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115th Congress    }                                         {    Report
                           HOUSE OF REPRESENTATIVES
 2d Session       }                                         {   115-965

======================================================================



 
                 STRATEGIC PETROLEUM RESERVE REFORM ACT

                                _______
                                

 September 25, 2018.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Walden, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 6511]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 6511) to authorize the Secretary of Energy to 
carry out a program to lease underutilized Strategic Petroleum 
Reserve facilities, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Committee Action.................................................     7
Committee Votes..................................................     8
Oversight Findings and Recommendations...........................     8
New Budget Authority, Entitlement Authority, and Tax Expenditures     8
Congressional Budget Office Estimate.............................     8
Federal Mandates Statement.......................................     8
Statement of General Performance Goals and Objectives............     8
Duplication of Federal Programs..................................     8
Committee Cost Estimate..........................................     9
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......     9
Disclosure of Directed Rule Makings..............................     9
Advisory Committee Statement.....................................     9
Applicability to Legislative Branch..............................     9
Section-by-Section Analysis of the Legislation...................     9
Changes in Existing Law Made by the Bill, as Reported............    10
Additional Views.................................................    13

    The amendment is as follows:

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Strategic Petroleum Reserve Reform 
Act''.

SEC. 2. USE OF UNDERUTILIZED STRATEGIC PETROLEUM RESERVE FACILITIES.

  Section 168 of the Energy Policy and Conservation Act (42 U.S.C. 
6247a) is amended to read as follows:

``SEC. 168. USE OF UNDERUTILIZED FACILITIES.

  ``(a) Authority.--Notwithstanding any other provision of this title, 
the Secretary may establish and carry out a program to lease 
underutilized Strategic Petroleum Reserve storage facilities and 
related facilities to the private sector, or a foreign government or 
its representative. Petroleum products stored under this section are 
not part of the Strategic Petroleum Reserve.
  ``(b) Protection of Facilities.--Any lease entered into under the 
program established under subsection (a) shall contain provisions 
providing for fees to fully compensate the United States for all 
related costs of storage and removals of petroleum products (including 
the proportionate cost of replacement facilities necessitated as a 
result of any withdrawals) incurred by the United States as a result of 
such lease.
  ``(c) Access by the United States.--The Secretary shall ensure that 
leasing of facilities under the program established under subsection 
(a) does not impair the ability of the United States to withdraw, 
distribute, or sell petroleum products from the Strategic Petroleum 
Reserve in response to an energy emergency or to the obligations of the 
United States under the Agreement on an International Energy Program.
  ``(d) National Security.--The Secretary shall ensure that leasing of 
facilities under the program established under subsection (a) to a 
foreign government or its representative will not impair national 
security.
  ``(e) Deposits of Amounts Received.--
          ``(1) In general.--Except as provided in paragraph (2), 
        amounts received through the leasing of facilities under the 
        program established under subsection (a) shall be deposited in 
        the general fund of the Treasury during the fiscal year in 
        which such amounts are received.
          ``(2) Costs.--The Secretary may use for costs described in 
        subsection (b) (other than costs described in subsection (f)), 
        without further appropriation, amounts received through the 
        leasing of facilities under the program established under 
        subsection (a).
  ``(f) Preparation of Facilities.--The Secretary shall only use 
amounts available in the Energy Security and Infrastructure 
Modernization Fund established by section 404 of the Bipartisan Budget 
Act of 2015 for costs described in subsection (b) of this section that 
relate to addition of facilities or changes to facilities or facility 
operations necessary to lease such facilities, including costs related 
to acquisition of land, acquisition of ancillary facilities and 
equipment, and site development, and other necessary costs related to 
capital improvement.''.

SEC. 3. PILOT PROGRAM TO LEASE STRATEGIC PETROLEUM RESERVE FACILITIES.

  (a) In General.--Part B of title I of the Energy Policy and 
Conservation Act (42 U.S.C. 6231 et seq.) is amended by adding at the 
end the following:

``SEC. 170. PILOT PROGRAM TO LEASE STORAGE AND RELATED FACILITIES.

