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1976/04/05 HR49 Naval Petroleum Reserves Production Act of 1976 (2)
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1976/04/05 HR49 Naval Petroleum Reserves Production Act of 1976 (2)
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The original documents are located in Box 42, folder "1976/04/05 HR49 Naval Petroleum
Reserves Production Act of 1976 (2)" of the White House Records Office: Legislation Case
Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 42 of the White House Records Office Legislation Case Files
at the Gerald R. Ford Presidential Library
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPT. No. 94-
1st Session
81 PART I
AUTHORIZING THE SECRETARY OF THE INTERIOR TO ESTABLISH ON
CERTAIN PUBLIC LANDS OF THE U.S. NATIONAL PETROLEUM RE-
SERVES THE DEVELOPMENT OF WHICH NEEDS TO BE REGULATED
IN A MANNER CONSISTENT WITH THE TOTAL ENERGY NEEDS OF
THE NATION AND FOR OTHER PURPOSES
MARCH 18, 1975.-Ordered to be printed
Mr. HALEY, from the Committee on Interior and Insular Affairs,
submitted the following
REPORT
[To accompany H.R. 49]
The Committee on Interior and Insular Affairs, to whom was re-
ferred the bill (H.R. 49) To authorize the Secretary of the Interior
to establish on certain public lands of the United States national pe-
troleum reserves the development of which needs to be regulated in a
manner consistent with the total energy needs of the Nation, and for
other purposes, having considered the same, reports favorably thereon
with an amendment and recommends that the bill as amended do pass.
The amendment is as follows:
Page 1, beginning on line 3, strike out all after the enacting clause
and insert in lieu thereof the following:
That in order to develop petroleum reserves of the United States which need to
be regulated in a manner to meet the total energy needs of the Nation, including
but not limited to national defense, the Secretary of the Interior is authorized
to establish national petroleum reserves on any reserved or unreserved public
lands of the United States (except lands in the National Park System, the Na-
tional Wildlife Refuge System, the Wild and Scenic Rivers System, the National
Wilderness Preservation System, areas now under review for inclusion in the
Wilderness System in accordance with provisions of the Wilderness Act of 1964,
and lands in Alaska other than those in Naval Petroleum Reserve #4).
SEC. 2. No national petroleum reserve that includes all or part of an existing
naval petroleum reserve shall be established without prior consultation with the
Secretary of Defense, and when SO established, the portion of such naval reserve
included shall be deemed to be excluded from the naval petroleum reserve.
Upon the inclusion in a national petroleum reserve of any land which is in a
naval petroleum reserve on the date of enactment of this act, any equipment,
facilities, or other property of the Department of the Navy used in operations on
the land SO included and any records, maps, exhibits, or other informational data
held by the Secretary of the Navy in connection with the land SO included shall
be transferred from the Secretary of the Navy to the Secretary of the Interior
who shall thereafter be authorized to use them to carry out the purposes of this
Act.
38-006
FORD
GERALD
LIBRARY
2
3
The Secretary of the Interior shall assume the responsibilities and functions
of the Secretary of the Navy under any contract which now exists with respect
EXPLANATION AND NEED
to activities on a naval petroleum reserve to which the United States is a party.
SEC. 3. (a) The oil and gas in the national petroleum reserves in the contiguous
The bill seeks to accomplish three things:
forty-eight states established pursuant to this section may be developed under
terms and conditions prescribed by the Secretary of the Interior. The Secretary
First, to authorize the Secretary of the Interior to establish national
of the Interior shall use competitive bidding procedures with prior public notice
petroleum reserves on the public lands.
of not less than 30 days of the terms and conditions for any contract, lease, or
Second, to anthorize the Secretary to prepare plans for development
operating agreement for development and production of oil and gas from a
and production of oil and gas on such reserves in the lower forty-eight
national petroleum reserve. Such terms and conditions and also plans for the
development of each area of the national petroleum reserves shall be published in
states, subject to Congressional acceptance of any production plan.
the Federal Register, but shall not become effective until sixty days after final
Third, to direct the Secretary to explore for oil and gas on the 22
notice has been published and submitted to the Congress (not counting days on
million-acre Naval Petroleum Reserve No. 4 in Alaska, and to report
which either the House of Representatives or the Senate is not in session for
his findings annually to Congress. However, the bill expressly prohibits
three consecutive days or more) and then only if neither the House of Repre-
sentatives nor the Senate adopts a resolution of disapproval. Each proposed Plan
the Secretary from allowing any leasing, development, or production
of development and each amendment thereof shall explain in detail the method of
from this Alaskan reserve until further action by Congress.
development and production proposed, shall provide for disposal and transporta-
tion of the oil consistent with the public interest, and shall give full and equal
Potential Oil and Gas Production on Public Lands
opportunity for development of or acquisition of, or exchange for, the oil and gas
by qualified persons including major and independent producers or refiners alike.
H.R. 49 proposes that public lands heretofore set aside as Naval
Each proposed plan of development by the Secretary shall also explain the rela-
tive needs for developing the oil and gas resources in order to meet the total
Petroleum Reserves may be reviewed by the Secretary of the Interior.
energy needs of the Nation, compared with the need for prohibiting such devel-
After consultation with the Secretary of Defense he is authorized to
opment in order to further some other public interest.
establish national petroleum reserves, which may include all or part
(b) Any oil or gas produced from such petroleum reserves, except such oil or
of a Naval Petroleum Reserve. Subsequently the Secretary of the In-
gas which is either exchanged in similar quantities for convenience or increased
efficiency of transportation with persons or the government of an adjacent for-
terior is authorized to proposed to Congress a plan for the develop-
eign state, or which is temporarily exported for convenience or increased effi-
ment and production of any area within a national petroleum reserve.
ciency of transportation across ports of an adjacent foreign state and reenters
Such proposed plans would take effect 60 days after publication in the
the United States, shall be subject to all of the limitations and licensing require-
Federal Register unless rejected by either body of Congress.
ments of the Export Administration Act of 1969 (Act of Dec. 30, 1969 ; 83 Stat.
841)-and, in addition, before any oil or gas subject to this section may be exported
The potential 300,000 barrels per day of production from Elk Hills
under the limitations and licensing requirement and penalty and enforcement
could replace a like amount of imported crude oil. At current prices
provisions of the Export Administration Act of 1969 the President must make
this would reduce our balance of payments deficit by about $1.3 billion
and publish an express finding that such exports will not Alminish the total qual-
and return to the U.S. Treasury approximately $1.0 billion per year.
ity or quantity of oil and gas available to the United States and are in the
national interest and are in accord with the Export Administration Act of 1969.
