Skip to main content

Naval Petroleum Reserve: Opportunities Exist to Enhance Its Profitability

RCED-95-65 Published: Jan 12, 1995. Publicly Released: Feb 13, 1995.
Jump To:
Skip to Highlights

Highlights

Pursuant to a congressional request, GAO reviewed the Naval Petroleum Reserve (NPR-1), focusing on actions the U.S. government could take to increase its profitability.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
In the context of reconsidering the purposes of NPR-1 to enhance its profitability, Congress may wish to consider amending the Naval Petroleum Reserve Production Act of 1976 by: (1) eliminating the maximum efficient rate requirement; (2) requiring that the equity shares be finalized; and (3) eliminating the requirement that adjustments in the equity shares be retroactive.
Closed – Implemented
Legislation was passed in the 104th Congress and signed by the President on February 10, 1996 authorizing the sale of the government's portion of NPR-1 no later than February 10, 1998. Language in this legislation also specifically eliminates the maximum efficient rate (MER) requirement and requires equity to be finalized before sale of NPR-1. Changing the MER requirement is particularly important in the unlikely event that NPR-1 is not sold. Equity settlement is important in either case. The legislation does not address the retroactivity requirement, but this requirement will no longer be relevant once the equity issue is settled.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Energy To help enhance the profitability of NPR-1, the Secretary of Energy should, in consultation with the Senate and House Committees on Armed Services, amend the unit plan contract to require the addition of a nonconsent clause.
Closed – Not Implemented
This issue should be moot once the NPR-1 is sold. Once sold, NPR-1 will presumably be operated according to standard industry practice. A nonconsent clause is in accordance with standard industry practice.

Full Report

Office of Public Affairs

Topics

Contract modificationsCost sharing (finance)Domestic crude oilEnergy suppliesFuel salesMicroeconomic analysisOil resourcesPetroleum industryPetroleum refining facilitiesPrivate sector practicesProfits