By Tom Kenworthy, Senior Fellow, Center for American Progress Action Fund

Rep. Cory Gardner (R-CO) is only in his first term as a member of the U.S. House. But he’s already collected nearly a quarter of a million dollars in campaign contributions from oil and gas interests. It’s by far the number one industry that supports his budding political career.

Little surprise then, that Gardner is a reliable Capitol Hill ally for big oil. Little surprise either, that in serving the oil and gas industry agenda, he gets his facts wrong, as the Denver Post recently reported.

This week, he stepped up to the petroleum plate again, saying he’s introducing legislation to link any sales of our emergency oil supply from the Strategic Petroleum Reserve to increases in oil and gas leases on federal lands. Sell five percent of the oil in the reserve, said Gardner, and the Obama administration must draw up a plan to increase the amount of federal lands that are leased by five percent. That five percent would mean leasing nearly another two million acres of public land on top of the 38 million acres already under lease.

Apparently with a straight face, Gardner characterized his bill as something other than a blatant give-away to Big Oil:

This bill is about achieving energy independence and keeping prices at the pump affordable

Give Gardner credit. He makes it hard to know where to start the rebutting and fact-checking.

One might begin with the fact that in a recent report on domestic onshore oil and gas production, the Interior Department found that nearly three-fifths of the federal onshore acreage leased to the oil and gas industry was sitting idle and undeveloped. Surely it then makes sense to give them more when they’ve got leases on nearly 22 million acres they have yet to drill.

Or, consider where the drill rigs already are: in the U.S. As recently reported by Michael Conathan, CAP’s Director of Ocean Policy, the number of rigs operating in the U.S. has quadrupled since President Obama took office, and we’ve got more oil rigs at work now than in the rest of the world combined.

All that drilling activity and increased U.S. production – now at an eight year high — hasn’t lowered gasoline prices here, and it won’t. As Conathan pointed out, gasoline supply is dependent on refining capacity more than oil supply, and oil is a global commodity.

Taking the Strategic Petroleum Reserve as a hostage to Republican talking points has now infected both the House and Senate. Last month, several members of the Senate introduced legislation that would prevent President Obama from selling reserve oil unless his administration approves the Keystone XL Pipeline that would bring dirty tar sands crude from Canada to the U.S.

To stem supply disruptions from Libya and to disrupt the grip of nonconsumer oil speculators, the U.S. Department of Energy announced the sale of 30 million barrels of crude as part of the International Energy Agency’s effort to release 60 million barrels into the global oil market. The sale of oil from the Strategic Petroleum Reserve, as well as the suggestion from the Obama administration that more sales could be announced in the future, has already lowered the price of crude. As the Baker Institute’s Amy Myers Jaffe has noted, the release sends a “signal that should keep rampant speculation at bay.”

However, as Bloomberg reported last week, “some of the oil being released from the U.S. Strategic Petroleum Reserve to bring down prices may be held by traders for later sale rather than sent directly to refiners for processing into gasoline or other fuels.” Some of the purchasers have claimed that they will immediately refine the SPR crude. But many banks and large oil speculators looking to purchase the oil may intend to simply hoard it:

Representatives of trading companies including JPMorgan Chase & Co., Morgan Stanley (MS), Hess Trading Company and Koch Supply & Trading LP joined Valero Energy Corp. (VLO) and Statoil ASA in questioning Energy Department officials June 28 about shipping options and requests for waivers of the Jones Act.

The Jones Act “restricts the shipment of goods between U.S. ports to American-flagged vessels.” Because most oil tankers are foreign-flagged ships, the traders looking to store in the oil offshore must request Jones Act waivers.

Argus Media reports that Koch Industries has already shown interest in leasing super tankers for storage of crude in the Gulf of Mexico. The Economist points out that the small rebound in oil prices have already provided an incentive for oil traders to store, rather than refine, the oil: “If a trader was able to purchase West Texas Intermediate—the oil held in America’s Strategic Petroleum Reserve (SPR)—at the spot price on June 24th, they would already be sitting on a tidy profit.”

In December 2008, when oil prices crashed from a record high to $33 a barrel, speculators with the capability to store massive quantities of crude oil bought in bulk and stored the oil for later sale. As Fortune magazine reported, the rush to store oil instead of refining it pushed prices for consumers back up. Now, the contango — a market situation when the spot price is much lower than the future price of oil — is less significant than back in 2008.

Nevertheless, its not clear what oil traders will do. In Europe and Japan, much of the oil released as part of the IEA effort was sent directly to industry. In the U.S., the release was entirely crude with less strings attached. “Our inventories are in good shape and our markets are well supplied here in the United States,” Rayola Dougher, an economic adviser with the American Petroleum Institute, the largest oil lobbying group, told Reuters. “It may be that our refiners are buying it to store up.”

Opening the Strategic Petroleum Reserve worked well when President George H. W. Bush did it during Desert Storm.

The Department of Energy just issued this news release:

U.S. Energy Secretary Steven Chu announced today that the U.S. and its partners in the International Energy Agency have decided to release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East.  As part of this effort, the U.S. will release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR).  The SPR is currently at a historically high level with 727 million barrels.

“We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery,” said Energy Secretary Steven Chu.  “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.”

The United States has been in close contact with oil producing and consuming countries about disruptions to the international oil market that could affect the global economy.  The situation in Libya has caused a loss of roughly 1.5 million barrels of oil per day – particularly of light, sweet crude – from global markets.  As the United States enters the months of July and August, when demand is typically highest, prices remain significantly higher than they were prior to the start of the unrest in Libya.

I have recommended selling off the SPR for a long time.

From 1993 to 1995, I was special assistant for policy and planning to the deputy secretary of energy, who oversaw all of DOE’s energy programs, including the SPR.  I was invited in July 2008 to testify in front of the Select Committee on Energy Independence and Global Warming hearing, “Immediate Relief from High Oil Prices: Deploying the Strategic Petroleum Reserve.”

My full 2008 statement (plus “Seven Reasons to Release Oil from the Strategic Petroleum Reserve”) is here.  All of the basic arguments remain valid.  My 5-minute Oral Statement (~750 words) follows:

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