrels of oil from the Strategic 
     Petroleum Reserve to the extent that appropriations acts make 
     the proceeds from such a sale available for the purposes 
     specified in subsection (b).
       (b) The proceeds from the sale described in subsection (a) 
     shall be deposited into a special account in the Treasury, to 
     be established and known as the ``SPR Decommissioning Fund,'' 
     and shall be available to the extent and in the amounts 
     provided in advance in appropriations acts for the purpose of 
     removal of oil from and decommissioning of the Weeks Island 
     site, and for other purposes related to the Strategic 
     Petroleum Reserve.
       (c) The proceeds from the sale described in subsection (a) 
     shall be included in the budget baseline required by the 
     Balanced Budget and Emergency Deficit Control Act of 1985 and 
     shall be counted as an offset to discretionary budget 
     authority and outlays for the purposes of section 251(a)(7) 
     of that Act, if the President designates that the proceeds 
     should be so counted, notwithstanding section 257(e) of that 
     Act.
       (d) The authority to contract for sale of oil under this 
     section expires September 30, 1996.
                                                                    ____

                                      The Secretary of Energy,

                                   Washington, DC, March 27, 1995.
     Hon. Al Gore,
     President of the Senate,
     Washington, DC.
       Dear Mr. President: Enclosed is a legislative proposal to 
     ``provide for the sale of oil from the Strategic Petroleum 
     Reserve and the transfer of oil from Weeks Island, and for 
     other purposes.'' This legislation, which is 
     [[Page S6146]] proposed in the President's Fiscal Year 1996 
     Budget, is part of the Administration's ongoing effort to 
     reinvent the Federal Government.
       The Department of Energy recently announced the planned 
     decommissioning of the Strategic Petroleum Reserve's Weeks 
     Island site. Water seeping into underground storage chambers 
     is compromising the structural integrity of the facility, 
     which holds nearly 73 million barrels of oil. As a result the 
     Department will transfer the oil to other sites in Louisiana 
     and Texas, and sell up to seven million barrels of oil to 
     finance the transfer and decommissioning, and other SPR 
     activities. Currently, the Department has legislative 
     authority to draw down and sell Strategic Petroleum Reserve 
     oil only under emergency authorities vested in the President 
     or as part of a test sale of up to five million barrels of 
     oil. New authority is required for this proposed sale.
       The proposed legislation would authorize to the extent 
     provided in appropriations Acts the sale and drawdown of up 
     to seven million barrels of oil from the Reserve for purposes 
     of removing the oil and decommissioning the site. Seven 
     million barrels is equivalent to less than one day of oil 
     imports, and would not appreciably affect the mission of the 
     Reserve. Proceeds from the sale would be deposited in a 
     special account known as the ``SPR Decommissioning Fund'' and 
     would offset the cost of decommissioning and other SPR 
     activities. This bill would also allow the sale proceeds to 
     be counted as offsets to spending. Authority to contract for 
     sale of oil under this section would expire on September 30, 
     1996.
       We look forward to working with the Congress toward 
     enactment of this legislation.
       The Office of Management and Budget advises that enactment 
     of this proposal would be in accord with the program of the 
     President.
           Sincerely,
                                                 Hazel R. O'Leary.
     

                          ____________________
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