DOE sidesteps hurdle to Elk Hills NPR sale

Clearing a possible roadblock to the U.S. government's proposed piecemeal sale of Elk Hills Naval Petroleum Reserve, the Energy Department has settled a long dispute with California regarding state setaside lands within the field. DOE plans to sell its 78% interest in Elk Hills field to multiple buyers in 1998 (OGJ, Oct. 14, p. 40). Chevron Corp. owns the remaining 22%. Upon statehood, certain federal lands in California were set aside to support the school system, and some fell within what

Oct. 21, 1996

2 min read

DOE plans to sell its 78% interest in Elk Hills field to multiple buyers in 1998 (OGJ, Oct. 14, p. 40). Chevron Corp. owns the remaining 22%.

Upon statehood, certain federal lands in California were set aside to support the school system, and some fell within what later became Elk Hills field.

The 1996 Defense Authorization Act, which permitted the Elk Hills sale, set aside 9% of the net proceeds to benefit California's State Teachers' Retirement System. The Congressional Budget Office estimates the Elk Hills sale to draw at least $1.5 billion, so the fund would be assured of at least $135 million.

DOE has agreed to pay the 9% in five equal installments, without interest, beginning in 1999 and ending in 2003. If the amount exceeds $180 million, the excess would be paid in two equal installments in 2004 and 2005.

The department's obligation to pay the funds is contingent on the Elk Hills sale and subject to congressional appropriations.

If the settlement installments are paid, California will release its claims against the U.S. and the purchasers of Elk Hills field. If not, the state may terminate the agreement and sue DOE or the purchasers for damages.

DOE said whether or not Congress funds the settlement, the agreement would preclude the state from seeking to enjoin the Elk Hills sale and prohibit the treble damage claims that could be filed against the purchasers under state law.