Summary: GAO discussed the Strategic Petroleum Reserve (SPR), focusing on the: (1) Department of Energy's (DOE) response to GAO recommendations concerning its plan for selling SPR oil; (2) recently completed test drawdown and sale of SPR oil; and (3) DOE distribution enhancement program and its effect on drawdown capability. GAO found that, although the plan's market approach would limit oil price increases in a severe supply disruption, a hostile foreign power could buy large quantities of oil and undermine public support for SPR. Congress required DOE to do a test sale of 1.1 million barrels of oil, and GAO found that: (1) 17 companies submitted bids for over 7 million barrels of oil; (2) DOE did not have enough staff available in the finance area and, in the event of a larger test, would need additional staff for sales, scheduling, billing, and collections; and (3) the quantity of oil sold was not sufficient to fully test the site drawdown and terminal distribution capabilities. DOE developed a plan to construct additional pipelines and make terminal improvements so that the distribution capabilities would be increased to 4 million barrels per day, but decided not to include any enhancements because of high cost estimates. The DOE 1987 budget indicated a revision to the enhancement program which would meet immediate needs but would fall short of future distribution needs. Unless additional enhancements are made to the distribution system concurrently with site development and oil fill, distribution constraints will again limit SPR drawdown capability.
