Naval Petroleum Reserves:

Oil Sales Procedures and Prices at Elk Hills, April Through December 1986

RCED-87-75FS: Published: Jan 29, 1987. Publicly Released: Feb 2, 1987.

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In response to a congressional request, GAO provided information on the Department of Energy's (DOE) procedures and prices for oil sales from the Elk Hills Naval Petroleum Reserve (NPR-1) from April through December 1986.

GAO found that: (1) DOE received between $3.91 and $11.27 per barrel for NPR-1 crude oil between April 1, 1986 and September 30, 1986; (2) the DOE bonus/discount bidding procedure to sell NPR-1 oil resulted in net bonuses to DOE of about $272 million; (3) the DOE sales procedures required bidders to submit a specific price for the oil rather than a bonus or discount to a base price, reduced the contract period from 6 months to 3 months, shortened the time period between the invitation for bids, contract award, and oil delivery, and strengthened its right to reject bids deemed unfavorable to the taxpayer; (4) under its new procedures, DOE awarded contracts to seven companies in September 1986 for the sale of 53,000 barrels of oil per day for the contract period October 1, 1986 to December 31, 1986; and (5) to avoid future NPR-1 oil sales at less than fair market value, DOE tests the sale and shipment of NPR-1 oil to the Strategic Petroleum Reserve and prepares unused storage tanks at NPR-1 for possible storage of oil.

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