SPR Comments 12.01.22

The interesting commentary seems to suggest the DOE wants to swap emergency and mandatory sales for 140 million barrels and repurchase 60 million barrels, replacing the 180 million release with an extra 20 million barrels.

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"It doesn't make sense for us to be releasing oil while we're trying to refill the SPR from the emergency sales. So we're trying to create an opportunity in FY 24 through FY 27 to stop those sales, either delay them to further out or cancel them, and then do a rescission on our account to make sure those pay fors are accounted for.""So starting in 2024, we're doing 35 million barrel. A year in order to meet more, 25, 26 and 27. So that 140 million barrels plus a 60 million barrels that we're planning to purchase physically would more than cover the 180 million barrels that we sold this year."

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Full Transcript

Manchin

Thank you so much. And now we have Mr. Doug McIntyre. Doug

Doug MacIntyre

the reports on the threes. Thank you, chairman Mansion, ranking member Baraso, and distinguished members of the committee. It is an honor to appear before you and represent the Department of Energy at this hearing. This morning, I will speak to the proposed legislation under my purview as the Deputy Director of doe's Office of Petroleum Reserves, commonly referred to as O.

The energy sector provides critical resources, electricity, and fuel that we all depend on. O p's role and efforts are instrumental in addressing the continuously evolving risks facing the energy security energy sector today. Right. The mission of the Office of Petroleum Reserves is to protect the United States from severe petroleum supply interruptions through the acquisition, storage, distribution, and management of emergency petroleum stocks, and to carry out the US obligations under the International Energy Program.

The O P R manages the operational readiness of three emergency stockpiles, the strategic patrolling reserve, often called Ds p r. The United States Crude oil stockpile. Also the Northeast Home Heating Oil reserve, often referred to as NE Hor and the Northeast Gasoline Supply Reserve, often referred to as the NGS R.

In the event of a natural disaster or other national emergency, the US can rely on these emergency stockpiles to maintain a constant supply of crude oil and other petroleum. And this way, o P directly supports the Department of Energy's goal of energy dominance by ensuring energy. Security for America.

Collective preparedness and collective response are at the heart of our work, which is why the department strengthen the Office of Cybersecurity, energy Security and Emergency Response, or Caesar roll with the addition of the o p. This. The transition of P to Caesar consolidates and streamlines the department's critical emergency response function, and improves the department's ability to utilize the Office of Patrol and Reserves as a critical resource during natural disasters and other emergency events.

I'll now turn to the two bills under consideration today that relate to the SPR Senate Bill 46 51, the prohibiting strategic patrolling Reserve sales to Rogue State. Would limit the sale and export of petroleum products from the SPR to countries that are designated as countries of concern for religious freedom.

Under the International Religious Freedom Act of 1998, the legislation would limit the sale of spr crude oil to state owned entity, subject to a ban or imposition of sanctions. These companies would be required to certify. They have not purchased oil from countries subject to US sanctions or bans while they were in.

If the Department of Energy determines these countries determines these companies have purchased oil from these countries of concern, they would not be able to bid on SPR Oil at auction. The second piece of legislation, Senate Bill 45 15, the No emergency Crude Oil for Foreign Adversaries Act would require the Secretary of Energy to stipulate as a condition on the sale of SPR crude oil at auction.

That the oil cannot be exported to China, Russia, North Korea, or Iran. The proposed legislation also requires a report on the route to destination and place a refinement of SPR crude oil, and the ownership of the refinement facilities of all crude oil sold at auction from the p r since November 23rd, 2021, the SPR currently has no way to track the movement of the crude oil sold after.

Custody transfer of crude oil from the SPR takes place at either a pipeline boundary of the SPR site commercial crude oil storage facility. We're at the vessel, which the crude oil is loaded. Once the vessel is loaded, the crude oil on that vessel may be sold multiple times prior to reaching the intended destination.

In closing, thank you for the opportunity to testify today. O p is and remains committed to protecting our nation's energy, security and resilience. I look forward to your questions

Manchin

and thank you. Now we'll start the questions and I'll begin and it stays with you, Mr. McIntyre. We don't have a bill before on the strategic petroleum Reserve, and I like to better understand the plans to refill.

First of all, you might give us a little bit of a background on when we. The spr and I think it was after the 74 oil embargo. A few of us are old enough to remember that. And, but anyway, and how we determined and how we got to 700, almost 800 billion million barrels. Why did we think we needed 800?

