The following provides a brief description of the times when crude oil has been released from the Strategic Petroleum Reserve (SPR).
Emergency Drawdowns: The SPR exists, first and foremost, as an emergency response tool the President can use should the United States be confronted with an economically-threatening disruption in oil supplies.
Crude Oil Test Sales: The SPR has also conducted Test Sales to ensure the readiness of the Reserve and its personnel to carry out a Presidentially-ordered drawdown.
Exchanges Agreements: Oil can also be released from the Strategic Petroleum Reserve under exchange arrangements (similar to loans) with private companies. Exchange contracts provide for a loan of crude oil to be repaid, in kind, within a date certain, with additional premium barrels (similar to interest).
2012 Hurrican Isaac Exchange | 2008 Hurricanes Gustav and Ike Exchanges | 2006 Ship Channel Closure Exchange | 2006 Barge Accident Exchange | 2005 Hurricane Katrina Exchange | 2004 Hurricane Ivan Exchange | 2002 Hurricane Lili Exchange | 2000 Heating Oil Exchange | 2000 Ship Channel Closure Exchange | 1999 Maya Exchange | 1996 Pipeline Blockage Exchange
Non-Emergency Sales: Although the Reserve was established to cushion oil markets during energy disruptions, non-emergency sales of oil from the Reserve can be authorized to respond to lesser supply disruptions or to raise revenues.
A Presidentially-directed emergency release has occurred twice in the history of the SPR. First, in 1991, at the beginning of Operation Desert Storm, the United States joined its allies in assuring the adequacy of global oil supplies when war broke out in the Persian Gulf. An emergency sale of SPR crude oil was announced the day the war began.
The second was in September 2005 after Hurricane Katrina devastated the oil production, distribution, and refining industries in the Gulf regions of Louisiana and Mississippi. Hurricane Katrina's impact was so great, in fact, that SPR emergency oil loans preceded the President's decision to drawdown and sell oil from the Reserve. The first of several emergency loan requests from refiners was received and approved within 24 hours of Hurricane Katrina making landfall.
Hurricane Katrina entered the Gulf of Mexico in late August 2005 and caused massive damage to oil production facilities, terminals, pipelines, and refineries. All Gulf of Mexico production, which equates to about 25% of domestic production, was shut in initially. In addition, import terminals were closed; some pipelines and several refineries were inoperable. Gasoline prices spiked nationwide in reaction to the disruptions and the supply levels of gasoline and other refined products were impacted.
Because of these disruptions, on September 2, 2005, President George W. Bush issued a Finding of a Severe Energy Supply Interruption as defined in section 161(d) of the Energy Policy and Conservation Act (EPCA), 42 U.S.C. 6 241(d). President Bush authorized and directed the Secretary of Energy to drawdown and sell crude oil from the Strategic Petroleum Reserve at a rate to be determined by Secretary of Energy Samuel W. Bodman.
The United States' Hurricane Katrina sale was part of a coordinated emergency response with the International Energy Agency (IEA), a coalition of 28 member countries that supports energy supply security through energy policy cooperation. The IEA set a goal to make available 60 million barrels of crude oil and refined products to help mitigate the impact of the disruptions in the global flow of crude oil while efforts were underway to restore operations of offshore production platforms, refineries and other facilities. IEA member nations delivered to the United States much needed gasoline and other products during this period.
On September 6, 2005, the Department of Energy issued a Notice of Sale, offering 30 million barrels of crude oil (15 million barrels each of sweet and sour). The competitive sale was conducted on-line for the first time using the Strategic Petroleum Reserve's Crude Oil Sales Offer Program. Offers were due by 4:00 p.m., Central Daylight Time, September 9, 2005.
The results of the Hurricane Katrina sale were announced on September 14, 2005. Of the 30 million barrels offered for sale, 14 offers requesting 19.2 million barrels (14.8 million barrels of sweet and 4.4 million barrels of sour) were received from seven companies. DOE evaluated each offer and determined that five companies had submitted successful offers for 11 million barrels. Awards were made for delivery of 10.8 million barrels of sweet and 200 thousand barrels of sour crude oil. The first oil delivery commenced on September 26, 2005 from the Bryan Mound site.
