The Northeast region of the U.S. is particularly vulnerable to gasoline disruptions as a result of hurricanes and other natural events. Hurricane Sandy in 2012 caused widespread issues related to the availability of gasoline. In response to help build a more secure and resilient energy infrastructure, the Energy Department established the first federal regional refined petroleum product reserve containing gasoline. The reserve currently holds one million barrels of gasoline to help strengthen regional fuel resiliency in the Northeast.
Creation of an emergency stock of gasoline was authorized by Department of Energy Secretary Moniz on June 20, 2014. Secretary Moniz directed the Office of Petroleum Reserves to establish a one million barrel gasoline component of the Strategic Petroleum Reserve in the Northeast. The intent was to create a buffer large enough to allow commercial companies to compensate for the initial impacts of interruptions in supply, but not so large as to dissuade the companies from maintaining stock levels sufficient to respond to routine disruptions or to recognize that increasing prices are an indicator that more supply is needed. A one million barrel emergency reserve would give Northeast consumers supplemental supplies for a few days in the event of a hurricane or other disruption, until existing distribution infrastructure could return to full operation.
An on-line anonymous open bidding system would be used for emergency sales of product from the Northeast Gasoline Supply Reserve.
DOE Establishes a One Million Barrel Reserve
Immediately after the Secretary’s June 2014 directive, the Energy Department, acting through the Department of Defense, Defense Logistics Agency – Energy (DLA-E), finalized solicitations to acquire storage service contracts in the Northeast, as well as one million barrels of gasoline stocks. Contracts were awarded in late summer 2014 and the gasoline was soon delivered. The regional reserve has 700,000 barrels of gasoline located in the New York Harbor area, 200,000 barrels positioned in the Boston area, and 100,000 in South Portland, Maine.
To facilitate distribution during an emergency, each terminal is required to have backup power at the storage site, and multiple options to move fuel in the event of a disruption, including truck and marine vessel loading facilities. Additionally, several terminals also have pipeline connectivity to move fuel.
This new Northeastern gasoline reserve supplements the Northeast Home Heating Oil Reserve, a one million barrel supply of ultra-low sulfur diesel, which was used for the first time by first-responders and to fill emergency generators in the wake of Superstorm Sandy. The storm caused heavy damage to refineries in 2012, forcing more than 40 terminals in the New York Harbor to close due to water damage and loss of power.
Beyond the Northeast, the Energy Department is not currently planning additional regional product reserves; instead the Department is conducting a series of regional fuel resiliency studies to analyze the specific challenges faced by different parts of the country that are vunerable to a variety of weather-related natural disasters that could potentially affect energy supply infrastructure as part of the Quadrennial Energy Review (QER). Launched earlier in 2014 as part of President Obama's Climate Action Plan, the first QER will focus on the United States' infrastructure for transmitting, storing and delivering energy.