The creaky SPR

Aug. 11, 2014
Much has been written lately about the obsolescence of a ban enacted nearly 39 years ago on US exports of crude oil. The attention is warranted.

Much has been written lately about the obsolescence of a ban enacted nearly 39 years ago on US exports of crude oil. The attention is warranted. By capping a natural outlet for supplies of crude exceeding need on the Gulf Coast, the prohibition distorts an important regional market. Much less attention has gone to problems of a different product of the law that prohibits crude exports: the Strategic Petroleum Reserve.

Like the crude-export ban, the SPR addressed problems anticipated by Congress in the politically and economically turbulent aftermath of the Arab oil embargo of 1973-74. Lawmakers then couldn't foresee a technically driven surge of oil and gas production from unconventional reservoirs, which lately has turned the inability to export crude into a logistical bottleneck.

Unexpected use patterns

Reasonably but incorrectly, lawmakers four decades ago also thought the US should be able to draw heavily on the SPR in response to supply emergencies every 5 years. After about 25 years, they believed, energy supply lifted by technology and demand lowered by policy would remove the need for protection against interruptions to oil imports. The downturn in imports arrived much later than that. And SPR withdrawals turned out to be much smaller and more frequent than expected.

According to John Shages, who was deputy assistant secretary for petroleum reserves in the Department of Energy during 2003-07, usage patterns at variance from design expectations have hurt the SPR. In fact, Shages writes in a paper published last month by the Energy Policy Research Foundation Inc., Washington, DC, the SPR has shrunk. Capacity, reported at 727 million bbl, actually has fallen to the current inventory level of 692 million bbl, he says.

Some capacity shrinkage, Shages explains, occurs naturally from geologic pressures on the plastic salt formations into which SPR storage caverns are leached. Full withdrawals of stored crude should balance the effect. In a storage cavern, the ideal shape of which is cylindrical, crude floats under pressure atop brine. During withdrawals, operators inject fresh water into the bottoms of caverns, displacing crude out the tops. The injected water dissolves salt along cavern walls, expanding the fluid-filled cavity from inside as geologic pressures close in from outside.

Withdrawals that totally emptied caverns of crude while filling them with water would provide bottom-to-top salt dissolution and keep storage space cylindrical. But frequent, partial emptying has widened cavern bottoms. Salt above the consequent bulges sometimes falls, damaging tubular installations. Meanwhile, geologic activity has damaged caverns. And when operators, preparing to perform repairs or maintenance, depressurize caverns, shrinkage from natural closing forces accelerates.

SPR capacity has diminished to the extent that "the SPR program does not have the option of replacing the 30 million bbl of oil sold in 2011 to offset the loss of Libyan oil," Shages writes. Workers have circulated fresh water through caverns to dissolve salt uniformly. But that operation strained surface pumps and motors designed to work faster and for shorter periods. Shages says the procedure successfully defrayed capacity shrinkage while under way but did not increase usable capacity of the caverns.

The SPR underwent a life-extending upgrade during 1994-2000, after which the system was thought to be viable until 2025. But that assessment, Shages argues, applied to surface facilities and didn't account for cavern problems. With its capacity now below officially reported levels and shrinking, the SPR needs another upgrade.

Funds scarce

Naturally, funds for such an upgrade are scarce. And revenue from past sales of SPR crude has been diverted to the creation of a gasoline hoard in the Northeast. On a scale of political urgency, maintenance of the strategic stockpile of crude oil ranks low.

Since enactment in 1975 of the Energy Policy and Conservation Act, origin of the crude-export ban and SPR, circumstances have changed. Changed circumstances should draw attention to mature programs. The worst thing Congress can do about the export prohibition and SPR is to pay no attention at all.