  ``(a) Establishment.--In carrying out section 168 and not later than 
180 days after the date of enactment of the Strategic Petroleum Reserve 
Reform Act, the Secretary shall establish and carry out a pilot program 
to make available for lease--
          ``(1) capacity for storage of up to 200,000,000 barrels of 
        petroleum products at Strategic Petroleum Reserve storage 
        facilities; and
          ``(2) related facilities.
  ``(b) Contents.--In carrying out the pilot program established under 
subsection (a), the Secretary shall--
          ``(1) identify appropriate Strategic Petroleum Reserve 
        storage facilities and related facilities to lease, in order to 
        make maximum use of such facilities;
          ``(2) identify and implement any changes to facilities or 
        facility operations necessary to so lease such facilities, 
        including any such changes necessary to ensure the long-term 
        structural viability and use of the facilities for purposes of 
        this part and part C;
          ``(3) make such facilities available for lease; and
          ``(4) identify environmental effects, including benefits, of 
        leasing storage facilities and related facilities.
  ``(c) Report.--Not later than 1 year after the date of enactment of 
the Strategic Petroleum Reserve Reform Act, the Secretary shall submit 
to Congress a report on the status of the pilot program established 
under subsection (a).''.
  (b) Conforming Amendment.--The table of contents for the Energy 
Policy and Conservation Act is amended by adding after the item 
relating to section 169 the following:

``Sec. 170. Pilot program to lease storage and related facilities.''.

                          Purpose and Summary

    H.R. 6511, Strategic Petroleum Reserve Reform Act, was 
introduced by Rep. Joe Barton (R-TX) and Rep. Bobby Rush (D-IL) 
on June 25, 2018. H.R. 6511 requires the Secretary of Energy to 
carry out a pilot program to lease underutilized caverns and 
other facilities at the Strategic Petroleum Reserve (SPR).