Committee Jurisdiction
(c) The Secretary of the Interior is authorized to enter into contracts for
the sale of oil and gas which is produced from the National Petroleum Reserves
and which is owned by the United States. Such contracts shall be issued by com-
Jurisdiction over public lands in the House of Representatives is
petitive bidding, they shall be for periods of not more than one-year's duration,
the responsibility of the Committee on Interior and Insular Affairs.
and in amounts which, in the opinion of the Secretary, shall not exceed those
H.R. 49 deals with establishing national petroleum reserves on any
which can be effectively handled by the purchasers.
reserved or unreserved public lands, with certain specified exceptions.
(d) The Secretary of the Interior is hereby authorized and directed to explore
for oil and gas on Naval Petroleum Reserve No. 4 and he shall report annually
These exceptions are lands in the National Park System, National
to Congress on his plan for exploration of such Reserve: Provided, That no
Wildlife Refuge System, Wild and Scenic Rivers System, Wilderness
development leading to production shall be undertaken unless authorized by
Preservation System and lands under review for inclusion in the
Congress.
Wilderness System, and lands in Alaska except those in Naval Pe-
(e) Any pipeline which carries oil or gas produced from the national petroleum
troleum Reserve No. 4.
reserves shall be subject to the common carrier provisions of Section 28 (r) of
the Mineral Leasing Act of 1920, (41 Stat. 449), as amended (30 U.S.C. Sec-
Naval Petroleum Reserves are public lands set aside by Executive
tion 185), regardless of whether the pipeline crosses public lands.
Order and used for a specific purpose. Their development and pro-
duction for their oil potential is covered by statute (10 U.S.C. 7421,
PURPOSE
et seq.). Under the House Rules, this statute puts them under the juris-
diction of the House Committee on Armed Services.
H.R. 49 proposes to authorize the Secretary of the Interior to estab-
lish on certain public lands of the United States national petroleum re-
Any production of oil and gas for other than national defense pur-
poses from a Naval Petroleum Reserve requires an act of Congress
serves the development of which needs to be regulated in a manner
consistent with the total energy needs of the Nation, and for other
because current law limits production from these reserves to national
defense needs. This has been interpreted to mean a declaration of war.
purposes.
H.R. 49, by authorizing a naval petroleum reserve to be included in a
H.R. 81
H.R. 81
4
5
national petroleum reserve, would lift these restrictions on production
and would permit the reserves to be developed in order to meet the
As you know, House Rule X, Clause 1 (c) (4), grants this Committee
total energy needs of the nation, including but not limited to national
jurisdiction over the conservation, development and use of Naval
defense.
1
Petroleum Reserves. That jurisdiction was reaffirmed as recently as
Similar bills, i.e., H.R. 11840 and H.R. 16800, were introduced in
last October, when the House adopted H. Res. 988. In view of the
the 93d Congress. After extensive hearings held by the Subcommittee
exclusive jurisdiction of this Committee, I respectfully submit that
on Public Lands, the substance of H.R. 11840 was approved by the
the action taken by the Subcommittee on Public Lands clearly ex-
Subcommittee as part of the broader Public Land Policy and Manage-
ceeded its jurisdiction and that of the Interior Committee. Accord-
ment Act, H.R. 16800. However, no final Committee action was taken
ingly, I request that the Interior Committee specifically exclude the
on this legislation in the 93d Congress.
Naval Petroleum Reserves from the provisions of the bill when it is
The Committee is aware of the jurisdictional overlapping of H.R. 49
presented for Committee action. I would also appreciate it if you
insofar as the Naval Petroleum Reserves is concerned. A letter from
would call this matter to the attention of the membership of your Com-
the Honorable Melvin Price, Chairman of the Armed Services Com-
mittee by having this letter read when H.R. 49 comes before the
mittee, on this question is included as a part of this report, together
Committee.
with the response of the Chairman of this Committee. This Commit-
In the event that the Interior Committee approves the bill without
tee believes that the urgent national need for immediate action to pro-
specifically excepting the Naval Petroleum Reserves from its pro-
duce more domestic oil and natural gas weighs heavily against any
visions, I request that this letter be made a part of the Interior Com-
further delay through duplicating this Committee's hearings and con-
mittee report on the bill.
sideration. Debate on amendments or a substitute for H.R. 49, offered
Sincerely,
on the House Floor, could give the House an opportunity to decide on
MELVIN PRICE,
a policy for establishment and development of national petroleum
Chairman.
reserves on the public lands. If this is done without further delay,
domestic petroleum production could be increased by 160,000 barrels
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,
per day in less than six months, and 300,000 barrels within a year
U.S. HOUSE OF REPRESENTATIVES,
according to administration officials.
Washington, D.C., March 7, 1975.
The Committee respectfully notes that the House Armed Services
Committee's Investigating Subcommittee held hearings on Elk Hills
(Letter from Chairman of Committee on Interior and Insular Affairs
on October 17 and 18, 1973, during the 93d Congress. They recom-
to Chairman of Committee on Armed Services)
mended that the reserve only be put in readiness for military use. This
Committee is not insensitive to the views and prerogatives of the Com-
Hon. MELVIN PRICE,
mittee on Armed Services; however, the Members strongly urge im-
Chairman, House Committee on Armed Services, Room 2120, Rayburn
mediate consideration of H.R. 49 by the House. It is in this format
Building, Washington, D.C.
that H.R. 49 as well as the position of the Armed Services Committee
DEAR MR. CHAIRMAN: H.R. 49, the bill to which you refer in your
together with the President's recommendations in his Energy Inde-
letter of March 3, has been scheduled for consideration by the Full
pendence Act of 1975, can be fully and adequately debated and
Committee at our next regular meeting, Wednesday, March 12, at
considered.
which time I assume the members will be aware of your position since
U.S. HOUSE OF REPRESENTATIVES,
you provided them with copies of your letter to me.
COMMITTEE ON ARMED SERVICES,
As to propriety of considering this legislation, we can only operate
Washington, D.C., March 3, 1975.
under the assumption that we have jurisdiction over a matter that has
been referred to us by the Speaker. The bill of course provides that
(Letter from Chairman of Committee on Armed Services to Chairman
no petroleum reserve that includes an existing Naval Petroleum Re-
of Committee on Interior and Insular Affairs)
serve can be established without prior consultation with the Secretary
of Defense.
Hon. JAMES A. HALEY,
At such time as any report on this bill is drafted, your request that
Chairman, Committee on Interior and Insular Affairs, House of Rep-
your letter be made a part of that report will of course be considered.
resentatives, Washington, D.C.
