The U.S. Department of Energy has completed the sale of its 78% interest in Elk Hills oil field near Bakersfield, Calif., to Occidental Oil & Gas Corp., Los Angeles, for $3.65 billion. It is believed to be the largest federal privatization in U.S. history.
Chevron Corp. owns the other 22%. Oxy said much of the purchase price came from the $3.1 billion it received from the sale of its parent company's MidCon Corp. natural gas transmission and marketing subsidiary.
Occidental CEO David Hentschel said, "We view this asset as becoming the crown jewel of our domestic operations."
Oxy said Elk Hills is expected to ultimately yield 1 billion boe net to the company. Proven reserves are 450 million boe.
The U.S. government had held an interest in Elk Hills since President William Taft set the field aside as a Naval Petroleum Reserve in 1912. Congress authorized the sale in the 1996 Defense Authorization Act.
Elk Hills is one of the 11 largest U.S. oil fields, with more than 900 wells. It produces about 55,000 b/d of oil and almost 400 MMcfd of gas.
DOE's 1999 budget proposed that $36 million from the Elk Hills sale be transferred to the California State Teachers Retirement System under the administration's agreement with the state to resolve a long-standing dispute over "school lands" within the 47,000-acre field.
Over the next 7 years, if Congress approves the appropriations, the government will pay more than $320 million to the teachers' retirement plan.
Energy Sec. Federico Pe?a said the government was placing Elk Hills field "into the very capable hands of a company respected worldwide for its responsible development of energy resources."
Lawsuit rejected
The sale was held 2 days after Northern California U.S. District Judge Oliver Wanger rejected efforts by environmentalists and Indians who wanted to stop it. Congressional authorization for the sale would have expired Feb. 10.Wanger ruled there was "no unlawful conduct, abuse of discretion, or arbitrary or capricious action" by the Department of Energy.
The Sierra Club, the Arizona-based Southwest Center for Biological Diversity, the Tinoqui-Chalola Council of Kitanemuk, and the Yowlumne Tejon Indians filed the suit in U.S. District Court at Fresno, Calif.
They argued the government failed to determine the effect of the sale on endangered species and sacred Native American sites, as required by the Environmental Policy Act, the Endangered Species Act, and federal laws protecting historic and archaeological Indian sites and graves.
Judge Wanger noted that, in the sale, Oxy had agreed to be bound by the same environmental commitments as the federal government.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