                  Background and Need for Legislation


Strategic Petroleum Reserve

    The Strategic Petroleum Reserve is a stockpile of 
government-owned petroleum managed by the Department of Energy 
(DOE) that Congress authorized as a response to gasoline supply 
shortages and price spikes associated with the Organization of 
Arab Petroleum Exporting Countries (OPEC) oil trade embargo in 
1973 and 1974. The Energy Policy and Conservation Act of 1975 
(EPCA) authorized the SPR to reduce the impact of disruptions 
in supplies of petroleum products and to carry out U.S. 
obligations under the 1974 Agreement on an International Energy 
Program (IEA).\1\ EPCA authorizes the President to draw down 
the SPR upon finding that there is a ``severe supply 
interruption.''
---------------------------------------------------------------------------
    \1\See International Energy Agency, Agreement on an International 
Energy Program.
---------------------------------------------------------------------------
    The SPR's crude oil storage facilities are comprised of 62 
underground caverns mined in naturally occurring salt domes. 
Two sites are located in Texas, and two in Louisiana (Figure 
1). The sites offer access to marine terminals and pipeline 
systems to move crude oil to and from the SPR. The SPR 
currently holds 660 million barrels (MMbbl) of crude oil, 
representing 176 days of net import protection.\2\ DOE also 
maintains the Northeast Gasoline Supply Reserve (NGSR), which 
holds 1 MMbbl of gasoline. The NGSR was established by 
Secretary Moniz in 2014 using funds collected from a test sale 
of SPR crude oil. The NGSR is currently operating under 
temporary authority provided by Congress.\3\
---------------------------------------------------------------------------
    \2\Based on 2017 U.S. net imports of crude oil and refined 
products.
    \3\H.R. 1625, Consolidated Appropriations Act of 2018. (P.L. 115-
141).
---------------------------------------------------------------------------
    In September, the Committee received a letter from DOE, 
providing its responses to a recommendation by the Government 
Accountability Office that DOE should conduct or complete 
studies on the costs and benefits of regional petroleum product 
reserves for all of the regions of the United States that had 
been identified as vulnerable to fuel supply disruptions.\4\
---------------------------------------------------------------------------
    \4\Department of Energy. Letter from Assistant Secretary for Fossil 
Energy Steven Winberg to Chairman Greg Walden. September 17, 2018.
---------------------------------------------------------------------------
    It is DOE's position that above-ground government-owned and 
-operated regional petroleum product reserves are an 
inefficient and expensive solution to respond to regional 
petroleum supply disruptions. According to DOE, based on the 
current annual costs of maintaining 1 million barrels of 
refined petroleum products in the Northeast, costs of storing 
refined petroleum products in above ground tanks can range from 
$10 to $30 million per year, depending on the product and local 
conditions. This compares to the approximate annual cost of 
about $200 million to maintain the current SPR inventory level 
of about 660 million barrels.
    Citing the expensive nature of storing refined petroleum 
products and the logistical issues in making them available to 
the market, the Administration has proposed disestablishing the 
NGSR in both the 2018 and 2019 federal budgets. It is DOE's 
position that, given the inefficient and expensive nature of 
storing refined petroleum products in above ground tanks, it 
would be inappropriate to use taxpayer funds to conduct 
additional studies on the use of federal government owned 
storage of refined petroleum products.
    As a member of the IEA, the United States is obligated (1) 
as a net importer, to maintain crude oil and/or refined product 
reserves equal to at least 90 days of net petroleum imports and 
(2) to be able to contribute a proportional share to an IEA 
collective action response, based on its share of IEA oil 
consumption, which at present is about 41 percent of the 
barrels released in a collective action.\5\
---------------------------------------------------------------------------
    \5\See, for example, testimony by Steven E. Winberg, Assistant 
Secretary for Fossil Energy, Department of Energy at Subcommittee on 
Energy hearing entitled, ``DOE Modernization: Legislation to Authorize 
a Pilot Project to Commercialize the Strategic Petroleum Reserve,'' 
July 24, 2018.
---------------------------------------------------------------------------
    The U.S. currently exceeds its obligation to maintain at 
least 90 days of strategic stocks. In the face of declining net 
U.S. imports, a 70 percent reduction from 2005 peak levels, 
Congress has taken steps to reduce the size of the SPR.\6\ At 
the same time, Congress has also authorized an investment of up 
to $2 billion to carry out an SPR modernization program. The 
purpose of the SPR modernization program is to provide for the 
construction, maintenance, repair, and replacement of SPR 
facilities. The program may include operational improvements to 
extend the useful life of surface and subsurface 
infrastructure; maintenance of cavern storage integrity; and 
addition of infrastructure and facilities to optimize the 
drawdown and incremental distribution capacity of the SPR.
---------------------------------------------------------------------------
    \6\See Energy Information Administration. U.S. Net Imports of Crude 
Oil and Petroleum Products. U.S. net imports declined from an average 
of 12.5 MMbbl/day in 2005 to 3.7 MMbbl/day in 2017.


Congressionally-mandated sales

    Congress has passed several laws mandating the sale of 
crude oil from the SPR. These sales, totaling an estimated $16 
billion, are projected to reduce the SPR's inventory from the 
current level of 660 MMbbl to approximately 400 MMbbl over the 
next decade, provided the drawdowns do not limit the ability of 
the SPR to prevent or reduce the adverse impact of an energy 
supply shortage (Figure 2, Table 1).