Sincerely,
DEAR MR. CHAIRMAN I have learned that H.R. 49, a bill to author-
JAMES A. HALEY,
ize the Secretary of the Interior to establish on certain public lands of
Chairman.
the United States national petroleum reserves, has been favorably re-
ported by the Subcommittee on Public Lands of your Committee. That
Historical Need for Naval Petroleum Reserves Has Changed
bill would authorize the Secretary of the Interior to include within the
national petroleum reserves the existing Naval Petroleum Reserves.
In the first quarter of this century four Naval Petroleum Reserves
were created from public lands to assure that, in time of war, the
Navy's ships would have adequate petroleum supplies. Naval Petro-
H.R. 81
H.R. 81
6
7
leum Reserve No. 1 at Elk Hills (established in September 1912) ;
Joint U.S. and Standard Oil of California Ownership of Elk Hills
Naval Petroleum Reserve No. 2 (established in December 1915) at
Reserve Oil and Gas
Buena Vista are both in California. Naval Petroleum Reserve No. 3
(established in December 1912) is Teapot Dome in Wyoming. Naval
The Elk Hills reserve is in joint ownership and, as a result of this,
Petroleum Reserve No. 4 consisting of 22 million acres located on
a unit plan contract between the Navy and the Standard Oil Company
the north slope of the Brooks Range in Alaska was established in
of California allocates 79 percent of the ownership to the Federal
February 1923. Of the first three reserves, only Elk Hills, with 1.5
government and 21 percent to Standard. Since production ceased
billion barrels, has any appreciable reserve.
following World War II, standby maintenance has been provided for
The Defense Production Act of 1950, as amended, adequately pro-
the existing wells through an operating agreement between the two
tects the nation's defense needs. Under the terms of that Act, the
parties which designates Standard as the operator of the field. How-
President is authorized to assign priorities to any defense-related
ever, the terms of the operating agreement permit its cancellation by
contracts or orders, including all fuels. The nation's entire supply of
either party. On February 14 of this year, Standard notified the Navy
fuel could be immediately reserved and held for military use if neces-
that it was exercising its right of cancellation.
sary the minute the President establishes such a priority. Therefore, a
Whether the Navy or another Federal agency manages Elk Hills,
reserve controlled by the Navy, but limited to use only during time of
any new operating agreement must be negotiated with another com-
war, has lost the significance it once had.
pany. Navy has testified that the unit plan contract and the operating
Each of the three reserves in the lower forty-eight states is ad-
agreement with Standard are equitable. The unit plan contract would
jacent to other producing areas. Due to past and present production
remain in effect under any plan of production.
Buena Vista has been virtually depleted, with a reserve of only 51
Known reserves of gas in Elk Hills exceed 1.2 trillion cubic feet
million barrels remaining. Reserves in Teapot Dome are estimated to
which would become available for sale as oil production proceeded.
be only 50 million barrels. The relative insignificance of the amount
There appears to be little need to stress the existing natural gas short-
of oil remaining in these two reserves make them reserves for the
age in the Nation.
Navy in name only.
The case at Elk Hills is different. It can be put into production
Protection of the Public Interest and Assuring Opportunity for
within sixty days. Production of 160,000 barrels per day could be
Independent Oil Refiners to Have Equitable Access to Oil Produced
obtained in less than six months and the reserve is capable of produc-
on a National Petroleum Reserve
tion of 300,000 barrels per day within one year. The Committee notes
that this amount represents approximately 40 percent of the Presi-
H.R. 49 provides that any plan of production proposed by the Sec-
dent's goal of reducing U.S. dependence on foreign crude imports by
retary of the Interior from a national petroleum reserve in the lower
800,000 barrels per day within one year. The total reserve is esti-
forty-eight states can become effective only after being published in
mated to be 1.5 billion barrels of oil and over 1.2 trillion cubic feet
the Federal Register and submitted to Congress for 60 days during
of natural gas.
which time either body of Congress may veto it by adopting a resolu-
Drainage From the Elk Hills Reserve
tion of disapproval. Any plan of production proposed by the Secretary
can develop and produce such reserves either through a Federal
Navy and Interior officials, private geologists and petroleum engi-
agency, or by contracting or leasing with a private company on the
neers, alike, all agreed in testimony that drainage from a partially
basis of competitive bidding only.
developed petroleum field is difficult and sometimes impossible to
The need for variation in any proposed production plans is evident
prevent. Navy, in 1974, and again in February of this year, testified
because of the variations in conditions and circumstances of the petro-
there was some drainage from Elk Hills. In this regard, two actions
leum reserves and supplies. As was pointed out previously, a reserve
are now being litigated between the Navy and private oil companies
such as Teapot Dome has little oil left, requiring secondary treatment
to prevent further drainage through production from wells outside
to recover the remaining oil, while Elk Hills permits primary produc-
of the boundaries of the reserve.
tion in several proven zones.
To prevent such drainage, the Navy must either enjoin the produc-
In any production plan, H.R. 49 requires that the small independent
tion of oil on the adjoining lands outside of the reserve, or attempt to
oil refiners, or purchasers of natural gas, have equitable opportunity
"jawbone" agreements with private interests to slow down produc-
to buy the product in amounts suitable to their needs, through pur-
tion from, or vacate, active wells, or drill offset wells within the re-
chase contracts limited to a year's duration. It also provides that any
serve and commence their own production. H.R. 49 would permit a
pipeline carrying oil or gas produced from a national petroleum re-
production plan subject to Congressional approval. Such a plan would
serve must be operated as a common carrier, thus assuring accessibility
not only permit production within the reserve but would also free up
of the pipeline to the small independent companies, These protections
production from wells on adjoining lands outside the reserve now
are intended to guarantee small independent companies a viable oppor-
enjoined by court action, thus ending the current litigation. This
tunity to participate in the benefits of production from such national
would mean an additional production of 20,000 barrels per day of
petroleum reserves.
oil by private companies on private lands now foreclosed by court
Oil or gas produced from a national petroleum reserve cannot be
order.
exported under H.R. 49, except under the limitations and licensing
H.R. 81
H.R. 81
9
8
other public land in Alaska may be designated as wilderness, wild
.
requirements of the Export Administration Act of 1969 and, in addi-
and scenic river, wildlife refuge, national park or national forest lands.
tion, unless the President makes a finding that such sale to a foreign
The Committee believes Congress must determine policy for this
country is in the national interest.
vast area of our largest State, and it believes also that the Depart-
ment of the Interior should be guided by new law concerning public
Potential of Naval Petroleum Reserve No. 4 in Alaska
land policy. Certainly, the Navy should not retain exclusive juris-
diction over 22 million acres of Alaska public lands in the guise of
The Committee finds that early exploration for oil and gas in Naval
an essentially unexplored petroleum reserve.
