In December 1975, the Energy Policy and Conservation Act (EPCA) was passed, officially establishing the Strategic Petroleum Reserve (SPR) as a reserve of up to 1 billion barrels. To store the reserve Oil, the U.S. government acquired several salt caverns along the Gulf of Mexico coastline. The first Crude Oil was delivered to the SPR in 1977 and stored at the West Hackberry storage site near Lake Charles, LA. Other major storage sites include: Bryan Mound and Big Hill in Texas and Bayou Choctaw in Louisiana. Total storage capacity at the SPR is currently 700 million barrels.
In mid-November 2001, President Bush directed the Department of Energy (DOE) to fill the SPR to its capacity of 700 million barrels to "maximize long-term protection against oil supply disruptions." On August 17, 2005, the SPR reached its goal of 700 million barrels, just two weeks before Hurricane Katrina hit. On August 31, 2005, President George W. Bush authorized the SPR to loan oil to help refineries whose operations had been affected by Hurricane Katrina. In addition, the President announced the sale of 30 million barrels to maintain supplies and calm markets. As of November 14, 2005, the SPR contained around 684 million barrels of oil -- the largest emergency oil stockpile in the world. The SPR has a maximum drawdown capability of 4.3 million bbl/d for 90 days, with oil beginning to arrive in the marketplace 15 days after a presidential decision to initiate a drawdown. The SPR drawdown rate declines to 3.2 million bbl/d from days 91-120, to 2.2 million bbl/d for days 121-150, and to 1.3 million bbl/d for days 151-180. Prior to Hurricane Katrina, other withdrawals from the SPR occurred in 1985, 1990, 1991, 1996-97, and 2004.
Under EPCA, there is no preset "trigger" for withdrawing oil from the SPR. Instead, the President determines that drawdown is required by "a severe energy supply interruption or by obligations of the United States" under the International Energy Agency. EPCA defines a "severe energy supply interruption" as one which: 1) "is, or is likely to be, of significant scope and duration, and of an emergency nature;" 2) "may cause major adverse impact on national safety or the national economy" (including an oil price spike); and 3) "results, or is likely to result, from an interruption in the supply of imported petroleum products, or from sabotage or an act of God." Should the President decide to order an emergency drawdown of the SPR, oil would be distributed mainly by competitive sale to the highest bidder(s). This would be accomplished in a 4-step process, including a "Notice of Sale," receipt of bids, selection of bidders, and finally delivery of oil.