House Draws Prudent Line in Sand in Oil Reserve Debate

The House made the right decision in passing a bill that will release crude oil from Strategic Petroleum Reserve stockpiles.

By + More
FE_PR_080201budget_b.jpg
An oil feed pipeline at the BP Endicott field in Alasks, which is benefiting from oil revenues.

Pete Sepp is executive vice president of the National Taxpayers Union.

It's an all-too-rare occasion when Washington does something right for America's energy policy, but taxpayers had reason to celebrate one of those instances last week when the U.S. House of Representatives passed H.R. 4480, the Domestic Energy and Jobs Act. The legislation, sponsored by Rep. Cory Gardner, a Republican from Colorado, was offered as a way of linking the release of crude oil stockpiles from the Strategic Petroleum Reserve to much-needed reforms in federal regulatory policy toward oil and gas exploration.

Some might ask, other than the word "oil," what do issues surrounding the Strategic Petroleum Reserve and exploration have in common? Plenty.

The Strategic Petroleum Reserve, founded on the heels of the Mideast oil embargo of 1973-74, is intended to serve as a source for critical petroleum needs in times of severe supply problems brought about by events such as wars. As the Strategic Petroleum Reserve's caretaker, the U.S. Department of Energy notes:

The SPR provides the president with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy. It is also the critical component for the United States to meet its International Energy Agency obligation to maintain emergency oil stocks, and it provides a national defense fuel reserve.

[ See a collection of political cartoons on energy policy.]

Recent Strategic Petroleum Reserve activity seemed to serve a legitimate purpose—some 31 million barrels were drawn out of the reserve in the fall of 2011 as part of the United States's contribution toward stabilizing international oil supplies amid unrest in Libya. But even in this case, some industry observers claimed that politics were at work. The trouble is, the Strategic Petroleum Reserve can often serve as a tempting target for presidents and Congresses desperate to appear as if they're "acting decisively" to address oil price spikes. In April, Human Events reported that "some Congressional Democrats and at least one former administration official have been floating the idea that the President should release oil from the U.S. Strategic Petroleum Reserve as a way to lower prices."

Here's more trouble. Although the Department of Energy is supposed to repurchase oil for the reserve  "without incurring excessive cost or appreciably affecting the market price of petroleum products to consumers," such operations can be difficult to time and balance, creating fiscal consequences. President Barack Obama—who once criticized George W. Bush's post-Hurricane Katrina Strategic Petroleum Reserve drawdown for "tapping the reserve to provide a small, short-term decrease in gas prices"—has yet to replace the oil reserves that were released during the Libyan turmoil, possibly out of concerns for the federal balance sheet. (In previous times, Strategic Petroleum Reserve oil has been sold to reduce the deficit.)

[ See a collection of political cartoons on gas prices.]

Instead of perpetrating an election-year gimmick, policymakers can take the more prudent, far-reaching direction of increasing domestic oil and gas supplies. Doing so means formulating an expedited plan to safely allow more leasing of federal lands (as well as the Outer Continental Shelf) for exploration of such resources. As reported to the House floor, H.R. 4480 stipulated that within 180 days of a Strategic Petroleum Reserve withdrawal, the Department of Energy and other appropriate federal agencies must execute that plan—by requiring the total percentage amount of lands leased to be as high as the percentage of the withdrawal. Prior to passage, however, the bill was amended to include a number of provisions that could boost energy (and economic) productivity, including:

  • More evaluation of the impact that Environmental Protection Agency rulemaking can have on energy prices
  • Creation of a quadrennial onshore energy development strategic plan
  • Introduction of greater certainty and consistency in the energy and gas leasing process
  • Promulgation of streamlined permitting procedures

[ See a collection of political cartoons on the 2012 campaign.]

Of course, as my National Taxpayers Union colleague Janene Senofonte recently pointed out, the ultimate aim of legislation like H.R. 4480 should be to transcend the politics of the moment:

Representative Gardner's bill is a good way to keep energy exploration on the table and deserves support. However, this shouldn't become an excuse to use the SPR to manipulate oil prices to score a few electoral points. Expanding energy exploration and production are important long-term solutions for greater energy independence and lower prices and deserve support regardless of elections and political favor.

On June 21, H.R. 4480 passed the House with 248 votes, including those of 19 Democrats. The bill's prospects in the Senate are uncertain at best, but the House action is only the latest demonstration of where elected officials ought to be focusing their, well, energy. Election-year-motivated Strategic Petroleum Reserve drawdowns can't replace the necessary hard work of policymaking still needed to fuel our economic recovery. That hard work, which involves lower tax rates, less burdensome regulations, and free, nonsubsidized energy markets, may not be glamorous. But in the long run, the results will look much better to Americans.