Petroleum Reserve No. 4 is essential. H.R. 49 directs the Secretary to
H.R. 49 would direct a more sensible and logical approach to the
undertake such exploration. However, production is out of the ques-
consideration of all of the public lands by integrating the management
tion for a number of years due to a lack of transportation. There are
of Naval Petroleum Reserve No. 4 into the Department of the Interior.
other matters to be considered before Congress makes a final judgment
That Department could then determine the oil and gas potential on
on the production of oil and gas contained in this reserve. These lands
this reserve, together with its other values. Congress should determine
may have substantial values, including recreation, wildlife and other
all the relative values, including continuation of all or parts of it as a
mineral deposits, in addition to any oil and gas.
national petroleum reserve.
Current oil development in Alaska is principally in the Prudhoe
Meanwhile, production from proven reserves in the lower forty-
Bay area. That field involves leases issued by the State of Alaska to
eight States could proceed subject to Congressional review of the pro-
private oil companies and will pay royalties to the owners of the land.
duction plans.
There could well be other fields found as extensions to the Prudhoe
BUDGET ACT COMPLIANCE
Bay field or in other areas of Alaska which could be developed under
existing law and regulations and would return substantial revenues to
Under the provision of Rule X, clause 3 (b), and clause 1 (e) (3)
the Federal government as well as to the State and the natives.
(c), and sections 308 (a) and 403 of the Congressional Budget Act of
Exploration by the Navy within Naval Petroleum Reserve No. 4
1974, the Committee recognizes that some costs will be incurred as a
is presently proceeding at a snail's pace. Navy has only two explora-
result of the enactment of H.R. 49 (see Current and Five Subsequent
tory wells on this year's schedule, although they have programmed
Fiscal Year Cost Estimate), but it notes that the income will far ex-
24 more over the next 7 years at an estimated cost of $382 million.
ceed the costs.
Little is known of the potential oil or gas reserves in Naval Petroleum
Reserve No. 4. Estimates range as high as 20-30 billion barrels of oil,
CURRENT AND FIVE SUBSEQUENT FISCAL YEAR COST ESTIMATE
but the Committee recognizes that these are little more than prelimi-
nary estimates until additional exploration has been accomplished.
Pursuant to Rule XIII, Clause 7, of the Rules of the House of Rep-
Transportation facilities for oil or gas from this reserve will not
resentatives, the Committee estimates the cost to be incurred by the
be possible for at least five years and probably longer. The Trans-
Federal Government during the current and the five subsequent fiscal
Alaskan Pipeline will begin operation in mid-1977, but any connection
years as a result of the enactment of this legislation would be as fol-
to it or expansion of it by looping to carry more than the oil produced
lows:
in the Prudhoe Bay field is a major construction effort that would re-
This bill would mean production of oil and gas from national petro-
quire another two to four years beyond 1977. A pipeline to carry
leum reserves within the contiguous 48 states subject to a plan devel-
natural gas from the North Slope of Alaska would require even more
oped by the Secretary of Interior which would come before Congress
time.
for 60 days and be subject to a veto by either body. The Committee
It is vital to the national interest to assess the amount and location
estimates that outlays for developing plans by the Secretary would
of potential oil and gas available in this 22 million acre reserve. There
not exceed $2 million per year.
is the possibility of finding other minerals and there are wildlife and
The bill also directs the Secretary of the Interior to explore for oil
many other values on this large tract of public land that will have to
and gas on Naval Petroleum Reserve No. 4 in Alaska and report an-
be considered. For example, an area on the western side of the reserve
nually to Congress on his findings but does not allow any production.
is an historic and current calving ground of the Arctic caribou herd.
The Committee estimates that the Secretary of the Interior will expend
The northeastern coastal plain area is considered to be the best water-
nothing during the current fiscal year for exploration of this area, but
fowl nesting area on the North Slope. Finally, lands in and adjacent
up to $50 million may be spent in each of the succeeding five fiscal
to the Brooks Range are highly scenic. These areas should all receive
years. However, it must be pointed out that these costs could vary con-
consideration in any plans for development. In the Committee's opin-
siderably depending on the Secretary's findings as presented in his
ion, the Secretary of the Interior is best qualified to make judgments
annual report to the Congress and on the determination by Congress of
regarding these other values.
the Secretary's actual needs for exploration in Naval Petroleum Re-
The Department of the Interior administers more than 300 million
serve No. 4. Even without enactment of H.R. 49, Navy estimates
acres of public land in Alaska. Some of this land is yet to be selected
exploration costs of $382 million over the next seven years. Cost
by the Natives and the State as permitted in the Alaskan Native
estimates for H.R. 49 substantially replace Navy's projected costs.
Claims Settlement Act and the Alaska Statehood Act. Much of the
H.R. 81
H.R. 81
10
U.S. receipts from sale of oil and gas produced from National Petro-
leum Reserves would most likely offset these expenditures many times
over.
OVERSIGHT STATEMENT
Pursuant to Rule X, clause 2(b) (1), the Subcommittee on Public
Lands conducted oversight related hearings during its hearings on
H.R. 49. While the Subcommittee did not find that existing laws were
implemented in a manner inconsistent with the intent of Congress at
the time they were enacted, it did conclude that conditions and cir-
eumstances had so changed that new legislation was necessary and de-
sirable. Based on this conclusion, the Subcommittee recommended and
the Committee on Interior and Insular Affairs agreed (by a vote of 32
to 0) that the national interest demanded the development of new
policy with respect to Federal oil and gas reserves.
No recommendations were submitted to the Committee pursuant to
Rule X, clause 2(b) (2).
COMMITTEE CONSIDERATION
In the 93d Congress hearings were held on H.R. 11840 and related
measures on December 18, 20, 21, 1973; on January 17, 22, 25, 28, 29,
1974; on February 4, 5, 28, 1974; and on March 14, 15, 1974-a total of
13 Committee Hearings.
In the 94th Congress the Subcommittee on Public Lands met to
hear and consider H.R. 49 on February 6, 21 and 28, 1975. After dis-
cussing the matter on February 28 the Subcommittee revised the legis-
lation and reported it favorably to the Full Committeee on Intrior
and Insular Affairs. On March 13, 1975, the Committee on Interior
and Insular Affairs ordered the measure favorably reported, as
amended, to the House by a vote of 32 to O.
DEPARTMENTAL REPORT
While no formal report was received from the Department of the
Interior or the Department of Defense on H.R. 49, testimony was
taken by the Subcommittee on Public Lands from both Executive De-
partments. Generally, the Administration spokesmen testified that
their Energy Independence Act of 1975, a more general measure, is
recommended. That legislation contains a provision similar to H.R.
