ILTA Tells President Trump it is Not Opposed to SPR Leasing During COVID-19
Strongly opposed to using SPR in such a way in a non-emergency
The President
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
April 29, 2020
Dear Mr. President:
Thank you for your leadership during this unprecedented time. As you know, the COVID-19 pandemic has led to stay-at-home orders in the United States and internationally, resulting in a 30 percent drop in oil demand. Plummeting demand, along with oversupply by other nations, has caused a severe imbalance in the market.
Considering today’s exceptional circumstances, ILTA has no objection to the administration’s plans to lease storage capacity in Strategic Petroleum Reserve locations to commercial interests. On April 14, Energy Secretary Dan Brouillette announced his department had awarded contracts to store a total of 23 million barrels of the 30 million barrels initially offered in the reserve, with the first deliveries taken earlier this week.
Once normal market conditions are re-established, ILTA would oppose further government actions in commercial storage markets. Allowing government-owned storage into the market constitutes a subsidized storage service that could place private commercial storage operators at a competitive disadvantage.
Under normal market conditions, imbalances between oil supply and demand are readily addressed using above ground storage provided by crude oil terminals and tank farms located throughout the country. Our member companies own and operate liquid storage terminals, including crude oil storage, in all fifty states. Overall, the United States has over 250 crude oil storage terminal facilities with a net storage capacity of about 500 million barrels.
According to statistics published by the Energy Information Administration, the historical storage utilization rate of these crude oil terminals ranges from 45 to 55 percent. In a normal year, assuming last year’s peak rates for domestic production of 13 million barrels per day, the liquid storage industry has the flexibility to absorb nearly three weeks of domestic production. If not for the extreme circumstances the nation is now facing, the considerable amount of storage capacity provided by our industry would be ample to provide balancing and flexibility to oil markets.
However, we recognize that the effects on the oil market from the current global pandemic are no ordinary circumstances. Crude oil storage inventories are at record levels – at or very near capacity at commercial tanks across the country. Our members have taken every opportunity to consolidate existing stocks at storage facilities, but there is little to no extra availability beyond existing storage contracts. Moreover, expanding storage capacity is a lengthy process that varies by the size of tank and permitting jurisdiction. A typical aboveground storage tank in a petroleum product terminal would require 12-18 months to permit and construct.
Thank you again for your administration’s attention to the domestic energy sector. Should you require any further information, please contact me, at kclay@ilta.org.
Most respectfully,
Kathryn Clay, Ph.D.
President
International Liquid Terminals Association
Founded in 1974, the International Liquid Terminals Association represents more than 85 companies operating liquid terminals in all 50 states and in over 40 countries. Our members’ facilities provide critical links between all modes of transportation for liquid commodities, such as crude oil, petroleum products, chemicals, renewable fuels, fertilizer, vegetable oils and other food-grade materials that are central to the U.S. economy. Terminals provide essential logistics services that spur trade both within the United States and connect the U.S. economy with overseas markets. ILTA’s membership also includes about 400 companies that supply equipment and services to the terminal industry.
CC: House Committee on Energy and Commerce
Senate Committee on Energy and Natural Resources
Energy Secretary Dan Brouillette
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