The total U.S. response to Hurricane Katrina, considering both the emergency loans of 9.8 million barrels and the 11 million barrels of oil that was sold, was 20.8 million barrels.
On January 16, 1991, President Bush announced in a nationally televised address that U.S. and allied warplanes had begun attacks against Baghdad and other military targets in Iraq. Simultaneously, the President announced that the United States would begin releasing a portion of its Strategic Petroleum Reserve stocks as part of an international effort to minimize world oil market disruptions.
Immediately following the President's address, Secretary Watkins directed the Energy Department to prepare for a drawdown of 33.75 million barrels of Strategic Petroleum Reserve oil, the proportional amount assigned to the United States under a coordinated emergency response plan drawn up by the International Energy Agency. The oil was released over a 45-day delivery period.
Operation Desert Shield had become Desert Storm, and the first emergency use of the Strategic Petroleum Reserve had been authorized.
Less than 12 hours after the President's authorization, on January 17, 1991, the Energy Department released the crude oil sales notice, and on January 28, 1991, 26 companies submitted offers.
The rapid decision to release crude oil from government-controlled stocks in the United States and other OECD countries helped calm the global oil market, and prices began to moderate. On January 30, 1991, the Energy Department accepted offers from 13 companies offering the best prices for 17.3 million barrels of Reserve oil.
The total volume sold during the Desert Storm drawdown was just over half the amount offered by the Government, primarily because industry offers for the higher-sulfur "sour" crude oil were substantially lower than bids for the lower-sulfur "sweet" crude.
"We clearly must remain sensitive to the market by making available the crude oil the industry is saying it really needs and not allowing bargain hunters to take advantage of the taxpayers," Watkins said in announcing his decision to accept only those offers that were above 97.5 percent of benchmark prices of comparable crude oils.
On February 5, 1991, the first crude oil in the emergency drawdown was delivered.
On February 23, 1991, allied ground forces moved into Iraq and Kuwait, and Hussein's troops began to pull back. Four days later, on February 27, President Bush ordered a cease fire, and on March 3, Iraqi leaders formally accepted cease fire terms. The Persian Gulf war was over.
World oil markets had remained remarkably calm throughout most of the war, due largely to the swift release of the Strategic Petroleum Reserve oil in combination with other oil response measures taken around the world. By April 3, 1991, the Energy Department had completed its contractual obligations, delivering the last of the 17.3 million barrels.
In wrapping up the first-ever emergency drawdown the Strategic Petroleum Reserve, Energy Secretary Watkins said, "We have sent an important message to the American people that their $20 billion investment in an emergency supply of crude oil has produced a system that can respond rapidly and effectively to the threat of an energy disruption."
Three times the Administration has conducted test sales to ensure the readiness of the Reserve and its personnel to carry out a Presidentially-ordered drawdown. The first took place in 1985, the second in 1990, in the months immediately preceding 1991's Operation Desert Storm and the third test sale was conducted in 2014.
Due to significant changes in domestic crude oil production, increased imports of Canadian crude oil, and changes to crude oil distribution infrastructure upon which the SPR relies, DOE determined that a test sale should be carried out to evaluate the drawdown and sales procedure capabilities of the Reserve in the Texoma distribution system, which had been most impacted by these changes.
On March 12, 2014, the Secretary authorized the test sale and a Notice of Sale was issued for five million barrels of light sour crude from Big Hill and West Hackberry, the two SPR sites in the Texoma distribution system.
When the offering closed on March 14, 2014, the SPR had received 37 bids from 12 companies requesting a total of 18.5 million barrels of crude oil. On March 17, 2014, the SPR announced five companies as successful offerors, which were subsequently awarded contracts totaling five million barrels.
The SPR initiated crude oil deliveries on March 31, 2014, and completed the final delivery on May 16, 2014. There were 41 separate crude oil deliveries, 4.62 million barrels (92.4 percent) by pipeline, and 380,000 barrels (7.6 percent) via marine transportation. All pipeline and marine deliveries were to Gulf Coast refiners located in Texas and Louisiana.