SPR modernization and pilot leasing program

    The Committee finds that modernizing the SPR's surface and 
subsurface infrastructure and commercializing excess or 
underutilized SPR storage capacity through a leasing program 
will improve the SPR's emergency response capability and 
maximize the long-term strategic value of the government asset. 
As DOE withdraws oil to meet congressionally mandated sales--
approximately 300 MMbbl by 2028--SPR facilities will have 
unused storage capacity of roughly 45 percent of current design 
capacity. Absent new statutory authority, DOE will be required 
to maintain the caverns and surface infrastructure at 
considerable taxpayer expense, with no associated energy 
security benefits.
    H.R. 6511 provides DOE with new authorities to allow for 
the preservation of the existing SPR design capacity and 
further modernization of SPR facilities. H.R. 6511 amends EPCA 
to authorize DOE to lease underutilized SPR facilities to the 
private sector or a foreign government, provided the lease 
protects existing SPR facilities and does not impair national 
security or the ability of the SPR to respond in an emergency 
or to fulfill international obligations. H.R. 6511 authorizes 
DOE to use lease revenues to fully offset associated operations 
and maintenance costs.
    H.R. 6511 requires DOE to establish a pilot program to 
lease up to 200 MMbbl, which the Committee anticipates will 
incentivize upgrades to the SPR's distribution capacity, 
allowing for more efficient movement of petroleum products and 
increased performance of the SPR when addressing energy 
security needs. The Committee expects that DOE may be required 
to reconfigure the existing infrastructure to handle an 
increase in inflow/outflow activities across SPR sites, which 
could result in capital expenditures to enable leasing. This 
may include, for example, the addition of new surface 
infrastructure and additional conversion to brine-drive caverns 
to support more frequent drawdown and retrieval cycles. H.R. 
6511 authorizes such capital expenditures from amounts 
available in the Energy Security and Infrastructure 
Modernization Fund, established by Section 404 of the 
Bipartisan Budget Act of 2015. The Committee finds that such 
activities are consistent with the purpose of the Modernization 
Fund and may be necessary to support the pilot leasing program. 
The Committee expects that over the life of the SPR leasing 
program, revenues will be generated that exceed the costs 
associated with preparing, operating, and maintaining the 
leased facilities.

                            Committee Action

    On July 24, 2018, the Subcommittee on Energy held a hearing 
entitled ``DOE Modernization: Legislation to Authorize a Pilot 
Project to Commercialize the Strategic Petroleum Reserve.'' The 
Subcommittee received testimony from:
           Steven Winberg, Assistant Secretary of 
        Fossil Energy, U.S. Department of Energy;
           Kevin Book, Managing Director, ClearView 
        Energy Partners, LLC;
           Daniel M. Evans, Project Manager, Fluor 
        Federal Petroleum Operations; and,
           Frank Rusco, Director, Natural Resources and 
        Environment, Government Accountability Office.
    On September 6, 2018, the Subcommittee on Energy met in 
open markup session and forwarded H.R. 6511, without amendment, 
to the full Committee by a voice vote.
    On September 13, 2018, the full Committee on Energy and 
Commerce met in open markup session and ordered H.R. 6511, as 
amended, favorably reported to the House by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII requires the Committee to list the 
recorded votes on the motion to report legislation and 
amendments thereto. There were no recorded votes taken in 
connection with ordering H.R. 6511 reported.

                 Oversight Findings and Recommendations

    Pursuant to clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII, the Committee held a hearing and made findings that 
are reflected in this report.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Pursuant to clause 3(c)(2) of rule XIII, the Committee 
finds that H.R. 6511 would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII, at the time this 
report was filed, the cost estimate prepared by the Director of 
the Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not available.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

         Statement of General Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII, the general 
performance goal or objective of this legislation is to 
authorize the Secretary of Energy to carry out a program to 
lease underutilized SPR facilities.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII, no provision of 
H.R. 6511 is known to be duplicative of another Federal 
program, including any program that was included in a report to 
Congress pursuant to section 21 of Public Law 111-139 or the 
most recent Catalog of Federal Domestic Assistance.

                        Committee Cost Estimate

    Pursuant to clause 3(d)(1) of rule XIII, the Committee 
adopts as its own the cost estimate prepared by the Director of 
the Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974. At the time this report was 
filed, the estimate was not available.

       Earmark, Limited Tax Benefits, and Limited Tariff Benefits

    Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the 
Committee finds that H.R. 6511 contains no earmarks, limited 
tax benefits, or limited tariff benefits.

                  Disclosure of Directed Rule Makings

    Pursuant to section 3(i) of H.Res. 5, the Committee finds 
that H.R. 6511 contains no directed rule makings.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 provides the short title of ``Strategic Petroleum 
Reserve Reform Act.''