49 which aims towards the ultimate development of the Naval oil re-
serves by the Navy Department. H.R. 49 modifies that approach by
allowing the Secretary of the Interior to establish National Petro-
leum Reserves, including Naval Petroleum Reserves under certain
circumstances, and to utilize the expertise available to him to explore
and develop those reserves under the terms of the legislation.
While the Administration spokesmen indicated a preference for
the proposal, as transmitted, it was clearly understood by the Mem-
bers of the Committee that the Administration strongly recommends
action by the Congress to assure the immediate production of the Elk
Hills area. If the Congress concludes that a solution different from
the one transmitted is more appropriate, the Administration is not
expected to reject it on a jurisdictional basis.
H.R. 81
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPT. 94-
1st Session
81 Part 2
AUTHORIZING THE SECRETARY OF THE INTERIOR TO ESTABLISH
ON CERTAIN PUBLIC LANDS OF THE UNITED STATES NATIONAL
PETROLEUM RESERVES THE DEVELOPMENT OF WHICH NEEDS TO
BE REGULATED IN A MANNER CONSISTENT WITH THE TOTAL
ENERGY OF THE NATION, AND FOR OTHER PURPOSES
APRIL 18, 1975.--Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mr: HÉBERT, from the Committee on Armed Services,
submitted the following
REPORT
[To accompany H.R. 49]
The Committee on Armed Services, to whom was referred the bill
(H.R. 49) sequentially, following its consideration and report to the
House by the Committee on Interior and Insular Affairs (Rept. No.
94-81, Part I), which bill would authorize the Secretary of the In-
terior to establish on certain public lands of the United States national
petroleum reserves the development of which needs to be regulated in
a manner consistent with the total energy needs of the Nation, and for
other purposes, having considered the same, report favorably thereon
with amendments and recommend that the bill as amended do pass.
The amendments are as follows:
AMENDMENTS TO THE AMENDMENT OF THE COMMITTEE ON INTERIOR
AND INSULAR AFFAIRS TO H.R. 49
Page 3, between lines 14 and 15, insert the following: "TITLE I".
Page 3, line 15, strike out "That in" and insert "SEC. 101. In".
Page 3, line 21, insert "the Naval Petroleum Reserves," immediately
before "the National Park System,".
Page 4 line 1, insert a period immediately after "Alaska".
Page 4, strike out line 2.
Page 4, strike out line 3 and all that follows down through line 22.
Page 4, line 23, strike out "Sec. 3." and insert "SEC. 102.".
Page 7, lines 5 and 6, strike out "on Naval Petroleum Reserve Num-
bered 4".
Page 7, line 7, strike out "of such reserve".
Page 7, after line 15, insert the following:
3S-006
2
3
TITLE II
(B) to construct or procure pipelines and associated facilities
SEC. 201. (a) Chapter 641 of title 10, United States Code, is amended
for transporting oil, associated liquids and gases, from naval pe-
troleum reserves numbered 1, 2, and 3 to the points where such
as follows—
(1) Immediately before section 7421 insert the following new
production will be refined or shipped.
Such pipelines at naval petroleum reserve numbered 1 shall have a
section:
combined delivery capability of not less than 350,000 barrels per day,
"§ 7420. Definitions
and shall be fully operable by three years after the date of enactment
of this subsection.
(a) In this chapter-
(1) 'National defense' includes the needs of, and the planning
(2) The production authorization set forth in paragraph (1)
and preparedness to meet, essential defense industrial and mili-
(A) of this subsection is conditioned upon the Secretary reaching
tary emergency energy requirements relative to the national
an agreement with the private owner to continue operation of
safety, welfare, and economy, particularly resulting from foreign
naval petroleum reserve numbered 1 under a unitized plan con-
military or economic actions.
tract which adequately protects the public interest.
"(2) 'Naval Petroleum and Oil Shale Reserves' means the naval
(3) The production of petroleum authorized under this sub-
petroleum and oil shale reserves established by this chapter, in-
section is not subject to the provisions of subsection (b) (2) of
cluding naval petroleum reserve numbered 1 (Elk Hills), located
in Kern County, California, established by Executive Order of
authorization." this section relating to Presidential approval or Congressional
the President on September 2, 1912; naval petroleum reserve
(4) Section 7423 is amended by inserting " (a) immediately be-
numbered 2 (Buena Vista), located in Kern County, California,
fore "The Secretary"; and by adding at the end thereof the fol-
established by Executive Order of the President on December 13,
lowing new subsection:
1912; naval petroleum reserve numbered 3 (Teapot Dome),
(b) During the three-year period of production authorized by sub-
located in Wyoming, established by Executive Order of the Presi-
section (d) of section 7422 (during which three-year period the con-
dent on April 30, 1915; naval petroleum reserve numbered 4,
sultation requirements of section 7431 (3) are waived), the Secretary
Alaska, on the north slope of the Brooks Range, established by
shall submit annual reports to the Armed Services Committees of the
Executive Order of the President of February 27, 1923; oil shale
Senate and the House of Representatives detailing-
reserve numbered 1, located in Colorado established by Executive
(1) the status of the exploration and development program at
Order of the President of December 6, 1916, as amended by Ex-
each of the naval petroleum reserves;
ecutive Order of June 12, 1919; oil shale reserve numbered 2, lo-
"(2) the production which has been achieved at éach of the
cated in Utah, established by Executive Order of the President of
naval petroleum reserves pursuant to that authorization, includ-
December 6, 1916; and oil shale reserve numbered 3, located in
ing the disposition of such production and the proceeds realized
Colorado, established by Executive Order of the President of Sep-
therefrom;
tember 27, 1924.
(3) the status of the pipeline construction and procurement
(3) 'Petroleum' includes crude oil, associated gases, natural
authorized by such subsection (d) ;
gasoline and other related hydrocarbons, oil shale, and the prod-
"(4) any need for modification of the production levels author-
ucts of any of such resources.
ized by such subsection (d), including any recommendation for
"(4) 'Secretary' means the Secretary of the Navy."
continuing production beyond the three-year period provided in
(2) Section 7421 (a) is amended—
such subsection: and
(A) by striking out "for naval purposes" and inserting in
(5) the plans for further exploration, development and pro-
lieu thereof "for use of the armed forces"; and
duction at naval petroleum reserve numbered 4."
(B) by striking out "section 7438 hereof" and inserting in
(5). Section 7430(b) is amended to read as follows:
lieu thereof "this chapter".
