For much of the 20th century, the Naval Petroleum and Oil Shale Reserves served as a contingency source of fuel for the Nation's military. All that changed in 1998 when Naval Petroleum Reserve No. 1, known as Elk Hills, was privatized, the first of a series of major organizational changes that leave only one of the original six Federal properties in the program.
Set aside in a series of Executive Orders in the early 1900s, the government-owned petroleum and oil shale properties were originally envisioned as a way to provide a reserve supply of crude oil to fuel U.S. naval vessels in times of short supply or emergencies. The Reserves remained mostly undeveloped until the 1970s, when the Nation began looking for ways to maximize its domestic oil supplies. In 1976, Congress passed the Naval Petroleum Reserves Production Act authorizing full commercial development of the Reserves. The crude oil, natural gas, and liquid products produced from the Reserves were sold by DOE at market rates. Revenues were deposited to the U.S. Treasury.
One of the largest of the Federal properties, the Elk Hills field in California, opened for production in 1976 and became the largest (in terms of production) oil and natural gas field in the lower 48 states at one point in its history. In September 1992, the field produced its one billionth barrel of oil, becoming only the thirteenth field in the Nation's history to reach that milestone. While managed by DOE, Elk Hills generated over $17 billion in profits for the U.S. Treasury.
For the two decades that the U.S. Department of Energy managed the Naval Petroleum and Oil Shale Reserves, the properties served valuable functions not only as a source of revenue for the U.S. Treasury but also as a model for improved oil field practices.
NPR-1 (Elk Hills) - In 1996, however, Congress determined that the properties no longer served the national defense purpose envisioned in the early 1900s, and authorized steps towards potential divestment or privatization of them. As a result, in 1996, the government's share of the Elk Hills field in California was offered for commercial sale. On February 5, 1998, DOE completed its sale to Occidental Petroleum Corporation for $3.65 billion in the largest privatization of Federal property in the history of the United States.
NOSR-1 and -3 - Subsequently, the Department of Energy transferred two of the Naval Oil Shale Reserves, both in Colorado, to the Department of the Interior's Bureau of Land Management. Like many other federally owned lands, these properties are offered for commercial mineral leasing, primarily for natural gas production and future petroleum exploration.
NOSR-2 - In 2000-2001, the Department returned the undeveloped Naval Oil Shale Reserve #2 in Utah to the Northern Ute Indian Tribe in the largest transfer of federal property to Native Americans in the last century.
NPR-2 - Enactment of the Energy Policy Act 2005 effected the transfer of administrative jurisdiction and land management of the Naval Petroleum Reserve #2 (NPR-2) to the Department of the Interior, with the exception of certain lands that were conveyed to the City of Taft, Calif., and some sites in Ford City that are to be disposed of by the Government after environmental assessments are completed. Those activities are ongoing.
The Reserves Today
Following the sale of Elk Hills and the transfer of the oil shale reserves and NPR-2, DOE retained oversight of one Naval Petroleum Reserve property and one oil field technology testing center until early 2015.
Naval Petroleum Reserve #3 (NPR-3) in Wyoming. Also known as Teapot Dome, the field is a small stripper well oil field that produces about 200 barrels of crude oil per day. Activities included:
- Production and operation of the field while preparing for eventual abandonment and restoration as it reaches its economic limit.
- Application of new oil field strategies and technologies to help maintain production levels.
- Plugging, abandonment and environmental remediation of uneconomic wells.
Rocky Mountain Oilfield Testing Center (RMOTC) at NPR-3. The Rocky Mountain Oilfield Testing Center, using the resources located at NPR-3, identified and resolved technical and environmental issues associated with the production, distribution, and use of the nation's energy resources.
- Established in 1995; co-located with NPR-3 operations,
- Forming private-public partnerships, RMOTC leverages its extensive experience in the oil and gas industry to provide field scale RDT&E increasing global energy security and affordability and reducing adverse environmental impacts of energy development.
- RMOTC supports large and small operators, service companies and other oil related technology companies, federal and state government and academia.
- Successful testing and demonstration of new energy technologies, development strategies, and products helps facilitate their commercialization and application in the market.
- The only oil field testing center in the United States.
In 2013, the Secretary of Energy reported to Congress the Department's intent to sell all right, title and interest in NPR-3 through a public competitive bid process. The sale was finalized January 30, 2015.