7. OIL

The DOE is currently working to determine which SPR facilities could be leased and what changes would be needed to preserve the long-term integrity of the caverns. Private companies may want to lease excess SPR capacity, which are more costcompetitive than above-ground storage. However, for regular drawdowns, a drawdown process based on brine (salt water) will have to be used to avoid altering the cavern structures. This process will likely involve investments to build up the required facilities, such as brine ponds.

Emergency response to supply disruptions

The United States is subject to various natural hazards: volcanoes and earthquakes around the Pacific Basin, hurricanes along the Atlantic and Gulf of Mexico coasts, and tornadoes in the Midwest and Southeast. The West Coast is not as vulnerable to hurricanes as the Gulf Coast, but a severe earthquake in the Los Angeles Basin or San Francisco region would cause significant disruptions to fuel supplies (DOE, 2018d) .

Impacts of hurricanes

Hurricanes in the Gulf of Mexico are of particular concern, since almost half of the nation’s refining capacity is located in the region, as are large import and export hubs, and pipelines to the hinterland; moreover, the SPR storage sites are located in Texas and Louisiana, two states often affected by hurricanes.

In October 2012, Hurricane Sandy affected coastal states from North Carolina to Maine with significant damage to energy infrastructure. Refinery capacity of up to 308 kb/d was shut down for several days, and the Buckeye, Colonial and Plantation product pipelines were also affected, as was the New Jersey Natural Gas pipeline. Crude pipelines were not affected, but several ports were affected with shutdowns at 57 petroleum terminals. Electricity infrastructure was also affected, with 20 states and the District of Columbia experiencing power outages affecting 8.5 million customers.

A more recent example was Hurricane Harvey, which made landfall in late August 2017 as a Category 4 hurricane, making it the strongest storm to strike Texas since 1961. The hurricane had severe impacts on onshore and offshore production and caused dramatic flooding in Houston. During the last week of August, US crude production was cut by more than 700 kb/d and in September crude oil production was nearly 300 kb/d lower than the previous month estimate.

Responses to hurricanes

To address supply disruptions caused by hurricanes, the primary response is an emergency exchange programme to restore supply to refineries, which cannot get access to crude feedstock using regular supply sources. If a refiner submits a request for an emergency loan, SPR staff will perform due diligence to ensure that there is no other source of oil available to the requesting refiner.

Since 2005, there have been four occasions when the emergency exchange process was activated to respond to hurricanes; the volume of stocks released range from 1.0 mb to 9.8 mb. In 2012, to respond to disruptions caused by Hurricane Sandy, refined products from the NEHHOR were released for use by emergency responders, generators and emergency equipment, and buildings, as well as to alleviate fuel shortages in Connecticut.

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ENERGY SECURITY

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