Naval Petroleum Reserve: Opportunities Exist to Enhance Its Value to the Taxpayer

GAO discussed how to enhance the profitability of the Naval Petroleum and Oil Shale Reserves, focusing on the operations at the Elk Hills, California, oil and natural gas field. GAO noted that: (1) measures to complement future options and increase revenues for the field include giving the Department of Energy more flexibility to maximize production and market its oil more aggressively; (2) if Congress forms a government corporation to manage Elk Hills, care should be taken to establish a financially sound corporate entity with few government restrictions on earning profits, because profitability would depend on how closely the corporation mirrored a corporate enterprise's efficiency; (3) if a decision is made to sell the reserves, it is important that government ensure that it receives fair market value by establishing a minimum asking price; and (4) the proposal to form a government corporation and sell the Elk Hills field by the end of fiscal year 1997 may not allow enough time to realize the full benefits of forming a corporation.