1. Click to edit Master title style United States Energy Emergency Response November 7, 2012 Click to edit Master title style David Johnson Deputy Assistant Secretary Office of Petroleum Reserves Washington, DC

2. Click to edit Master title style Energy Emergency Response Programs Strategic Petroleum Reserve Northeast Home Heating Oil Reserve Established in 1975 727 Million Barrels Reserve Crude Oil Established in 2000 1 Million Barrel Reserve Heating Oil (ULSD) 2

3. Click to edit Master title style 3 United States Strategic Petroleum Reserve Established by U.S. Law: Energy Policy & Conservation Act (EPCA) December 1975 Mission: To ensure U.S. Energy Security: −To reduce the impacts of potential disruptions in U.S. petroleum supplies. −To carry out U.S. obligations under International Energy Program (IEA). ●National Energy Policy (2001): “the United States also counts on the Strategic Petroleum Reserve as a national defense fuel reserve” 1973 Arab Oil Embargo International Energy Program

4. Click to edit Master title style Strategic Petroleum Reserve Implementation ●U.S. Government Ownership ●Centralized in U.S. Gulf Coast –Major U.S. Refining Centers –Entry Point for 70% of U.S. Imports –Flexibility in Response ●Underground Storage in Salt Dome Formations ‒ Maximum Safety and Security ‒ Low Environmental Impacts ‒ Lowest Storage Cost ●Crude Oil Storage Only ‒ Light Low-Sulfur Crude (S<0.5%) ‒ Light Med-Sulfur Crude (S<2.0%) 4

5. Click to edit Master title style 5 Strategic Petroleum Reserve Storage Facilities Storage FacilityCapacity Inventory DD Rate Bryan Mound254 Million241 Million1.35 MMB/d* Big Hill170 Million165 Million1.1 MMB/d West Hackberry227 Million216 Million1.3 MMB/d Bayou Choctaw 76 Million 73 Million0.5 MMB/d Total727 Million695 Million4.25 MMB/d Bayou Choctaw Big HillBryan Mound West Hackberry ____________ * Bryan Mound Drawdown Rate - Reduced from 1.5 Million B/D to 1.35 Million B/D due to a storage tank out-of-service

6. Click to edit Master title style 6 Strategic Petroleum Reserve Oil Drawdown Capability 695 Million Barrel Crude Oil Inventory Maximum Sustained Drawdown : 4.4 Million B/D for 90 Days Full Drawdown of Inventory in 180 Days

7. Click to edit Master title style 7 Strategic Petroleum Reserve Oil Distribution Capability Pipeline Capabilities - 23 Gulf Refineries (Imports of 3.6 MMB/D) Marine Capabilities - 5 Terminals (Capacity of 2.5 MMB/D)

8. Click to edit Master title style United States Crude Oil Import Protection *STEO: EIA Short-Term Energy Outlook (October 2012) 8

9. Click to edit Master title style SPR Drawdown Policies ●Energy Policy & Conservation Act: ‒ Release Authority: President of the U.S. ‒ Conditions for Release: “Severe Petroleum Supply Interruption” To meet U.S. obligations in an IEA Action ‒ Other Authorities: Test Sales & Exchanges ‒ Release Method: Public Sale Offering ‒ Exports: Restrictions ‒ SPR Oil Account for Repurchase ●U.S. Administration Policy on SPR: ‒ To be used in coordination with IEA ‒ To be used to mitigate economic damage resulting from supply shortages, not to control oil prices 9

