Reed & Whitehouse Urge Obama to Swiftly Sell $500 Million of Emergency Oil from Faltering Cavern
WASHINGTON, DC – In an effort to reduce gas prices for consumers and prevent millions of barrels of oil from seeping into the ground beneath Southeast Louisiana, U.S. Senators Jack Reed (D-RI) and Sheldon Whitehouse (D-RI) are backing the Obama Administration’s proposal to sell $500 million worth of federal oil from the Strategic Petroleum Reserve.
In 2009, the federal government found that Bayou Choctaw Cavern 20 near Baton Rouge, Louisiana had “structural problems that pose an environmental risk.” On February 16, 2011, Energy Secretary Steven Chu testified before Congress that: “We have an issue with one of our reservoirs. And there's one cavern that has some integrity issues. And we're draining that and backfilling other storage locations. But we're concerned of an overfill in those stores' locations. And so… we don't want to lose this crude.”
The senators say that tapping this oil now will help consumers, prevent a major oil leak, and ensure that hundreds of millions of dollars of crude oil is not wasted.
“Selling this oil now makes sense from both an economic and an environmental standpoint. The cavern has structural integrity issues and we need to move the oil to avoid losing it. Selling it now will prevent a potential environmental hazard, reduce prices at the pump in the short term, and create additional revenue to pay for restoring the reserve in a new, safer location. Letting this oil just seep into salt caverns would be both fiscally and strategically irresponsible,” said Reed, the Chairman of the Appropriations Subcommittee on the Interior and Environment.
“With too many Rhode Islanders still struggling to keep up in this economy, and with the price of gas rising, we should do everything possible to reduce the pain being felt at the gas pump. Considering our current budget shortfall, selling a small portion of the reserve is a reasonable approach to fund the necessary repairs to prevent rupture and significant damage to our environment,” said Whitehouse, a member of the Senate Environment and Public Works Committee.
The Strategic Petroleum Reserve is the world's largest supply of emergency crude oil, and is currently filled to over 99% of its capacity of 727 million barrels of crude oil. According to the U.S. Department of Energy, the average price paid for oil in the reserve is $29.76 per barrel. The average price of a barrel of oil today is about $99.
Bayou Choctaw Cavern 20 was supposed to be able to hold up to 7.5 million barrels of crude oil, but its capacity to safely store oil has been reduced to 3.2 million barrels because federal law requires oil storage facilities to be at least 300 feet from a salt barrier. In 2009, geologists discovered that Bayou Choctaw Cavern 20 had leached toward the edge of the salt dome and now sits within 60 feet in some places and must be replaced for fear of breaching the salt dome. Oil has been recently drawn down from the cavern to a safer level, but the temporary storage of the moved oil has become untenable due to over-capacity at the temporary sites. The Administration has requested to sell about 6 million barrels of oil to ensure that it is not lost before a replacement cavern is available. Congress has already appropriated $33.7 million, or roughly half the total cost, to purchase a replacement cavern in the region that is capable of safely storing 10 million barrels of crude oil. All oil from Choctaw Cavern 20 will eventually be moved to that replacement cavern.
Reed also cautioned that the additional increase in oil prices caused by events in Libya and the Middle East is only the most recent reminder of our dependence on foreign oil and its impact on American families’ budgets, especially this winter when heating oil prices are already 25% higher than last year.
“We must continue to pursue long-term solutions to reduce the overall cost of driving our cars, heating our homes, and powering our businesses. One of the most effective ways is improving energy efficiency through weatherization and increased fuel efficiency standards,” stated Reed. “We should address this reservoir issue now and provide short-term relief, but we must also continue to develop energy efficient technologies that can power our economy. Investing in clean, energy efficient technology over the long-term will strengthen our security, help families save on their energy bills, and create jobs here in Rhode Island.”
Rhode Island received over $44 million for weatherization and clean energy programs in the Recovery Act. Since it began in 1975, the weatherization program has benefited over 33,000 Rhode Island homes, saving consumers over 100 million gallons of heating oil.
According to the U.S. Department of Transportation, last year’s new fuel efficiency standard of 35.5 mpg by 2016 is expected to save consumers $3,000 over the lifetime of the vehicle and increasing the standard to 60 mpg by 2025 could result in $7,000 in savings. In addition, the Department of Energy states that weatherizing a home can reduce energy costs by over $400 in the first year alone.
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