Where is the mark now? I think we're down around 400 now in that neighborhood. And where do you think we need to go? So if you give us a little bit, it might help the. Understand what we're trying to achieve. And I'm understanding also in the cavities that we use for this. You can't be taking oil out and putting it in at the same time.

That's correct. Okay. Yes, sir. And, and also if you can tell me if any of our cavities we've had one collapse, as I'm understanding. We've had, we've lost one, correct? No, sir. We haven't. I thought we had, we had Damn For what? . Yeah. We know we had damage to one and we thought that was because of the, how we were managing it, but I could be wrong anyway.

Explain that. The shape that we're in. What is our total capacity to store oil and where do you think we need to be? And give us a little bit of background, if you will.

Doug MacIntyre

Thank you, Senator for the question. I wasn't old enough to be buying gasoline during the air oil embargo, but I was old enough to be in my dad's car while he was waiting in line, while he was

Manchin

raising Kane and cussing. I remember those days.

Doug MacIntyre

So you, yes, sir. So as you said, the the SPR was created as part of the energy production, epca energy conservation Act, and was created in 1970. 7 78 as a result of the air oil embargo it took several years for us to build up the reserves. What, what,

Manchin

did you have a target?

What was it? Why did you set, how did you set a target of where you had to get, how much we had to have in the United States?

Doug MacIntyre

So initially the target was set at 500 million barrels. Gotcha. It was init. It was then increased to a billion barrels. We eventually got to 715 million barrel. Of capacity. We reached that capacity in, in around 20 13, 20 14.

We had about 700 million barrels at 2017 when we started the congressionally mandated sales. A number of laws have mandated us to sell over since 2017. As

Manchin

the sales, your, your evaluation of the sales that were mandated by Congress was it to stabilize pricing or fill a void.

Doug MacIntyre

No sir. It was for deficit reduction, providing funding for those bills.

For pay fors. Absolutely. We understand that. Yes, sir. Awful . And Right, right. There was,

Manchin

there was. We have voice. We have, we have a verbal over here. Awful.

Doug MacIntyre

Yes. So on top of that, so since, since we were at 700 million barrels we sold a number of congressional mandated sales. We had 180 million barrels of emergency sales this year as a result of Putin's invasion of Ukraine.

And so right now we are sitting at around 400 million. Currently we have a study underway. It wasn't requested by Congress. It was something that we started on our own. It's under administration review that would look at various levels of the SPR and determine what kind of disruption that would mitigate against in, in other words, if you consider the SPR as an insurance, what do you, what are you getting with the different?

We have

Manchin

legislative man, mandatory sales.

Doug MacIntyre

. Yes sir. We starting when, so we're, we've been doing it from 2017 and we've got 'em through 2031. We've got the key. Does that fulfill the pay fors that we, that we, that, that would fulfill the pay fors? Yes, sir. And so we have to

Manchin

have that. So gimme, gimme your plan.

I think you have a little bit of an

Doug MacIntyre

idea here. Yes, sir. So we, as you said, we can't fill and release from. From the same site at the same time. Gotcha. It doesn't make sense for us to be releasing oil while we're trying to refill the SPR from the emergency sales. So we're trying to create an opportunity in FY 24 through FY 27 to stop those sales, either delay them to further out or cancel them, and then do a rescission on our account to make sure those pay fors are

Manchin

accounted.

Selling the 180 million barrels, how much money do we have to. To take off

Doug MacIntyre

the, so fortunately, yes, sir. Fortunately, we sold high, and so the average sales price for these emergency sales is about. $96 a barrel and the plan would be to purchase at roughly $70 a barrel or sometime around, somewhere around that.

So we would have enough money to

Manchin

refill the 100. And how much would ourselves, 35 billion a year starting, I mean, as of 2025,

Doug MacIntyre

we, so starting in 2024, we're doing 35 million barrel. A year in order to meet more, 25, 26 and 27. So that 140 million barrels plus a 60 million barrels that we're planning to purchase physically would more than cover the 180 million barrels that we sold this year.

Manchin

Hope that helps the committee a little bit, get an idea of where we are right now because it is alarming. And Dr. Ha, I'm, I'm out of time in consideration my committee, but I really want to talk to you concerning our disposal of nuclear waste. And they had a blue ribbon boom committee and all we want to hear about that.

So I get a second round if one of my colleagues here does not ask that question. I like to get into that with you. And with that, I'll turn this bar Alsoso. Yeah, thanks Mr. Chairman.