10. Click to edit Master title style 10 Prior SPR Oil Releases ●SPR Drawdowns (IEA Actions): ‒ 1991 Iraq War: 17.3 MMB ‒ 2005 Hurricane Katrina: 11.0 MMB ‒ 2011 Libya Situation: 30.6 MMB ●SPR Test Sales: ‒ 1985 Test Sale: 1.0 MMB ‒ 1990 Test Sale: 3.9 MMB ●Emergency Exchanges (Loans): ‒ Seaway Emergency (1996): 1.0 MMB ‒ Ship Channel Closure (2000): 1.0 MMB ‒ Time Exchange 2000: 30.0 MMB ‒ Hurricane Ivan (2004): 5.4 MMB ‒ Hurricane Katrina (2005): 9.8 MMB ‒ Ship Channel Closures (2006): 1.6 MMB ‒ Hurricane Gustav/Ike (2008): 5.4 MMB ‒ Hurricane Isaac (2011): 1.0 MMB 1991 Iraq War 2005 Hurricane Katrina

11. Click to edit Master title style United States Northeast Home Heating Oil Reserve Established by Law: President Clinton directed the Reserve establishment in July 2000. Mission: To protect the Northeast against high vulnerability of winter-related supply shortages. To protect the safety and health of the Northeast Residents. Implementation Policy: Size: 1 Million Barrels Stocks: Ultra Low Sulfur Distillate (ULSD) Storage Location: New England (CT & MA) Protection: 5-6 days of Consumption 11

12. Click to edit Master title style SPR3324.ppt PADD V & PADD IV < 2% 35.9% (41,852) 49.5% (57,697) 5.6% (6,568) 1.6% (1,881) 5.7% (6,663) SPR3324.ppt PADD 1A PADD 1C PADD III PADD II PADD 1B Petroleum Allocation Defense Districts (PADD) (Thousand Barrels) United States Heating Oil Consumption 12

13. Click to edit Master title style Strategic Petroleum Reserve Drawdown 2011 IEA Collective Action: On 6/23/11, the IEA announced the planned release of 60 million barrels to address the oil shortages created by the disruption in Libyan oil supplies. IEA Allocation: 50% from N. America, 30% from Europe & 20% from Asia. U.S. Share of the Collective Action: 30.237 million barrels. U.S. Response Action: On 6/23/11, the President directed the Secretary of Energy to draw down the SPR to meet U.S. obligations under the International Energy Program. On 6/24/11, the SPR issued a Notice of Sale for: –30 million barrels of light sweet crude –Delivery in July and August 2011 13

14. Click to edit Master title style Strategic Petroleum Reserve Oil Sale & Drawdown Activities IEA Announces Oil Release Bid Period Jun 24-29 2PM EDT Post SPR Notice of Sale Notification Successful Offerors Submission Financial Guarantees Certify LOC & Award Contracts Commence Early Oil Deliveries Commence Last Oil Deliveries Scheduling Of Oil Deliveries 14

15. Click to edit Master title style 15 SPR Drawdown 2011 U.S. IEA Obligation30.237 Million Barrels U.S. SPR Response30.640 Million Barrels

16. Click to edit Master title style 16 SPR Drawdown 2011

17. Click to edit Master title style U.S. Hurricane Vulnerability Approx. 50% of the U.S. petroleum refining capacity is located along the U.S. Gulf of Mexico coastline. The Gulf Coast has been impacted by 14 Hurricanes since 1998, including 5 major ones (Cat 3-5). The annual probability of having one or more hurricanes hitting the Gulf Coast is 56.4% (NOAA). Hurricanes cause disruption to U.S. oil production, refining operations and product supplies. YearName Category at Landfall Landfall Date 1998GeorgeCat 29/28/1998 1999BretCat 38/23/1999 2002LiliCat 110/3/2002 2003ClaudetteCat 17/15/2003 2004IvanCat 39/16/2004 2005CindyCat 17/6/2005 2005DennisCat 37/10/2005 2005KatrinaCat 48/29/2005 2005RitaCat 39/24/2005 2007HumbertoCat 19/13/2007 2008DollyCat 17/23/2008 2008GustavCat 29/1/2008 2008IkeCat 29/13/2008 2012IsaacCat 18/28/2012 17

