The Reagan administration has agreed to release $157 million to complete a major storage facility in Texas for the Strategic Petroleum Reserve, despite its insistence that the nation does not need additional oil reserves.
Energy Department officials said yesterday that construction will be restarted at the Big Hill facility near Beaumont, Tex., which would increase oil-storage capacity by nearly 50 percent, to 750 million barrels.
The White House has held up funds to complete Big Hill for more than two years, arguing that the nation does not need additional oil reserves and should not spend money to expand storage capacity.
DOE and Office of Management and Budget officials said the funds were released for legal reasons and that the decision does not reflect a change in administration policy on the reserve. Congress rejected OMB's attempt to withhold funds for the facility, and the budget office was facing a lawsuit accusing it of illegal impoundment unless it released the money.
Nonetheless, Energy Secretary John S. Herrington yesterday called the Big Hill construction a "prudent course of action," and an OMB official said "there is some merit" in expanding storage capacity.
The administration has been under pressure to step up purchases for the petroleum reserve, both for national security reasons and to ease the impact of depressed oil prices on U.S. producers.
"The Strategic Petroleum Reserve is this nation's first line of defense against the threat of a future oil supply disruption," Herrington said. "The department has been reviewing policies about the reserve, and in light of the current world oil market, we have decided that a prudent course of action is to have in place the long-range flexibility to resume fill of the reserve if necessary."
The Strategic Petroleum Reserve, established to protect the nation against economic disruptions stemming from oil shortages and embargoes, was initially envisioned as a billion-barrel reserve. It was scaled back for budgetary reasons in both the Carter and Reagan administrations. It now holds slightly more than 480 million barrels.
Without Big Hill, however, the government would have little space in which to store additional oil if it decided to buy some.
According to DOE officials, the capacity of the five current storage facilities, largely underground caverns in Louisiana, is 509 million barrels. Purchases under way will bring the reserve to 502 million barrels.