171. Summary of Conclusions of Special Coordinating Committee Meeting1
SUBJECT
- Strategic Petroleum Reserve
PARTICIPANTS
- The Vice President
- State
- Julius Katz, Assistant Secretary for Economic and Business Affairs
- Harold Rosen, Director, Office of Fuels and Energy
- OSD
- David McGiffert, Assistant Secretary for International Security
- Ellen Frost, Deputy Assistant Secretary for International Economic Affairs
- Treasury
- C. Fred Bergsten, Assistant Secretary for International Affairs
- Philip Verleger, Special Assistant to the Assistant Secretary for Economic Policy
- Energy
- Secretary Schlesinger
- Alvin Alm, Assistant Secretary, Policy and Evaluation
- Carlisle Hystad, Chairman, DOE Task Force on Strategic Plans for the SPR
- JCS
- Lt. Gen. William Smith, Assistant to the Chairman
- CIA
- Robert Bowie, Deputy Director, National Foreign Assessment Center
- John Eckland, OER Analyst
- OMB
- Dr. John White, Deputy Director
- Eliot Cutler, Associate Director for Natural Resources, Energy, and Science
- Council of Economic Advisers
- William Nordhaus, Member
- DPS
- Kitty Schirmer
- White House
- David Aaron—Chairman
- NSC
- Rutherford Poats
- James Thomson
SUMMARY OF CONCLUSIONS
An expanded NSC Special Coordinating Committee examined the risks and costs of differing proposals of the Department of Energy and OMB with regard to the fourth increment of the Strategic Petroleum Reserve. OMB advocated restatement of the SPR goal as one billion barrels worth of protection, including 750 million barrels (mmb) of USG storage and 250 mmb worth of private endurance through use of private stocks, fuel switching and reductions in use of oil in an emergency. DOE advocated proceeding with investment in FY 1980 on the fourth increment of 250 mmb of SPR storage, adhering to the announced goal of 1,000 mmb of USG-held SPR oil by 1985 or soon thereafter.
The NSC/SCC review examined four issues:
1. Potential military or political threats of extreme and prolonged oil supply interruption. Such threats, sufficient to give significant value to a fourth 250 mmb of USG-held oil, were judged to be of very low probability but they could not be discounted entirely. No participant contended that such supply interruptions would endanger US national security if the SPR were limited to 750 mmb of USG-held oil. In such circumstances vital US military and economic requirements could be met by allocation measures. Rather, the issue was judged to be economic and political: how much popular inconvenience and lost production could be avoided by the extra 250 mmb?
2. The potential costs of adapting to oil supply reductions beyond amounts offset by SPR releases. In the extreme threat scenario, there is a difference of 700,000 b/d in US oil supply between the DOE and OMB proposals. Stringent allocation of gasoline would be required whether the SPR were 1,000 mmb or 750 mmb, but general gasoline rationing would be more likely with the smaller SPR. Further study of the best means of distributing the marginal shortage should be undertaken by DOE and OMB.
3. The costs in strategic and foreign relations terms of restating the SPR goal as proposed by OMB. The OMB option would not violate international agreements nor would it be inconsistent with plans of other IEA countries. It would, however, conflict with clearly declared US objectives. Most participants believed such a change would be interpreted as a weakening of US oil security. Its announcement at a time of heightened instability in the Middle East was particularly troubling to several participants.
4. Costs and benefits of postponing budget action. No one argued that national security will require completing the full SPR by 1985. Further slippage of the schedule would cause nominal cost increases—possibly real ones in oil fill in a tightening world market. If given a choice of announcing a change to a 750 mmb USG-held SPR in January or, alterna[Page 553]tively, to defer this decision and not commence spending on a fourth increment until FY 1982, all participants except OMB preferred the latter.2
- Source: Carter Library, National Security Affairs, Staff Material, International Economics File, Box 44, Rutherford Poats Files, Chron: 12/5–13/78. Confidential. The minutes of the meeting, which was held in the White House Situation Room, are ibid. The meeting was held in response to the President’s request for a review of a December 2 OMB memorandum and a Department of Energy proposal concerning the Strategic Petroleum Reserve. (Memorandum from Aaron to Carter, undated; ibid.)↩
- On December 7, Brzezinski sent the President a memorandum informing him of the conclusions reached at the meeting. (Ibid.)↩