Analyses of Proposal That an Indefinite Moratorium Be Placed on SPR Development and Oil Fill

Testimony was given on the results of GAO analyses of the potential impact of the administration's proposal that an indefinite moratorium be placed on Strategic Petroleum Reserve (SPR) development and oil fill at the end of fiscal year 1985. SPR storage facilities have been and are being developed at six sites: two sites are completed, three are in development, and a sixth is in the initial construction stage. The SPR is the cornerstone of the energy emergency preparedness program, and the size of the SPR is linked to import levels. In order to evaluate the administration's proposal, GAO studied: (1) the cost to develop and fill the SPR at five different levels; (2) the time period over which each of the optional SPR inventories would provide a 90-day supply offset to net import reductions; and (3) the potential impact that each SPR option would have on dampening the expected increase in oil prices which would result from a supply disruption. The analysis showed that: (1) large budget savings would result from decreased oil fill, not from stopping facilities development; (2) unless legislative changes are made regarding the production of naval petroleum reserve oil, a 500-million-barrel reserve would be the minimum cost-effective level to achieve; and (3) the need for a reserve capable of meeting the demands of a possible 90-day oil import disruption and related price increases requires that serious consideration be given to continued development of the storage sites for a larger reserve capacity and tailoring the fill rate in future years to oil availability, price, and relevant budget considerations.