The 1990 incursion by Saddam Hussein's Iraqi troops into neighboring Kuwait set into motion the first Presidentially- ordered, emergency use of the Strategic Petroleum Reserve.
When Saddam's forces breached the Kuwaiti border on August 2, 1990, world oil prices shot upward. With the Middle East accounting for nearly half the crude oil the United States was importing at the time, concerns escalated over a possible disruption in oil supplies. Five days after the invasion, the United States hurriedly dispatched the 82nd Airborne and several fighter squadrons to the Persian Gulf, beginning Operation Desert Shield.
On September 27, 1990, Secretary of Energy James D. Watkins, after consulting with President George H. W. Bush, ordered a 5-million-barrel test sale of Strategic Petroleum Reserve crude oil to "demonstrate the readiness of the [Reserve] system under real life conditions." Stressing that the test was not an emergency drawdown, Watkins nonetheless emphasized that increasing the familiarity of the private sector with the Reserve's sales process was important "should it become necessary in the future to conduct an emergency strategic stock drawdown in coordination with our allies."
On October 10, 1990, the Energy Department announced that it would sell just under 4 million barrels of crude oil to 11 firms that submitted the highest offers from the 33 companies that had responded to the Department's solicitation. The amount sold was less than the 5 million barrels offered because of a lack of bids for one of the six types of crude oil the Department advertised for sale. The first crude oil moved out of the Reserve on October 19, 1990, and the test sale was completed on December 3, 1990.
Oil has been pumped into and out of the Reserve's storage sites many times in routine tests. But until 1985, the competitive sales process had never been tested outside of simulations run inside the government. In 1985 Congress and the Administration agreed it was time to test the full system, both the pumps and paperwork, which would be needed to release oil from the Reserve in the event of an energy emergency. When it extended the Energy Policy and Conservation Act in June 1985, Congress authorized the Department to conduct test sales for up to 5 million barrels that would involve the private sector in the competitive sales process for the first time.
On November 18, 1985, the Department announced that it would begin accepting offers for the crude oil. One week later, on November 26, 1985, 17 companies submitted offers. Since no energy emergency existed at the time, the law governing the sale specified that the Energy Department could not accept any offer for less than 90 percent of market price for similar quality crudes. On November 27, the Department announced that it would sell one million barrels to the five highest bidders who offered prices ranging from $27.69 to $31.25 per barrel. By December 4, the first contract had been awarded, and the first oil delivery occurred on December 11. By January 8, 1986, all oil had been delivered and the test sale was successfully concluded.
The Energy Policy and Conservation Act (P.L. 94-163, enacted December 22, 1975) gives the Energy Department the authority to exchange oil from the Reserve for the purpose of acquiring additional oil for the stockpile. This authority allows the SPR to negotiate exchanges where the SPR ultimately receives more oil than it released; thereby acquiring additional oil. With the exception of the 2000 Heating Oil Exchange, the SPR has entered into negotiated contracts at the request of private companies in order to address short-term, emergency supply disruptions to a refiner's normal operations.
In late August 2012, Tropical Storm Isaac entered the Gulf of Mexico and headed towards the Louisiana coast. The storm shut down 95% of oil production in the Gulf and caused minor damage and delays to petroleum industry facilities in the region. Marathon Petroleum Company requested an emergency loan of 1 million barrels to supplement Marathon's supplies to ensure their refining operations had suffient supplies to continue operations. The negotiated exchange contract required the oil to be repaid to the SPR in 3 months, with premium barrels.
On September 1, 2008, Hurricane Gustav entered Louisiana west of New Orleans as a Category 2 hurricane. The storm disrupted the production of oil in the Gulf and damaged the petroleum industry infrastructure necessary to receive, process and distribute crude oil and product. The Secretary of Energy announced that DOE would favorably consider requests for releases of crude oil from the SPR in order to supply refineries that were still able to operate. The SPR releases would be executed using the Secretary's emergency test exchange authority. The first request was received on September 2nd and was quickly approved. Additional requests followed and were also approved.