Section 2. Use of underutilized strategic petroleum reserve facilities

    Section 2 amends Section 168 of EPCA to provide the 
Secretary of Energy with authority to establish and carry out a 
program to lease underutilized SPR facilities to the private 
sector or a foreign government. The authority provided under 
this section is limited to provide for fees to offset 
associated operations and maintenance costs; to ensure the 
lease does not impair the government's ability to utilize the 
SPR in an emergency; and, to ensure a lease to a foreign 
government does not impair national security. This section 
requires lease revenues to be deposited into the Treasury, 
except fees that the Secretary may use for associated 
operations and maintenance costs, without further 
appropriation. This section clarifies that DOE shall only use 
amounts available in the Energy Security and Modernization Fund 
established by Section 404 of the Bipartisan Budget Act of 2015 
for capital improvements necessary to prepare SPR facilities 
for lease.

Section 3. Pilot program to lease strategic petroleum reserve 
        facilities

    Section 3 requires DOE to establish and carry out a pilot 
program to lease up to 200 MMbbl of petroleum products at SPR 
facilities within 180 days of enactment of H.R. 6511. This 
section requires DOE to report to Congress on the status of the 
pilot program within 1 year of enactment of H.R. 6511.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                   ENERGY POLICY AND CONSERVATION ACT




    Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, That this 
Act may be cited as the ``Energy Policy and Conservation Act''.

                            TABLE OF CONTENTS

     * * * * * * *

        TITLE I--MATTERS RELATED TO DOMESTIC SUPPLY AVAILABILITY

     * * * * * * *

                   Part B--Strategic Petroleum Reserve

     * * * * * * *
Sec. 169. Purchase of oil from marginal wells.
Sec. 170. Pilot program to lease storage and related facilities.
     * * * * * * *

TITLE I--MATTERS RELATED TO DOMESTIC SUPPLY AVAILABILITY

           *       *       *       *       *       *       *



Part B--Strategic Petroleum Reserve

           *       *       *       *       *       *       *



                    [use of underutilized facilities

  [Sec. 168. (a) Authority.--Notwithstanding any other 
provision of this title, the Secretary, by lease or otherwise, 
for any term and under such other conditions as the Secretary 
considers necessary or appropriate, may store in underutilized 
Strategic Petroleum Reserve facilities petroleum product owned 
by a foreign government or its representative. Petroleum 
products stored under this section are not part of the 
Strategic Petroleum Reserve and may be exported without license 
from the United States.
  [(b) Protection of Facilities.--All agreements entered into 
pursuant to subsection (a) shall contain provisions providing 
for fees to fully compensate the United States for all related 
costs of storage and removals of petroleum products (including 
the proportionate cost of replacement facilities necessitated 
as a result of any withdrawals) incurred by the United States 
on behalf of the foreign government or its representative.
  [(c) Access to Stored Oil.--The Secretary shall ensure that 
agreements to store petroleum products for foreign governments 
or their representatives do not impair the ability of the 
United States to withdraw, distribute, or sell petroleum 
products from the Strategic Petroleum Reserve in response to an 
energy emergency or to the obligations of the United States 
under the Agreement on an International Energy Program.
  [(d) Availability of Funds.--Funds collected through the 
leasing of Strategic Petroleum Reserve facilities authorized by 
subsection (a) after September 30, 2007, shall be used by the 
Secretary of Energy without further appropriation for the 
purchase of petroleum products for the Strategic Petroleum 
Reserve.]

SEC. 168. USE OF UNDERUTILIZED FACILITIES.

