Statement of Administration Policy: H.R. 3193 - Energy Policy and Conservation Act Amendments of 1990

(House)
(Sharp (D) Indiana)

The Administration supports the provisions of H.R. 3193 which would extend authority needed to manage the Strategic Petroleum Reserve (SPR) and to participate in the International Energy Agency. In addition, the Administration strongly supports the decision, implicit in this bill, not to mandate expansion of the SPR beyond the 750 million barrel Administration goal. The Administration believes that its recent interagency study clearly demonstrated that a 750 million barrel SPR provides substantial protection against a range of worst-case disruptions and ample deterrence against embargoes. The additional 250 million barrels would cost the taxpayer $12 billion.

The Administration, however, opposes enactment of H.R. 3193 because the bill would mandate the establishment of regional refined petroleum product reserves. Such regional reserves are unlikely to benefit consumers because private product stocks would merely be replaced by federally-financed product storage. Moreover, Federal attempts to stabilize petroleum products would interfere with the efficient functioning of energy markets, and significantly alter the strategic nature of the SPR. The establishment of regional product reserves could also increase budgetary cost by as much as $500 million. As a result, regional reserves are likely to have a negative net effect on the U.S. economy.

The Administration is also disappointed that the bill does not provide adequate authority to pursue alternative cost-cutting methods of financing the SPR, such as oil "leasing." H.R. 3193 requires that any contract to acquire oil for the SPR not owned by the United States must be "approved specifically by law." Such a cumbersome procedure would nullify the effectiveness of the limited leasing authority provided and preclude potentially cost-saving means of filling the SPR.

If legislation were presented to the President that included an expansion of the reserve to one billion barrels and the establishment of regional refined petroleum product reserves, the President's senior advisers would recommend that it be vetoed.