The government’s top watchdog has urged Congress to consider selling off some of the nation’s strategic oil reserves amid an American production boom, saying it could deliver several billion dollars to the government right now — but lawmakers on both sides of the aisle are still reluctant to reap the windfall.
“I have said before that it would be a mistake to treat the reserve as anything but a reserve,” Senate Energy and Natural Resources Chairwoman Lisa Murkowski said Tuesday as she led a hearing into the decision. “It is not an ATM for new spending or a vestige of our national energy policy. If we begin to treat it as that, I think we risk selling at the wrong time, at the wrong price and losing its substantial benefits.”
On that the Alaska Republican found common ground with Sen. Elizabeth Warren, Massachusetts Democrat and standard-bearer for the party’s liberal wing, who said the government needs to “act like grown-ups” and find other ways to raise money.
“Mandating massive, inefficient and inflexible sell-off of the Strategic Petroleum Reserve years in advance is just one more bad idea for how to finance government,” she said.
The Strategic Petroleum Reserve is a collection of 691 million barrels of crude oil that sit in salt caverns along the Gulf of Mexico. The federal government began collecting the backup oil in 1975, a reaction to the 1973-1974 oil crisis where many Arab nations cut off oil exports to the United States and sent the economy into a tailspin.
But the Government Accountability Office has suggested that Congress and the Department of Energy re-evaluate the size of the oil stockpile, which currently holds a 99 day supply of crude oil. The United States need only keep a 90 day supply according to its agreement with other members of the International Energy Agency — leaving the federal government with a potential excess of resources that could go toward funding projects.
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Private reserves also hold more than 100 days’ worth of oil, the GAO said in a 2014 report.
A spike in U.S. production, meanwhile, has made the U.S. less susceptible to outside shocks, and the GAO said it was time the government rethink how much it wants to store.
Lawmakers have introduced a bill that would sell 101 million barrels of oil from the reserve to earn about $9 billion over 9 years, saying the funds could pay for road construction and other infrastructure.
But the government would probably lose money on the deal given what it paid for the oil, said Sen. Debbie Stabenow, Michigan Democrat.
“It seems interesting to me that when we’re talking about selling off reserves right now, prices are so low. From a purely financial standpoint, from a taxpayer dollars standpoint, we would want to be selling off reserves when prices are high, not when prices are low,” Ms. Stabenow said. “From a financial standpoint, this doesn’t make any sense.”
Sen. Maria Cantwell, the ranking Democrat on the committee, said even a boost in U.S. oil production doesn’t guarantee security.
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“There are several immediate and medium-term geopolitical risks capable of rendering severe or even catastrophic oil supply losses, such as possible attacks on major Middle East supply notes or routes, major weather events, or severe disruptions originating in places like Nigeria or Venezuela,” the Washington Democrat, said. “Any of these situations could result in major disruptions and trigger an SPR draw down.”
The reserves were last tapped into in 2011, when President Obama sold 30 million barrels of crude oil to offset oil supply disruptions due to unrest in the Middle East.
Energy Secretary Ernest Moniz said he’d like $2 billion in new funding so his department can update the reserve locations, which were established 40 years ago, and need substantial upkeep. The department also needs to protect the facilities from rising sea levels that could result from global warming, he said.
• Anjali Shastry can be reached at ashastry@washingtontimes.com.
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