  (a) Authority.--Notwithstanding any other provision of this 
title, the Secretary may establish and carry out a program to 
lease underutilized Strategic Petroleum Reserve storage 
facilities and related facilities to the private sector, or a 
foreign government or its representative. Petroleum products 
stored under this section are not part of the Strategic 
Petroleum Reserve.
  (b) Protection of Facilities.--Any lease entered into under 
the program established under subsection (a) shall contain 
provisions providing for fees to fully compensate the United 
States for all related costs of storage and removals of 
petroleum products (including the proportionate cost of 
replacement facilities necessitated as a result of any 
withdrawals) incurred by the United States as a result of such 
lease.
  (c) Access by the United States.--The Secretary shall ensure 
that leasing of facilities under the program established under 
subsection (a) does not impair the ability of the United States 
to withdraw, distribute, or sell petroleum products from the 
Strategic Petroleum Reserve in response to an energy emergency 
or to the obligations of the United States under the Agreement 
on an International Energy Program.
  (d) National Security.--The Secretary shall ensure that 
leasing of facilities under the program established under 
subsection (a) to a foreign government or its representative 
will not impair national security.
  (e) Deposits of Amounts Received.--
          (1) In general.--Except as provided in paragraph (2), 
        amounts received through the leasing of facilities 
        under the program established under subsection (a) 
        shall be deposited in the general fund of the Treasury 
        during the fiscal year in which such amounts are 
        received.
          (2) Costs.--The Secretary may use for costs described 
        in subsection (b) (other than costs described in 
        subsection (f)), without further appropriation, amounts 
        received through the leasing of facilities under the 
        program established under subsection (a).
  (f) Preparation of Facilities.--The Secretary shall only use 
amounts available in the Energy Security and Infrastructure 
Modernization Fund established by section 404 of the Bipartisan 
Budget Act of 2015 for costs described in subsection (b) of 
this section that relate to addition of facilities or changes 
to facilities or facility operations necessary to lease such 
facilities, including costs related to acquisition of land, 
acquisition of ancillary facilities and equipment, and site 
development, and other necessary costs related to capital 
improvement.

           *       *       *       *       *       *       *


SEC. 170. PILOT PROGRAM TO LEASE STORAGE AND RELATED FACILITIES.

  (a) Establishment.--In carrying out section 168 and not later 
than 180 days after the date of enactment of the Strategic 
Petroleum Reserve Reform Act, the Secretary shall establish and 
carry out a pilot program to make available for lease--
          (1) capacity for storage of up to 200,000,000 barrels 
        of petroleum products at Strategic Petroleum Reserve 
        storage facilities; and
          (2) related facilities.
  (b) Contents.--In carrying out the pilot program established 
under subsection (a), the Secretary shall--
          (1) identify appropriate Strategic Petroleum Reserve 
        storage facilities and related facilities to lease, in 
        order to make maximum use of such facilities;
          (2) identify and implement any changes to facilities 
        or facility operations necessary to so lease such 
        facilities, including any such changes necessary to 
        ensure the long-term structural viability and use of 
        the facilities for purposes of this part and part C;
          (3) make such facilities available for lease; and
          (4) identify environmental effects, including 
        benefits, of leasing storage facilities and related 
        facilities.
  (c) Report.--Not later than 1 year after the date of 
enactment of the Strategic Petroleum Reserve Reform Act, the 
Secretary shall submit to Congress a report on the status of 
the pilot program established under subsection (a).

