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America thanks to high connectivity with the Permian and Eagle Ford basins and a deepwater harbour. In the Northeast and Southeast regions, four ports take only product imports and no crude oil imports: Boston; Baltimore; Jacksonville, Florida; and Charleston, South Carolina. Other ports are able to import both crude oil and oil products. In 2017, US crude oil exports averaged 1.6 mb/d and, in 2018, 2.5 mb/d.

All onshore ports in the Gulf Coast are located in inland harbours and are connected to the open ocean through shipping channels or rivers. These marine transport routes are not deep enough for vessels such as very large crude carriers (VLCC), the largest and most economic vessels used for crude oil transportation. Instead, export growth was mostly achieved using smaller and less cost-effective ships: Suezmax and Aframax. To circumvent depth restrictions, VLCCs transporting crude oil to or from the Gulf Coast have typically used partial loadings and ship-to-ship transfers, an approach known as reverse lightering.

Infrastructure bottlenecks have pricing implications for crude oil exports. Costs associated with using smaller vessels are less of a factor for short-distance exports, but since the share of exports to Asia is growing, these costs will become more important. In 2018, new expansion projects were built to add storage capacity, new terminals and new docks in the ports of Beaumont, Corpus Christi and Houston. In addition, a new export line was built at the Louisiana Offshore Oil Port (LOOP). The LOOP is located offshore southern Louisiana in the Gulf of Mexico and it is currently the only facility that can accommodate a fully loaded VLCC. In early 2019, the US Maritime Administration (MARAD) – in charge of permitting for deepwater offshore ports – had no pending applications for new deepwater ports similar to LOOP. Crude oil export projects with the intention to accommodate fully loaded VLCCs will be located near the port of Corpus Christi in southern Texas; a project led by the company Magellan is scheduled for completion in 2022.

Emergency response policy

Legislation and emergency response policy

The US emergency response policy is based on the 1975 Energy Policy and Conservation Act (EPCA) (Public Law 94-163 as amended). This act provides the statutory authority for the establishment of the US SPR (DOE, 2018a).

Section 161 of the EPCA provides specific authorities and conditions governing the release or drawdown of oil from the SPR. This section states that “drawdown and sale of petroleum products from the SPR may not be made unless the President has found drawdown and sale are required by a severe energy supply interruption or by obligations of the United States under the International Energy Program.” The EPCA does not distinguish between a domestic supply disruption and an IEA collective action, but the United States has utilised different authorities to respond to domestic or regional interruptions versus a global disruption (DOE, 2018b).

In 2000, the president directed the establishment of the Northeast Home Heating Oil Reserve (NEHHOR) in response to high volatility of heating oil prices during the cold winter of 1999-2000. In 2012, the events caused by Hurricane Sandy highlighted the need for a reserve of refined petroleum products to ease shortages caused by supply

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disruptions following an extreme weather event. The Northeast Gasoline Supply Reserve (NGSR) was authorised by the Secretary of Energy and established in 2014 (DOE, 2014).

National Emergency Strategy Organization

The US DOE acts as the NESO, with responsibility for initiating and co-ordinating the US response in the event of an oil supply disruption. The NESO structure includes a DOE executive team, a crisis assessment team and DOE support offices.

The DOE executive team deliberates on the technical team’s findings and submits a proposal for action to the president based on recommendations from the crisis assessment team. The executive team analyses and discusses the findings of the crisis assessment team and co-ordinates a response with other departments and White House staff offices. The Secretary of Energy is responsible for forwarding the executive team’s recommendations to the president.

The DOE, through the Office of Cybersecurity, Energy Security, and Emergency Response (CESER) Infrastructure Security and Energy Restoration Division, sponsors preparedness exercises at the local, state and national levels. In May 2018, DOE sponsored Clear Path VI, which addressed the co-ordination among industry, state and federal partners in managing interdependencies within and between infrastructure sectors. The Clear Path exercise is the DOE’s flagship annual energy sector simulation crisis exercise; in 2018, Clear Path VI was linked to the Federal Emergency Management Agency’s (FEMA’s) 2018 National Level Exercise.

Oil emergency reserves

The SPR was established in 1975 under the EPCA to reduce the impacts of supply disruptions and to carry out obligations of the United States under the IEA International Energy Program Agreement. The United States has always complied with the IEA requirement of holding 90 days of net imports (DOE, 2018c).

The NGSR contains 1 mb of seasonal gasoline blend stock stored in terminals in New York Harbour and New England ports. The products are commingled with industry stocks. The NEHHOR contains 1 mb of ultra-low-sulphur distillates, which are stored in above-ground tanks in New York Harbour and New England ports and cover about five days of consumption.

At the end of January 2019, the United States held 382 days of net imports; public stocks accounted for 153 days and industry stocks accounted for 229 days of net imports (Figure 7.13).

There is no statutory obligation on industry to hold stocks for emergency purposes, thus all amounts of industry stocks are held for commercial and operational purposes. The ample industry stocks have ensured that the United States remains fully compliant with its 90-day stockholding obligation. The United States does not hold any stocks abroad, but foreign entities are allowed to hold emergency reserves in the United States, either as tickets or as owned stocks. The United States signed a first-of-its kind arrangement in 2018 with the government of Australia to facilitate such stockholding.

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Figure 7.13 Oil stocks in days of net imports and 90-day IEA obligation, end-January 2019

IEA (2019). All rights reserved.

As of the end of January 2019, the US SPR accounted for 382 days of net imports.

Source: IEA (2019d), Monthly Oil Data Service, www.iea.org/statistics/mods/.

Storage locations

At the end of September 2018, the total working storage capacity of the United States was 2.14 billion barrels (EIA, 2018d). This volume was split between storage at refineries with 602 mb, product terminals (1 046 mb) and crude oil tank farms (489 mb). The total crude oil volume stored was 297 mb, with 100 mb stored at refineries and 197 mb stored in tank farms. The amount of product stored at refineries was 252 mb and the amount stored at product terminals was 463 mb.

The SPR has a design storage capacity of 713.5 mb; the reserves are located in four underground storage sites in Texas and Louisiana with a total of 60 operational caverns. The SPR storage locations are connected to 28 refineries on the Gulf Coast and to 15 refineries in the Midwest via the Midvalley (9 refineries) and Capline (6 refineries) pipelines. The SPR storage locations are also connected to four marine terminals with a total distribution capacity of 2.4 mb/d.

SPR modernisation programme, planned sales and commercial lease

In the last few years, the level of stocks of the SPR has been reduced from more than 700 mb to around 650 mb as of the end of December 2018. This rapid reduction is the result of the completion of mandated sales by Congress. There were several bills enacted in 2015 and 2016 that collectively called for the sale of 149 mb in FY2017FY 2025. A section of one of those bills includes authorisation for funding an SPR modernisation programme by selling up to USD 2 billion worth of SPR crude oil in FY 2017FY 2020. Two other Congressional bills collectively call for the sale of another 112 mb of crude oil in FY 2022 through FY 2028. After all existing mandated sales are complete, the expected SPR volume will be around 400 mb in 2028.

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