U.S. Strategic Petroleum Reserve faces stress as emergency releases strain old infrastructure

The U.S. Strategic Petroleum Reserve is under strain as massive stockpile releases in response to wars in the Middle East and Europe have stressed old infrastructure in need of repair.

The SPR this week fell to its lowest level since March 1983 after the U.S. withdrew 352 million barrels of crude oil in four years to ease supply disruptions triggered by its war with Iran and Russia's invasion of Ukraine.

Federal auditors have found that the SPR's ability to respond to future emergencies is at risk. A May report quoted Department of Energy officials telling auditors that the reserve's web of pipelines, caverns and storage tanks is held together "with 'Band-Aids,' and that it is uncertain how long they will hold."

"The SPR’s drawdown, distribution and fill capabilities are currently limited and are at risk going forward due to longstanding issues with aging infrastructure compounded with ongoing major construction intended to address them," the Government Accountability Office warned in the report.

Established by Congress in 1975 after the 1973 Arab oil embargo, SPR infrastructure is reaching the end of its life at a time when inventory releases are larger and more frequent, the auditors said in the report. The Energy Department is implementing a $1.4 billion plan to repair the SPR but had to narrow the scope of the project to stay within budget.

President Donald Trump in March ordered the release of 172 million barrels from the SPR as Iran choked off oil exports through the Strait of Hormuz, triggering the largest supply disruption in history. Government inventories fell last week by 3.7 million barrels to a total of about 308 million barrels, according to the Energy Department.

The SPR will fall to about 243 million barrels when Trump's release is fully executed, according to data from the Energy Information Administration. The emergency stockpile has an authorized storage capacity of 714 million barrels, according to the Department of Energy.

The federal auditors found that more than a quarter of the SPR "was not available for drawdown due to a combination of construction outages and cavern outages." This implies that a minimum of 103 million barrels in the SPR today are not deployable, according to a July analysis by Rapidan Energy.

The SPR has enough inventory left right now to address another crisis, said David Goldwyn, who served as a State Department special envoy for international energy affairs under President Barack Obama. "I'm not worried about the stability of the reserve or our ability to do another drawdown," Goldwyn said.

Federal law does not mandate a minimum operating level for the SPR, a Department of Energy spokesperson told CNBC. The operational minimum needed "to safely manage the caverns, is around ten percent of capacity – about 70 million barrels," the spokesperson said.

The crude oil in the SPR is stored at 60 salt caverns thousands of feet underground at four major sites on the Gulf Coast. Water is pumped into the bottom of the caverns to displace the oil to the surface and pump it through wells into pipelines.

The drawdown this year came as inventories were slowly recovering from Russia's invasion of Ukraine. President Joe Biden ordered 180 million barrels released in response to the war in Europe, the largest release in SPR history. The massive drawdown served as an "unplanned stress test of the SPR's operational capabilities," the federal auditors said.

"Every time when you do a drawdown, you accelerate the degradation of the wells themselves and some of the equipment," Goldwyn said. "It's like anything else — you use it a lot, you've got to maintain it."

The Energy Department executed Biden's release "without major equipment failures or crude oil spills," but "doing so was operationally challenging," the auditors said. The drawdown did require the "triaging of emergency repairs" due to leaking water pumps or pipes, they said.

Energy officials told the auditors that the earlier release "also highlighted risks to the SPR's capability to repeat a drawdown of similar speed and scale to the 2022 drawdown if directed to do so in the near future."

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