The first delivery began on September 9, 2008. As the SPR continued to review requests for emergency loans and deliver oil following Hurricane Gustav, the Nation was watching the progress of Hurricane Ike as it moved towards the U.S. Gulf Coast.
Hurricane Ike made landfall near Galveston, Texas as a Category 2 hurricane on September 13, 2008, before the petroleum industry had recovered from Hurricane Gustav. Hurricane Ike devastated the region along the northeastern coast of Texas and southwestern Louisiana.
In spite of sustaining facility damage as well as loss of commercial power at some sites from both hurricanes, the SPR was able to make operational repairs quickly in order to deliver crude oil. Beginning in early September and continuing through October 16, 2008, a total of 5,389,000 barrels of SPR crude oil were delivered to five companies whose normal supplies had been interrupted to the point that the companies could continue to operate, refine the crude oil into products, and deliver those products to U.S. consumers. Deliveries to Marathon, Placid, ConocoPhillips, Citgo, and Alon USA were completed from Louisiana's Bayou Choctaw and West Hackberry sites.
Repayment to DOE of the quantity of crude oil loaned to the contractors, in addition to premium barrels negotiated as a condition of the loan, would occur January through May 2009.
The Energy Policy and Conservation Act (P.L. 94-163) provides authority for the Secretary of Energy, under Sec. 161(g)(1), to conduct a test sale or exchange of up to five (5) million barrels from the SPR. Two separate test exchanges were authorized in response to Hurricanes Gustav and Ike. A Report to Congress was prepared on the use of the SPR's test exchange authority.
On June 21, 2006, the Calcasieu Ship Channel was closed to maritime traffic due to the release of a mixture of storm water and oil near Lake Charles, Louisiana, cutting off supplies to refiners in the area. Deliveries to the ConocoPhilips and Citgo refineries in the area were disrupted. In order to avert temporary shutdown of both refineries, the SPR agreed to loan a total of 750 thousand barrels of sour crude. The loaned amount, plus premium barrels, was repaid in early October 2006.
On January 17, 2006, a barge accident in the Sabine Neches ship channel resulted in the closure of the channel to deep-draft vessels, disrupting deliveries of crude oil to refiners in the Beaumont/Port Arthur area. In order to avoid shut down or reduced runs at the Total Petrochemicals USA, Inc. refinery at Port Arthur, the SPR agreed to loan Total 767 thousand barrels of sour crude. The loaned amount, plus premium barrels, was repaid in February 2006.
In late August 2005 Hurricane Katrina entered the Gulf of Mexico as a Category 5 hurricane, causing massive damage to offshore oil production facilities. The destruction continued when she made landfall as a Category 3 hurricane near New Orleans, Louisiana, on August 29, 2005. By the time she was finished, significant damage to production platforms, terminals, pipelines and refineries had occurred, leaving many facilities inoperable for weeks - and some for several months.
Immediately after learning of Hurricane Katrina's devastating impact, the Secretary of Energy approved six emergency requests for loans of crude oil from refiners whose scheduled deliveries had been disrupted. Without the SPR loans, the refineries faced severe reductions in processing rates or shutdown of their operations. The loans enabled them to continue refining crude oil into products such as gasoline, heating oil, and jet fuel for the Nation. The terms of the loans required repayment of crude oil that meets the specifications of the SPR, including premium barrels to be paid to the Government. The first oil delivery occurred on September 3, 2005, and continued in a series of batches through October, totaling 9.8 million barrels. During Fall 2005, 4.2 million barrels of oil and accompanying premium barrels were repaid. An additional 4.4 million barrels were repaid between February and May 2006, and the remaining 1.7 million barrels were repaid during the spring of 2007.
The 9.8 million barrels of oil loaned under exchange agreements, combined with the 11 million barrels of oil sold, provided 20.8 million barrels of crude oil to U.S. refiners.
