America’s Stockpiles Are Hardly Strategic
Before we assemble new reserves of critical commodities, we need a hard look at the existing ones.
Among President Biden’s first acts was to order a “status and inventory” report from the Strategic National Stockpile, a once-quiet backwater of the public-health bureaucracy thrust into the spotlight amid last year’s acute shortages of medical supplies and equipment. Now, as the pandemic and competition with great powers fuel proposals to construct additional stockpiles—and not simply of gloves and ventilators—it is worth taking stock of where we are. Many of our existing reserves lack clear direction and face an uncertain future.
Federal stockpiles essentially come in three flavors: medical, defense, and commodities. The SNS and All-Hazards Emergency Caches contain a wide array of medical drugs and other supplies. The National Veterinary Stockpile fulfills this function for livestock.
Naturally, the Department of Defense is the king of storage. Each service branch maintains its own prepositioned stocks of war materiel. The Defense Logistics Agency supervises the National Defense Stockpile, filled with various metals, including the “rare earth” elements so critical to weapons.
Reserves are more than physical storage. You can store food in your pantry, but you can also plant your own garden. In this latter way, DOD wields powerful authority under the Defense Production Act of 1950. This statute, most recently invoked to boost Covid-19 testing availability, allows it to shore up domestic suppliers for defense purposes. The National Petroleum Reserve-Alaska operates under a similar philosophy: companies actively produce oil from it, proving that more could be produced if we ever needed to.
Finally, civilian agencies operate a handful of commodity reserves. The Interior Department is winding down the National Helium Reserve. The grandest is the Strategic Petroleum Reserve, which comprises giant caverns along the Gulf Coast. Operated by the Department of Energy, the petroleum reserve is supplemented by two extremely small reserves of refined fuels. None of these sites produce any energy; they store and distribute it during an emergency.
As Americans scrambled for masks and cleaning supplies last year, the Strategic Petroleum Reserve figured in an altogether different kind of crisis. The U.S. energy sector was awash in oil it couldn’t sell. Through the first half of 2020, Saudi Arabia and Russia waged an inopportune battle for market share. Prices collapsed and oil storage filled to the brim. The White House tasked the Department of Energy with a clear mission: save America’s “energy dominance” from ruin.
Dedicated staff developed imaginative plans to soak up extra barrels with the SPR. It could simply buy oil and refill itself. Empty space could be leased by the private sector, a policy innovation termed “reverse exchange.” Oil could be purchased and kept in the ground, though this was never formally proposed. At one point, Treasury Secretary Steven Mnuchin even proposed spending $20 billion to buy oil, a sally that surely annoyed the Department of Energy.
This was quite the about-face. In 2015, the Obama administration and Congress agreed to fund budget priorities by selling off massive amounts of stockpiled oil. This “decade of drawdown” is paired with the SPR’s life extension program, projected to cost $1.4 billion. (It is already behind schedule.)
Ultimately, the crisis abated as the Saudis and Russians came to a truce and the world’s oil producers cut production. The SPR’s successful reverse exchanges provided a temporary home for some 23 million barrels, filling all but 7 million barrels of space on offer. But Congress declined to appropriate funds to support the administration’s proposal to purchase 77 million barrels. In all, the Energy Department bought merely 126,000 barrels — essentially, out of petty cash.
Thus passed the biggest crisis ever faced by the U.S. energy sector, greater than the oil shortages of the 1970s. It was one that the Strategic Petroleum Reserve, American energy’s premiere emergency response tool, proved almost entirely unable to address.
Today, other reserves are in administrative peril. The National Helium Reserve is shutting down, even as the Interior Department designates helium to be a critical mineral. There may be perfectly rational reasons to close out storage of this ethereal element, but no one is asking the obvious question: why are we closing it? The Office of Management and Budget is also targeting the Northeast’s reserves of gasoline and diesel fuel, employing about as much analysis into their elimination as was put into their creation.
All these unanswered questions have hardly dimmed policymakers’ attraction to stockpiling — at least in theory. Concerned about grid resilience? Stockpile electric transformers. Grid reliability? Subsidize coal and nuclear power. Nuclear fuel supply? Establish a uranium reserve. Trade restrictions on rare earth elements? Build a critical minerals reserve.
But before we build a whole new generation of reserves, let’s take a hard look at the ones we already have. We face a twin challenge: identifying their purpose and reconciling defense and economic imperatives. Our nation’s reserves do not exist in any semblance of a system. This may be a feature, not a bug, if their respective missions are sufficiently different—but what are those missions? Are we stockpiling for emergencies, such as a pandemic or hurricane, or to support the domestic economy by soaking up excess supply, the way the Federal Reserve might combat deflation through asset purchases? In either case, ensuring functionality is paramount.
Formed over eons by geological and cosmic processes, natural resources may lack the dramatic urgency of personal protective equipment or the implied lethality of prepositioned fighting gear. Commodity reserves focused on civilian economics may be fundamentally different than defense-oriented reserves, even those that contain the exact same materials. We already have a critical mineral reserve, for example, in the National Defense Stockpile. What are we to make of the Defense Production Act’s role in supporting the industrial base? If DOD needs rare earths for weapons, but DOE requires rare earths for renewables, which gets priority—particularly if the “climate crisis is a national security crisis?”
Perhaps these ruminations are imponderable. In the end, we will probably do as we usually do: stockpile first, ask questions later.
Tristan Abbey has served on the staffs of the National Security Council and the Senate Committee on Energy and Natural Resources.