18. Click to edit Master title style Hurricane Vulnerability of Gulf Coast Refining Centers Petronius Blind Faith Thunder Hawk Thunder Horse Devil’s Tower URSA Mars Droshky SS 332 Neptun e Atlantis Shenzi Mad Dog Poseidon Constitution Ticonderoga Tahiti Cascade Chinook Jack St. Malo LOOP Auger Perdido HOOPS Cameron Highway Poseidon Auger Poseidon Amberjack Alleghe ny Caesar Eugene Island Mars Mardi Gras Odyssey Mountaineer Locap Capline Shell U.S Department of Energy Strategic Petroleum Reserve Program Washington, D.C. 20585 Platform Offshore Port Refinery Major Pipeline SPR Site Gulf of Mexico 11 Refiners Capacity 2,347 MBD 9 Refiners Capacity 2,325 MBD 7 Refiners Capacity 1,817 MBD 4 Refiners Capacity 688 MBD 2 Refiners Capacity 410 MBD HOUSTON PASCAGOULA CORPUS CHRISTI FREEPORT TEXAS CITY PORT ARTHUR LAKE CHARLES BATON ROUGE NEW ORLEANS Bryan Mound Big Hill West Hackberry Bayou Choctaw SPR3315.PPT Hurricane Landfall Vulnerabilities Highest Moderate Lowest 18

19. Click to edit Master title style Gulf Coast Hurricane Impacts 2005 and 2008 Hurricanes Katrina & Rita Impacts in 2005 Category 3 & 4 Hurricanes 26 refineries were shutdown Recovery time 18 weeks –2 refiners required 8-9 months Refined Product Losses - 180 million barrels –Katrina – 113 million barrels –Rita – 67 million barrels Hurricanes Gustav & Ike Impacts in 2008 Both Category 2 Hurricanes 26 refineries were shutdown Recovery time 14 weeks Refined Product Losses - 103 million barrels –Gustav – 39 million barrels –Ike – 64 million barrels 19

20. Click to edit Master title style Strategic Petroleum Reserve Hurricane Responses YearHurricaneEmergency Oil Exchanges Drawdown Oil Sale 2002Hurricane Lili100,000 Bbl (1 contract) - 2004Hurricane Ivan5,400,000 Bbl (6 contracts) - 2005Hurricane Katrina/Rita9,800,000 Bbl (6 contracts) 11.0 MMB 2008Hurricane Gustav/Ike5,200,000 Bbl (16 contracts) - 2012Hurricane Isaac1,000,000 Bbl (1 contract) 20

21. Click to edit Master title style Hurricane Isaac 2012 21 Hurricane Isaac Category 1 Hurricane 5 Refineries Shutdown 6 Refineries Reduced Output Recovery time: –4 Refineries in 7-10 days –1 Refinery - 3 weeks U.S. Oil Supply Impacts Crude Production – 12 Million Bbl Refined Products – 13 Million Bbl U.S. SPR Release - 1 Million Bbl

22. Click to edit Master title style Hurricane Sandy 2012 FEMA coordinated Federal emergency assistance responses of Federal Agencies. DOE released ULSD from NE Reserve to DLA for emergency generators & responder needs. DHS waivered US Coastwise Shipping Law (Jones Act) for movement of oil products from Gulf to East Coast by Foreign vessels. EPA issued waivers of EPA restrictions on conventional fuels, ULSD and vapor emissions for states and terminals. DOT issued waivers for truckers hours-of- service, fuel truck size and weight, ULSD usage, interstate tolls, vehicle registration requirements and fuel tax. 22

23. Click to edit Master title style U.S. Strategic Petroleum Reserve Energy Security Role A National Insurance Policy against interruption in critical petroleum supplies (International crises, Terrorism, & Hurricanes). Provides a Deterrent to oil-based threats from oil producing nations and provides time for Diplomacy. Avails U.S. worldwide Emergency Assistance through IEA Alliance. Supports National Security for Military Fuel in the event of war. 23