Hurricane Ivan struck the Gulf of Mexico in mid-September 2004 and disrupted both Outer Continental Shelf production and import vessels delivering cargoes to Gulf terminals. Most of the production shut in was in the fields east of Louisiana and was sweet oil used in refining gasoline and distillate products. The Department of Energy received several emergency requests from refiners for assistance in securing supplies of crude oil adequate to avoid cutting back on refining operations. To relieve their shortages, the SPR loaned a total of 5.4 million barrels of sweet crude oil to five companies (Placid Refining, Shell Trading, Conoco Phillips, Astra Oil, and Premcor). The crude oil was delivered to the refiners during September and early October 2004. By April 2005, the loaned oil had been repaid to the SPR, plus 233,924 premium barrels paid to the Government in return for the time-exchange.
When Hurricane Lili disrupted normal commercial oil shipments into Gulf Coast distribution hubs in October 2002, a limited exchange of Strategic Petroleum Reserve was carried out to permit a major oil pipeline operator to continue critical crude shipments to refineries in Memphis and the Midwest.
The action began on September 30, when the Energy Department was informed that the Capline pipeline, a major interstate oil carrier that originates in Louisiana, might not be able to deliver needed oil supplies to customers, including the Williams refinery in Memphis, due to curtailments of incoming oil deliveries because of Hurricane Lili. The Capline operator, Shell Pipeline Co. LP, was concerned that using oil stocks from its Sugarland terminal in St. James Parish, Louisiana, to keep the Capline pipeline flowing would cause stock levels in the tanks to drop below the safety threshold for protection against hurricane-force winds.
By October 1, Strategic Petroleum Reserve staff had worked out an arrangement with the Capline Pipeline System to temporarily relocate up to 296,000 barrels of oil from the Strategic Petroleum Reserve's Bayou Choctaw site to keep stocks in Shell's tanks at acceptable levels. The SPR temporarily relocated a lesser amount of 98,000 barrels from the Bayou Choctaw site to the Capline tanks. This allowed Shell to continue supplying oil to Williams and other refineries in the Midwest that rely on the Capline pipeline.
When commercial oil deliveries returned to normal the next week, Shell pumped the SPR crude back to the government's storage site.
Because the SPR oil sent to Shell displaced oil in a connecting pipeline that served the Placid Refinery in Port Allen, Louisiana, the crude oil returned SPR oil went directly to the Placid Refinery. Under the exchange agreement, DOE received a comparable grade of replacement oil within 60 days plus premium barrels.
With U.S. consumers facing the winter of 2000-01 with commercial heating oil stocks much lower than typical, the Clinton Administration on July 10, 2000, announced its intent to establish a Home Heating Oil Reserve. The goal was to establish a 2-million barrel reserve to provide an emergency fuel source for consumers in the Northeast. The heating oil was to be stored in aboveground tank farms leased from private companies (see Northeast Heating Oil Reserve). To acquire the storage facilities and heating oil, the Energy Department offered to exchange crude oil from the Strategic Petroleum Reserve.
By the end of August 2000, the Department had contracts in place with three companies to provide the terminal capacity and with two companies to supply the heating oil. To acquire the first-year use of storage facilities, the Department agreed to provide 117,667 barrels of crude oil to Equiva Trading Company, Morgan Stanley Capital Group, Inc., and Amerada Hess Corporation. (After the initial year, the Administration began requesting direct appropriations to cover the costs of leasing commercial tank storage.) To obtain the 2 million barrels of heating oil, the Department provided 2,718,000 barrels of crude oil to Equiva Trading Company and the Morgan Stanley Capital Group, Inc. These companies offered the most favorable exchange terms to the government in an open competition.
Even with the establishment of the Northeast Home Heating Oil Reserve, low distillate inventories in the Northeast continued to alarm the Administration. On September 22, 2000, the President directed the Secretary of Energy to enter into time exchange agreements with oil companies for up to 30 million barrels of crude oil. Under the exchange agreements, companies were to return a like quantity, plus a bonus percentage of similar crude oil, in the fall of 2001.
An initial group of offerors was selected on October 4, 2000. When two of the selected offerors could not provide the necessary financial guarantees, the Energy Department reissued a solicitation for 7 million barrels of crude oil on October 16, 2000 and awarded final contracts on October 24, 2000.