"(b) Notwithstanding any other provision of law, each sale of the
(3) Section 7422 is amended by adding at the end thereof the
United States share of petroleum, gas, other hydrocarbons, oil shale,
following new subsection:
or products therefrom, shall be made by the Secretary at public sale
" (d) (1) In order to place certain naval petroleum reserves in a
to the highest qualified bidder at such time, in such amounts, and after
proven state of readiness to produce petroleum, the Secretary is
such advertising as the Secretary considers proper and without regard
authorized--
to Federal, State, or local regulations controlling sales or allocation of
(A) to explore, develop, operate and produce petroleum, from
petroleum products."
naval petroleum reserves numbered 1, 2 and 3 at a rate consistent
(6) Section 7430 is further amended by adding at the end
with sound oilfield engineering practices up to 200,000 barrels per
thereof the following new subsection:
day for a period not to exceed three years commencing 90 days
(c) Any disposition of the United States share of the production
after enactment of this legislation; and
authorized by section 7422 (d) shall be conducted in such a manner as
to insure that an amount of petroleum products equal in value to the
4
5
crude oil and associated gases and liquids supplied from the naval
"7432. Expenditures: appropriations available."
petroleum reserves shall be made available, exclusively to the armed
forces of the United States. Any disposition of that production shall
and inserting in lieu thereof the following:
be SO arranged as to give full and equal opportunity for acquisition of
"7432. Naval Petroleum and Oil Shale Reserve Special Fund."
the petroleum and associated products by all interested companies, in-
Sec. 202. (a) The Secretary of the Navy shall establish a study
cluding major and independent oil refineries alike."
group which shall investigate the feasibility of creating a National
(7) Section 7432 is amended to read as follows:
Strategic Petroleum Reserve (Military) (hereinafter in this section
"§ 7432. Naval Petroleum and Oil Shale Reserves Special Fund
referred to as the "Reserve"). Any such Reserve should include petro-
'(a) There is hereby established on the books of the Treasury De-
leum stored at strategic locations, or available for delivery to such lo-
partment a special fund designated the 'Naval Petroleum and Oil
cations, and include facilities for storage, transportation or processing
Shale Reserves Special Fund'. There shall be credited to such fund-
thereof. In computing the amount of petroleum to be stored in such
(1) all proceeds realized under this chapter from the disposi-
Reserve, the Peacetime Operating Stocks and Prepositioned War Re-
tion of the United States share of petroleum or refined products,
serve Stocks of the Department of Defense shall not be included. Such
oil and gas products, including royalty products;
Reserve should be in addition to any National Strategic Petroleum
(2) the net proceeds, if any, realized from sales or exchanges
Reserve (Civilian) which may be otherwise provided for.
within the Department of Defense of refined petroleum products
(b) The investigation required under subsection (a) shall include,
accruing to the benefit of any component of that Department as
but need not be limited to, determinations with respect to the size,
the result of any such sales or exchanges; and
scope, objectives, and all cost factors associated with the establish-
(3) such additional sums as have been, or may be, appropri-
ment, of the Reserve. In arriving at its findings and recommendations,
ated for the maintenance, operation, exploration, development
the study group shall consult with, and seek, the position of the Joint
and production of the naval petroleum and oil shale reserves.
Chiefs of Staff relative to the overall posture of the Reserve.
(b) Funds available in the Naval Petroleum and Oil Shale Reserve
(c) Not later than one year after the date of the enactment of this
Special Fund shall be available for expenditure in such sums as are
Act, the Secretary of the Navy shall report to the Congress the find-
specified in annual congressional appropriations acts for the expenses
ings and recommendations of the study group.
of-
"(1) exploration, prospecting, conservation, development, use,
EXPLANATION OF AMENDMENTS
operation and production of the Naval Petroleum and Oil Shale
The amendments proposed by the Committee on Armed Services
Reserves as authorized by this chapter;
amend the amendment recommended by the Committee on Interior
'(2) production, including preparation for production as au-
and Insular Affairs to H.R. 49.
thorized by this act, or as may hereafter be authorized; and
The amendments proposed by the Committee on Armed Services
"(3) the construction and operation of facilities both within
and outside the naval petroleum and oil shale reserves incident
accomplish two main objectives:
(1) The language proposed by the Interior and Insular Affairs
to the production and the delivery of crude petroleum and deriva-
Committee amendment would be left intact except that the Naval
tives, including pipelines and shipping terminals.
Petroleum Reserves would be treated in a separate title of the Armed
"(c) The budget estimates for annual appropriations from the
Services Committee amendment. This change honors the jurisdiction
Naval Petroleum and Oil Shale Reserve Special Fund shall be pre-
of the Interior and Insular Affairs Committee over all public lands
pared by the Office of Naval Petroleum and Oil Shale Reserves and
other than the Naval Petroleum Reserves which, by statute and the
shall be presented by the President independently of the budget of
Rules of the House of Representatives, are within the sole legislative
the Department of the Navy and the Department of Defense.
jurisdiction of the Committee on Armed Services, and
(d) Contracts obligating only such funds as are appropriated and
(2) A new Title II would provide very specific conditions under
made available annually may be entered into by the Secretary for
which the Naval Petroleum Reserves would be explored, developed,
periods of not more than five years renewable for a like term."
and produced in the national interest.
(8) Section 7433 (b) is amended by adding immediately before
Briefly, thenew title would-
the period at the end thereof the following: "and credited to the
Allow production from the Naval Petroleum Reserves at not
Naval Petroleum and Oil Shale Reserve Special Fund".
to exceed 200,000 barrels per day, for a period of three years;
(b) The analysis of such chapter 641 is amended-
Sell or exchange the oil produced for the exclusive use of the
(1) by inserting immediately before
armed forces;
"7421. Jurisdiction and control."
Put the proceeds of scuh sale in a Special Fund to be used for
further exploration, development and production of the Reserves,
the following:
including pipeline construction and other facilities;
"7420. Definitions."; and
Establish a group to study the feasibility of creating a National
(2) by striking out
Strategic Petroleum Reserve (military): and
Require that proceeds of the Special Fund be subject to the
regular Congressional appropriations process.
6
7
In addition to the foregoing general changes, the Committee added
revised House rules, and the request of the Chairman of the Armed
a technical amendment to section 201 (a) (6) of its proposed Title II to
Services Committee, referred H.R. 49 sequentially to the House Armed
provide that production of the Naval Petroleum Reserves would be
Services Committee for a period ending no later than April 19, 1975.
made available exclusively to the Armed Forces of the United States.