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    At the September 13, 2018 Energy and Commerce Committee 
full committee markup, numerous Democratic members discussed 
the importance of establishing and maintaining refined 
petroleum product reserves in different regions across the 
country. These include areas prone to disruptions in the supply 
of refined products, such as gasoline, in the aftermath of 
natural disasters or severe weather events.
    During the markup, Mr. Kennedy offered an amendment that 
would have required the Secretary of Energy to undertake a 
rulemaking for the development, maintenance, and operation of 
regional refined petroleum reserves across the U.S., including 
but not limited to, the Northeast, Southeast, and West Coast 
regions.
    In previous analyses, including a 2011 Department of Energy 
(DOE) cost-benefit analysis on the establishment of a Southeast 
Refined Petroleum Product Reserve and the First Installment of 
the Quadrennial Energy Review (QER) in 2015, DOE concluded such 
refined petroleum product reserves would be greatly beneficial. 
The 2011 study indicated a Southeast reserve, in particular, 
``would reduce the average gasoline price rise by 50 percent to 
70 percent in the weeks immediately after a hurricane 
landfall.''\1\ The QER stated one method of addressing 
vulnerabilities to fuel infrastructure and supply ``is to 
develop strategic and regional stockpiles of oil and refined 
petroleum products to help respond to shortfalls caused by 
breakdowns in the liquid fuel infrastructure, regardless of 
cause.''\2\ A May 2018 GAO report requested by this Committee 
further recognized the benefits of such reserves but noted DOE 
had not fully finalized its analyses in the QER and instead 
relied upon draft versions.\3\
---------------------------------------------------------------------------
    \1\https://www.energy.gov/sites/prod/files/2015/08/f25/
QER%20Chapter%20ll%20Resilience%20April%202015.pdf pg. 2-34
    \2\https://www.energy.gov/sites/prod/files/2015/08/f25/
QER%20Chapter%20ll%20Resilience%20April%202015.pdf pg. 2-33
    \3\https://www.gao.gov/assets/700/692113.pdf pg. 23.
---------------------------------------------------------------------------
    The Kennedy amendment would have addressed a critical 
shortcoming of the Strategic Petroleum Reserve (SPR) as current 
law only requires it to stockpile unrefined crude oil. The QER 
acknowledged this risk, identifying events such as Hurricanes 
Katrina and Rita (2005) and Hurricanes Gustav and Ike (2008) in 
the Gulf Coast and Superstorm Sandy in 2012 as major regional 
and national events affecting fuel supply and price.\4\ With 
more than 50 percent of the nation's refining capacity in the 
Gulf Coast, a major event in that region would have significant 
impact nationwide. Regional events, like Superstorm Sandy, may 
only effect one region but negatively impact the ability to 
import supply due to damaged infrastructure such as pipelines 
and ports. Regionally-located reserves would provide much 
needed stability.
---------------------------------------------------------------------------
    \4\https://www.energy.gov/sites/prod/files/2015/08/f25/
QER%20Chapter%2011%20Resilience%20April%202015.pdf pg. 2-31
---------------------------------------------------------------------------
    In the wake of Superstorm Sandy, then-Energy Secretary 
Ernest Moniz, using the existing authorities in Title I, Part C 
of the Energy Policy and Conservation Act, established the 
Northeast Gasoline Supply Reserve as a component of the SPR in 
2014.\5\ The one million barrel reserve holds gasoline in a 
number of different northeastern states as means of 
strengthening regional fuel resiliency in the event of another 
major weather event.\6\ The Trump Administration proposed 
eliminating the gasoline reserve in its Fiscal Year 2018 
budget, a proposal we believe to be both short-sighted and ill-
advised. This reserve is essential to disaster recovery efforts 
in the event of an emergency. Not only should the Northeast 
Gasoline Supply Reserve remain in operation, DOE should 
replicate it in other parts of the country to ensure recovery 
efforts are not compounded in rebuilding from a disaster due to 
lack or price of fuel.
---------------------------------------------------------------------------
    \5\https://www.energy.gov/fe/creating-northeast-gasoline-supply-
reserve
    \6\https://www.energy.gov/fe/services/petroleum-reserves/northeast-
regional-refined-petroleum-product-reserve
---------------------------------------------------------------------------
    We support the underlying bill, H.R. 6511, as a useful step 
toward modernizing the Strategic Petroleum Reserve. However, we 
find it unfortunate that the Republican Majority was unwilling 
to adopt this amendment, which would further advance the goal 
of a modernized, more flexible SPR. Democratic Members continue 
to believe that regional reserves should play an important role 
in the future of the SPR and will continue to push forward this 
concept. We hope the Majority will join us in our support for 
these reserves, particularly before the next hurricane or other 
natural disaster results in a significant supply disruption in 
the supply-constrained Southeast or in other regions of the 
country.

                                   Joseph P. Kennedy, III.
                                   Frank Pallone, Jr.
                                   Bobby L. Rush.
                                   G.K. Butterfield.
                                   Kathy Castor.
                                   Jerry McNerney.