The average bonus percentage from these initial awards was 4.5 percent, for a total of 31.2 million barrels of exchange oil to be returned to the Reserve by a specified date. However, market conditions in 2001 made it advantageous to the government to accept deferral of some of these deliveries until 2002 and 2003. Companies scheduled to supply oil to the Reserve agreed to provide an additional 3.3 million barrels as a condition of allowing later deliveries, bringing the total amount of oil to be returned under the time exchange to 34.5 million barrels.
In December 2002, with oil supplies tightening due to the curtailment of exports from Venezuela, Energy Secretary Spencer Abraham authorized the Department to accept further deferrals of the 5.3 million barrels that remained to be delivered. The renegotiated delivery schedules resulted in an additional premium of 600 thousand barrels for delivery by early 2004, resulting in a total return volume of 35.1 million barrels. No further deferrals were permitted and the Exchange 2000 initiative is now completed.
In June 2000, a commercial dry dock collapsed into the Calcasieu ship channel just north of the Intracoastal Waterway near Lake Charles, Louisiana. The channel served as the primary route used by nearby CITGO and Conoco refineries, two of the largest in Louisiana. The blockage meant that both refineries faced production curtailments in a matter of days if crude oil could not be supplied to them.
In less than 30 hours after being approached by the companies, the Energy Department had made arrangements to exchange oil from the Strategic Reserve to relieve the refineries' supply problems. On June 15, 2000, the Energy Department agreed to exchange 500,000 barrels from the Strategic Reserve's West Hackberry site with CITGO in return for an equivalent quantity, plus an exchange premium, of crude oil from the company after the shipping lanes were reopened. The next day, June 16, 2000, the Department reached an exchange agreement for the same amount with Conoco. Crude oil from the Reserve began flowing to the refineries on June 18, 2000.
Within a week, the U.S. Corps of Engineers had reopened the shipping channel, and on July 29, CITGO delivered replacement crude oil back to the Reserve. On August 4, Conoco delivered an equivalent quantity of crude oil to the Reserve, completing the exchange.
During 1998, the Department conducted an exchange of the 11 million barrels of Maya crude oil stored at the Bryan Mound site for 8.5 million barrels of other higher value crude oil.
The Maya crude oil was acquired from Mexico in the early 1980s, as part of a purchase agreement between the Department and Petroleos Mexicanos, Mexico's national oil company. Since that time, the Maya has been segregated in a single cavern at Bryan Mound because its lower API gravity and greater sulfur content made it significantly different from the other inventory. This had the effect of reducing the site's operational flexibility, efficiency, and drawdown capability during an energy emergency.
On August 13, 1998, the Reserve solicited offers to deliver crude oil which would meet the Reserve's quality specifications, in exchange for the Maya. On August 27, 1998, the Reserve received offers from seven companies, and on August 28, an exchange contract was awarded to P.M.I. Norteamerico S.A. de C.V. of Houston, Texas. Subsequently, P.M.I. delivered a total of 8.5 million barrels of light sour Olmeca and Isthmus crude oils to Bryan Mound from October 1998 through early January 1999. In return, the Reserve transferred title of Maya ownership to P.M.I.; however, the Maya crude remained in the custody of the Reserve until October 1999.
This exchange decreased the Reserve's total inventory by about 2.5 million barrels, but because of the higher quality of the oil received in the exchange, it did not decrease the value of the inventory. Additionally, it benefited the Reserve by increasing the quantity of Bryan Mound's light sour crude oil stream and improved the site's storage and drawdown capabilities.
In late April 1996, the ARCO Pipe Line Company incurred an operational emergency when its 20-inch pipeline from the Texas Gulf Coast to Cushing, Oklahoma, became blocked by a waxy crude, interrupting its oil deliveries to the midcontinent. On May 3, 1996, under an emergency crude oil lease exchange agreement with the Seaway Pipeline Company, the Energy Department agreed to supply up to one million barrels of crude oil to enable the start-up of its Freeport-to-Cushing pipeline to continue the flow of oil to the midcontinent refineries, avoiding any refinery shutdown. Under the terms of the agreement, ARCO would pay the Government a fee, plus a future price differential for leasing the oil, and would replace the oil with an equivalent grade of crude within six months. Under this lease, the Strategic Petroleum Reserve delivered a total of 900,416 barrels of crude oil to the Seaway Pipeline System. All the oil was returned by November 25, 1996.