It is also pertinent to note in this regard that following the Presi-
Details concerning the proposed objectives and implementation of
dent's State of the Union Message on January 15, 1975, in which he
the amendments are addressed further on in this report.
aked for production of Elk Hills Naval Petroleum Reserve in amounts
up to 300,000 barrels per day, H.R. 2633 and H.R. 2650 were intro-
PURPOSE
duced on February 4, 1975 as the President's Energy Independence
Act of 1975. Title I of those identical bills applied to the Naval Petro-
The purpose of H.R. 49 as stated in the report on the bill by the
leum Reserves. Title I of those bills was referred to the Committee
Committee on Interior and Insular Affairs (94-81, Part I) is "to au-
on Armed Services, with other titles to the Committee on Interstate
thorize the Secretary of the Interior to establish on certain public lands
and Foreign Commerce, Committee on Ways and Means and Com-
of the United States national petroleum reserves the development of
mittee on Banking, Currency and Housing. It is significant that no
which needs to be regulated in a manner consistent with the total
part of these bills was referred to the Committee on Interior and
energy needs of the Nation, and for other purposes."
Insular Affairs.
However, the thrust of the language in that report and the testi-
BACKGROUND
mony of two of the bills' sponsors before the Armed Services Com-
mittee make it evident that the real purpose of H.R. 49 is to break
The Establishment and Location of the Reserves
through the protection afforded Naval Petroleum Reserves 1 and 3
There are four naval petroleum reserves: No. 1, Elk Hills; No. 2,
under the law and open them for commercial exploitation with little
Buena Vista Hills, in Kern County, Calif.; No. 3, Teapot Dome, Wyo.;
apparent regard for national security considerations.
No. 4, on the North Slope in Alaska, immediately to the west of the
The amendments to H.R. 49 as proposed by the Committee on Armed
Prudhoe Bay commercial oil field. All of those reserves were estab-
Services would correct this problem as detailed in this report.
lished between 1912 and 1923.
In addition, there are three naval oil shale reserves: Nos. 1 and 3
SEQUENTIAL REFERRAL
in Colorado; No. 2 in Utah, established in 1916 and 1924.
Those oil shale reserves are undeveloped. The only current activity
H.R. 49 was introduced on January 14, 1975 and originally referred
at any of those reserves is in providing shale for use in an experimental
only to the Interior and Insular Affairs Committee. A reading of the
bill indicates that its apparent purpose is to remove the Naval Petro-
retort process of Paraho Development Corp.
Approximately 20 percent of Naval Petroleum Reserve No. 1 at Elk
leum Reserves from the control of the Secretary of the Navy, where
IIills is owned by Standard Oil Co. of California. It has been oper-
they are held for national defense purposes, and place the reserves
under the control of the Secretary of the Interior where Petroleum Re-
ated under a unit plan contract since 1944, which has kept the field
largely shut-in.
serves 1, 2, and 3 can be produced primarily for commercial sale.
There are over 1 billion barrels in proven reserves in this field, and
Nonetheless, the bill, because of the manner in which it was written,
1.2 billion thousand cubic feet of gas reserve. There are more than
was not referred to the House Armed Services Committee, which has
1,000 wells in existence on NPR No. 1. It has a current production
exclusive legislative jurisdiction over the Naval Petroleum Reserves,
capability of 160,000 barrels per day, which could be expanded by
under the provisions of House Rule X, clause 1(c).
further development of the field to 400,000 barrels per day.
Accordingly, the Chairman of the House Armed Services Committee
Since June 1974, 42 new wells have been drilled at Elk Hills. They
took two actions. On March 3. 1975 a letter was addressed to the Hon-
have proved an additional 100 million barrels of reserve. In 1974 the
orable Carl Albert, Speaker of the House of Representatives, pointing
U.S. income from this reserve was $2.5 million.
out the exclusive jurisdiction of the House Armed Services Committee
NPR No. 2 is located at Buena Vista Hills, Calif. Two-thirds of this
over the Naval Petroleum Reserves and requesting that H.R. 49 be
reserve is privately owned and one-third is U.S. owned. There are more
referred also to this Committee for consideration of matters relating
than 20 million barrels proven reserve remaining at Buena Vista Hills.
to the Naval Petroleum Reserves.
It is fully developed and producing. The United States presently de-
In a second action, also on March 3, 1975, the Chairman of the House
rives 647 barrels per day in royalty oil at NPR No. 2. In 1974 U.S.
Armed Services Committee addressed a letter to the Chairman of the
income from this reserve was $1.5 million.
Committee on Interior and Insular Affairs pointing out the jurisdic-
NPR No. 3 is located at Teapot Dome, Wyo. It is wholly-owned by
tional issue and requested that the Interior Committee specifically ex-
the United Staates. It has a proven reserve of 42.5 million barrels.
clude the Naval Petroleum Reserves from the provisions of H.R. 49.
There are 150 wells on the reserve. It has a présent production capa-
That request was not honored.
bility of 2,000 barrels per day. The 1974 income of the United States
The Committee on Interior and Insular Affairs reported H.R. 49 on
from Teapot Dome production was $1.1 million.
March 18, 1975 and its report is identified as "House Report 94-81,
NPR No. 4 is located on the North Slope in Alaska. It is wholly
Part I." Also, on March 18, 1975 the Speaker, in accordance with the
owned by the United States. It is largely unexplored and almost com-
8
9
pletely undeveloped. The reserve is estimated at between 10 billion
the Reserve, and that is owned by the operating partner, Standard of
and 33 billion barrels. However, only 100 million barrels of reserves
California.
have been proven. The rest, of course, must be proven in subsequent
Testimony indicates that three tie-ins to existing privately owned
exploration.
lines off the Reserve could be completed in a 60- to 90-day period at a
The exploration program in fiscal year 1975 consists of 3,500 miles of
cost of about $1.1 million, and would result in increased capacity to
seismic exploration and two exploratory wells. One gas well has been
130,000 barrels per day. An additional $1 million would be required to
completed, and is capable of producing 500,000 cubic feet of gas per
demothball the necessary wells. However, that figure would remain
day. The second exploration well was started on March 17 of this
constant for a period of about 30 months at which time the completion
of a fourth tieline and pumping facility would increase capacity to
year.
155,000 barrels per day-a figure which represents total pipeline space
Existing Law
capacity. That figure, coincidently, would also require additional gas
Chapter 641, title 10, United States Code, deals with Naval Pe-
pinelines and processing capability, with a total additional cost of
troleum Reserves. Section 7422 grants the Secretary of the Navy ex-
$5 million.
clusive jurisdiction and control of the reserves and directs him to
Thus, the earliest that Elk Hills could reach a capacity of 155,000
explore, prospect, conserve, develop, use and operate those reserves.
barrels per day would be close to 30 months after authority is granted.
