Hearing Reviews Vessels Used to Carry Strategic Petroleum

Washington, DC – The Subcommittee on Coast Guard and Maritime Transportation, chaired by U.S. Rep. Frank LoBiondo (R-NJ), met this morning to review the process used to determine the availability of U.S.-flagged vessels during the summer 2011 drawdown of crude oil from the Strategic Petroleum Reserve (SPR) and what steps are being taken to improve that process.

The following is the statement of Chairman LoBiondo:

“The Subcommittee is meeting today to review the process used to determine the availability of U.S.-flagged vessels during the summer 2011 drawdown of crude oil from the Strategic Petroleum Reserve (SPR). I want to thank Ranking Member Larsen for requesting a hearing on this important topic. My hope is that we will get some answers today to several important questions regarding the conduct of the Administration and identify what mistakes were made so we can avoid this situation from happening in the future.

“On June 23, 2011, President Obama announced the U.S. and its partners would release a total of 60 million barrels of oil onto the world market over a 30 day period to offset the disruption in the oil supply caused by unrest in Libya. As part of the effort, the U.S. pledged to release 30 million barrels of oil from the SPR. The water-borne transportation of oil from the SPR to U.S. refineries is governed by the Jones Act. The Jones Act protects our national security and promotes job growth in the U.S. maritime sector by requiring merchandise and passengers moving between two points in the U.S. to be carried on U.S. built, owned, crewed and flagged vessels.

“The Jones Act has been the law since 1920. In 1987, the Department of Energy, MARAD, and Customs signed an agreement outlining the process agencies must follow to ensure compliance with the Jones Act during an SPR drawdown. During last summer’s drawdown, however, reports from the press indicate the Administration may have deliberately ignored U.S. law in issuing over 40 Jones Act waivers for the transport of oil from the SPR. After issuing a blanket waiver and then rescinding it a day later, it appears as though the Administration was assuring potential bidders for SPR oil that individual waivers would be granted for large-volume sales before applications were even submitted. It also appears the Administration made no effort to use its authority to require the oil to be divided into smaller lots in order to be carried on U.S.-flagged vessels.

“I find these actions extremely disturbing, particularly because it came at a time when so many Americans were out of work. It is puzzling that an Administration claiming to be doing everything they can to help America’s unemployed would allow vessels crewed by foreigners, owned by foreigners, built in foreign countries, and flying foreign flags to carry nearly all of the SPR oil released. In fact, only one U.S. vessel was used. That vessel carried less than 1 percent of the 25 million barrels of SPR oil that was moved on water. U.S. owned vessels, crewed by American mariners, stood ready to move more of the oil, but it seems the Administration decided to leave them at the dock.”