Summary: In response to a congressional request, GAO reviewed the proposed sale of the Elk Hills, California, Naval Petroleum Reserve No. 1 (NPR-1), specifically the: (1) chronological events leading to and following sale proposals; (2) proposals to produce and sell NPR-1 oil and gas production for nonmilitary use; and (3) Department of Energy's (DOE) 1987 divestiture report.
GAO found that: (1) Congress must authorize NPR sales, and it has not delegated that authority or approved executive branch proposals to sell or otherwise change the status of NPR; (2) after the Arab oil embargo, Congress passed legislation that allowed the military to acquire some or all of the oil, as needed, for defense purposes; (3) in 1987, Congress authorized DOE up to $500,000 to study a NPR-1 sale; and (4) DOE proposed to use the receipts from the sale of NPR-1 to complete filling the Strategic Petroleum Reserve to 750 million barrels of oil and to develop and fill a 10-million-barrel defense petroleum inventory. GAO also found that the DOE divestiture report did not adequately justify the sale of NPR-1, since: (1) its conclusions relied heavily on inaccurate data concerning NPR-1 recoverable reserves; (2) it estimated NPR-1 value from industry rather than government perspectives; and (3) it did not consider the potential for leasing NPR-1 as an alternative to either selling or holding the asset.
