Naval Petroleum Reserve No. 1: Examination of DOE's Report on Divestiture
RCED-88-151
Published: Aug 25, 1988. Publicly Released: Sep 30, 1988.
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Highlights
In response to a congressional request, GAO examined: (1) the Department of Energy's (DOE) report on the proposed divestiture of Naval Petroleum Reserve 1 (NPR-1); and (2) whether DOE could lease the reserve instead of selling it.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Energy | To provide better information on whether an NPR-1 sale is in the public interest and on whether a divestiture determination by Congress could be formulated, the Secretary of Energy should revise the June 30, 1987, report to Congress by assessing the value to the government of retaining and producing NPR-1, using revised estimates for reserve data, production schedules and operating costs from the comprehensive reserve study, government-generated oil and gas price forecasts, and a discount rate based on the government's borrowing costs. |
Closed – Implemented
DOE has dropped its plan to sell NPR-1 and has proposed that Congress allow it to competitively lease NPR-1. By taking this action, DOE has eliminated: (1) the need to clear up several uncertainties about a sale that were identified in the report; and (2) a payment of a 10 percent contingency fee to the contractor.
|
| Department of Energy | To provide better information on whether an NPR-1 sale is in the public interest and on whether a divestiture determination by Congress could be formulated, the Secretary of Energy should assess where the private sector's assumptions concerning the valuation factors would likely differ and then: (1) develop sensitivity analyses to show the magnitude of these differences on the NPR-1 net present value; and (2) identify the advantages of private versus government ownership. |
Closed – Implemented
DOE has dropped its plan to sell NPR-1 and has proposed that Congress allow it to competitively lease NPR-1. By taking this action, DOE has eliminated: (1) the need to clear up several uncertainties about a sale that were identified in the report; and (2) a payment of a 10 percent contingency fee to the contractor.
|
| Department of Energy | To provide better information on whether an NPR-1 sale is in the public interest and on whether a divestiture determination by Congress could be formulated, the Secretary of Energy should prepare an analysis of the feasibility and the potential benefits to the government of leasing NPR-1 and determine what actions would be required to enter a leasing program. |
Closed – Implemented
In its fiscal year 1992 budget, DOE proposes to competitively lease NPR-1. H.R. 701 was introduced on January 29, 1991 to obtain the authorization needed to lease the reserve.
|
| Department of Energy | In the event that Congress elects to authorize an NPR-1 sale, the Secretary of Energy should ensure that the maximum amount of data DOE has on NPR-1 is available to all potential bidders so as to minimize any advantages that Chevron may have over other bidders in the sales process. |
Closed – Not Implemented
DOE has dropped its plan to sell NPR-1 and has proposed that Congress allow it to competitively lease NPR-1. By taking this action, DOE has eliminated the need to clear up several uncertainties about a sale that were identified in the report.
|
| Department of Energy | In the event that Congress elects to authorize an NPR-1 sale, the Secretary of Energy should ascertain the validity of small and independent refiners' claims that they would be excluded from bidding on a portion of NPR-1, and, if the claims are valid, determine: (1) how that fact might affect the competitive bid process envisioned; and (2) alternate means of ensuring supplies of light oil to these users. |
Closed – Not Implemented
DOE has dropped its plan to sell NPR-1 and has proposed that Congress allow it to competitively lease NPR-1. By taking this action, DOE has eliminated the need to clear up several uncertainties about a sale that were identified in the report.
|
| Department of Energy | In the event that Congress elects to authorize an NPR-1 sale, the Secretary of Energy should examine the impact of the possibility that a single large company could buy all or most of NPR-1, determine what Department of Justice involvement in the sale might do to the timely nature envisioned for completing the sale and, if necessary, assess the impact on the sale of restricting any one bidder to a certain maximum share of NPR-1. |
Closed – Not Implemented
DOE believes that an antitrust review provision by the Department of Justice, in any proposed legislation, would address this problem. Congress has shown no inclination to authorize the sale of NPR-1 reserves, and DOE has dropped its proposal.
|
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