Naval Petroleum Reserves

GAO provided information on the Naval Petroleum and Oil Shale Reserves. GAO noted that: (1) although the mission of the reserves has changed from emphasizing energy security to providing revenue to the Treasury, few measures have been taken to maximize profits; (2) profits could be increased at the Elk Hills, California oil field by allowing the Department of Energy to set the rate of production, finalizing equity shares, sharing the risks of drilling wells to encourage new drilling ventures, establishing a more reliable price index, marketing Elk Hills oil more aggressively, lifting the ban on exporting Alaskan oil, and eliminating certain requirements and preferences; (3) establishing the Elk Hills field as a government corporation could increase profits greatly; (4) selling the reserves could result in a great return to the Treasury if the government set a sufficiently high minimum price and established a competitive bidding process; and (5) it is unclear what benefits could be realized by operating a government corporation to manage Elk Hills in fiscal year (FY) 1996 and sell it in FY 1997, as the Administration has proposed.