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RCED-95-141R 1 (1995-03-17)

handle is hein.gao/gaobackua0001 and id is 1 raw text is: GUnited States General Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division B-260785 March 17, 1995 The Honorable Strom Thurmond Chairman, Armed Services Committee United States Senate Dear Mr. Chairman: As agreed with your office, this correspondence provides background information on the Naval Petroleum and Oil Shale Reserves, the case for changing the current status of the reserves, and a summary of recommendations from our previous reports. It also discusses factors to consider if a government corporation is formed to manage the reserves or if the reserves are sold. (An enclosure to this correspondence lists relevant GAO products.) BACKGROUND The Naval Petroleum and Oil Shale Reserves, established in the early 1900s, consist of six oil and gas sites located in California, Colorado, Wyoming, and Utah. Originally intended as a source of fuel for the military, they remained largely undeveloped until the period following the oil embargo of 1973-74. In 1976, the Congress passed the Naval Petroleum Reserves Production Act, requiring that the reserves be fully developed and operated at their maximum efficient rate of production. The act generally requires that production be sold at public sale to the highest bidder and the revenues deposited in the Treasury. From 1976 to 1993, the reserves generated about $15.7 billion in revenues at a cost of $2.9 billion.1 According to the Department of Energy, the remaining oil and gas could sustain commercial- level production for another 40 years. The reserves are jointly owned by the U.S. government and private companies. For example, the government owns about 78 percent of the reserves at the Elk Hills site, and 'In constant 1993 dollars, revenues were $22.5 billion and costs were $4 billion. GAOIRCED-95-141R, Naval Petroleum Reserves

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