A non-emergency Presidentially-directed release was announced on June 23, 2011, in coordination with a general release of 60 million barrels of petroleum from member countries of the International Energy Agency. The U.S. obligation under the International Energy Program was for 30 million barrels of petroleum. The release of strategic reserves was to offset the disruption in global oil supplies caused by unrest in Libya and other countries.
In addition to national energy emergencies, crude oil has been withdrawn many times from the SPR sites for other reasons. Small quantities of oil are routinely pumped from the storage caverns in tests of the reserve's equipment. And in several instances, oil has been removed from the caverns under the legal authority to "exchange" SPR crude oil.
On June 23, 2011, Secretary Chu announced that the U.S. and its partners in the International Energy Agency (IEA) would release a total of 60 million barrels of oil onto the world market. The Secretary stated, "We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery." Under the IEA's response measures guidelines, the United States' obligation was for 30 million barrels.
The SPR issued a Notice of Sale on June 24, 2011, to solicit competitive offers for the purchase of 30 million barrels of sweet crude oil to be delivered by the end of August 2011. DOE received over 90 offers that resulted in 28 contracts with 15 companies for deliveries of 30,640,000 barrels.
The first sale was requested by the Administration to pay for the unexpected decommissioning of the Weeks Island Strategic Petroleum Reserve storage site. A fracture in the overburden above the converted salt mine - the only site in the Reserve that used a former mine to store crude oil - threatened the site's geologic integrity and its 73 million barrels of crude oil. On October 5, 1994, the Energy Department had announced that it would begin transferring the oil to other sites to reduce the threat of its catastrophic release into the environment. The cost of the transfer and subsequent site decommissioning was estimated to be $100 million. To pay for the effort, the Department proposed to sell up to seven million barrels of the Weeks Island inventory. Congress approved the sale in the Balanced Budget Downpayment Act, enacted January 26, 1996.
On January 29, 1996, the Defense Fuel Supply Center, acting as the Energy Department's sales agent, issued a solicitation to industry for competitive offers to purchase Weeks Island oil. Subsequently, on a two-week cycle, beginning February 20 and ending March 21, offers were received, negotiations conducted, and contracts awarded to those offerors bidding prices consistent with the oil's market value. Six contracts were awarded to four oil firms for 5.1 million barrels. Deliveries were made between March 4 and April 21, 1996. Payments to the U.S. Treasury totaled $97.1 million, or $18.95 per barrel.
The second sale of Weeks Island crude oil was directed by Congress in the Omnibus Consolidated Rescissions and Appropriations Act of 1996, enacted April 26, 1996. It required the sale of $227 million worth of oil during fiscal year 1996 to reduce the federal budget deficit. This sale was performed in the same manner as the first. From May 22 through August 5, 1996, the Defense Fuel Supply Center awarded twenty-four contracts to nine oil companies. Deliveries of 12.8 million barrels were made from May 26 through September 17, 1996. This sale yielded $227.6 million in revenue for the U.S. Treasury, or $17.81 per barrel.
The third sale was directed by the Omnibus Consolidated Appropriations Act for Fiscal Year 1997, enacted September 30, 1996, and called for the sale of $220 million worth of crude oil to offset fiscal year 1997 appropriations. On October 3, 1996, the Defense Fuel Supply Center issued a solicitation to prospective offerors requesting bids to purchase West Hackberry sour crude oil, and a small quantity of sweet crude oil in the pipeline connecting the West Hackberry site with the Sunoco Marine Terminal in Nederland, Texas. The first purchase contracts were awarded on October 24, 1996, and by December 5, 1996, the Defense Fuel Supply Center had awarded twenty contracts to seven companies for the purchase of 10.2 million barrels to yield about $220 million in revenue. The first delivery occurred on October 29, 1996, and all deliveries were completed by January 1997.
The combined quantity sold in the Weeks Island Sales was 28.1 million barrels.