The production of the reserves is limited to that which is necessary
Any capacity beyond that figure would require additional pipeline
for protection, conservation, testing and maintenance. For any pro-
facilities to the coast. The Navy is currently negotiating for a 20-inch
duction beyond that, the Secretary of the Navy must find that it is
line now in place which would meet a marine terminal at Port Hue-
needed for national defense, that finding must be approved by the
neme. Because of necessary additional connections, that line would
President and the production must be authorized by joint resolution
require a three-year lead time which could be stretched due to ex-
of Congress.
pected critical environmental impact problems.
Recent Committee Oversight Actions
Although some of the pipeline owners might be interested in mak-
During October 1973 the Investigating Subcommittee conducted
ing these tie-ins at their own expense with the belief that their costs
hearings following a public statement by President Nixon that Naval
could be recouped over several years of use of the lines, none are
Petroleum Reserve No. 1 at Elk Hills should be opened up to meet
willing to undertake these costs for a limited open-up of the field. Be-
the fuel needs of the west coast. In its report on November 13, 1973,
lieving that it would be in the best interests of national defense for the
the Subcommittee indicated that an energy crisis was upon the Nation
Navy to have the capability ot transport petroleum off the Reserve,
and that the statutory restriction on the use of the Naval Petroleum
the Committee amendments would authorize the Navy to make these
Reserves should not be amended.
tie-ins and also to acquire and/or construct a line to a marine terminal
During the period January through May 1974 a Special Subcom-
to transport a large quantity of petroleum. This could free the Navy
mittee on Department of Defense Energy Resources and Requirements,
from the constraints imposed by privately owned pipelines.
chaired by Congressman Otis G. Pike (D-NY) held extensive hear-
It is important to note that production of the field during the in-
ings on the overall defense energy question, with particular reference
terim period now through fiscal year 1979 will reduce the maximum
to the Naval Petroleum Reserves. In its principal findings the Sub-
capability of the field.
committee held that production of Elk Hills Petroleum Reserve be-
Buena Vista (Reserve No. 2)
yond the statutory limits was not warranted at that time and that
As noted earlier in this report, almost two-thirds of this field is
the exploration and development of Reserves 1 and 4 at Elk Hills
privately owned, and the field has been in production since the 1920's,
and Alaska must be completed as rapidly as time and resources per-
with the Navy producing its portion in order to prevent losing its oil
mit. That report showed particular concern over the inadequate re-
to adjacent owners. The Navy receives about 647 barrels of oil per
sponse to fulfilling defense petroleum needs when the Defense Pro-
day in royalty oil from Buena Vista.
duction Act of 1950 was invoked during the 1973 fuel crisis.
Teapot Dome (Reserve No. 3)
READINESS AND DELIVERABILITY
There are no refinery or pipeline constraints at Teapot. Whatever
crude cannot be handled in local refineries can be piped out to refin-
Elk Hills (Reserve No. 1)
eries with considerable excess capacity. The real problems involve lead
Two figures have been popularly used in discussing the oil to be
time on equipment necessary to increase production.
delivered from Elk Hills-160,000 barrels per day and 300,000 barrels
The field is currently being developed under a five-year program at
per day. The facts are that with present facilities the maximum amount
a cost of $54 million. Under that plan peak production would come at
of deliverable oil is 30,000 barrels per day, which is a constraint re-
the end of the second year, producing some 18,000 to 20,000 barrels per
sulting from the fact that only one pipeline exists to carry the oil off
day.
H. Rept. 94-81-pt. 2-2
10
11
CONCEPTS
the language of the Defense Production Act. The fault lies with the
H.R. 49, as Amended by the Committee on Interior and Insular Affairs
improbability of producing or acquiring oil in sufficient quantities to
satisfy all emergency requirements, regardless of how the law is
That bill would authorize the Secretary of Interior, replacing the
worded.
Secretary of the Navy as the custodian of the Naval Petroleum Re-
A drainage from the reserves is cited by the Interior Committee as
serves, to establish national petroleum reserves, including all existing
an additional reason for producing the reserves. While drainage has
Naval Petroleum Reserves.
been a problem at both Elk Hills and Teapot Dome, it is nothing
The Secretary of the Interior could develop Naval Petroleum Re-
unique to those reserves or to oil production in general, and the Navy
serves 1, 2 and 3 and use competitive bidding to enter into leases, con-
has been able to combat the drainage by offset production or enjoining
tracts, or operating agreements for development and production. Any
actions.
such arrangments would be submitted to Congress and would become
Finally, we find no arrangements for setting up a special fund to
effective in 60 days if neither the House nor Senate adopted a resolu-
insure that the proceeds from the sale of petroleum are funneled back
tion of disapproval.
to the Naval Petroleum Reserves for exploration and development-
There would be equal opportunity for development, acquisition and
particularly for Reserve No. 4 in Alaska.
exchange of oil and gas by qualified persons, including major and
H.R. 2633, the President's Energy Independence Act of 1975
independent producers and refineries alike.
The Secretary of the Interior would be authorized to enter into
The basic concept embodied in this proposal would continue the
contracts to self the oil and gas produced under competitive bidding
Naval Petroleum Reserves in the custody of the Secretary of the Navy
but would place the basic decision making process in the hands of the
arrangements.
The Secretary of the Interior would be authorized and directed to
President. In that bill national security would take on a broad defini-
explore Petroleum Reserve No. 4, but the development leading to
tion, to include essential civilian and military emergency energy
production would be prohibited unless authorized by Congress.
requirements.
All pipelines carrying production from the reserves would be sub-
The proposal would provide for the establishment of National Stra-
ject to the common carrier provision of the Mineral Leasing Act.
tegic Petroleum Reserves in unidentified facilities at unidentified loca-
It should be noted that there are no restrictions on production and
tions, to include a civilian reserve of 1 billion barrels of oil and a
military reserve of 300 million barrels of oil.
no provisions for maintaining a defense petroleum reserve or strategic
The President could produce the Naval Petroleum Reserves to sup-
petroleum reserve.
The Interìor Committee concluded that conditions and circum-
ply the strategic petroleum reserve, to generate funds for deposit in
stances have SO changed since the establishment of the Naval Petro-
a National Strategic Petroleum Reserve Special Fund, and to re-
leum Reserves that new legislation is necessary and desirable. In that
plenish military peacetime operating stocks and prepositioned war
reserve stocks.
context, the Interior Committee stated that the Defense Production
Act of 1950 adequately provides for the Nation's defense needs. In SO
Moneys from the special fund could be used to explore, develop and
finding, the Interior Committee stated that the Nation's entire supply
produce the Naval Petroleum Reserves, but the proposal would place
no limit on the production of the reserves.
of fuel could be immediately reserved and held for military use.
The bill would allow the use of private capital in exploring and
The experience of the Department of Defense in the 1973 fuel crisis
found the decisions made in the Executive Branch under the Defense
developing Petroleum Reserve No. 4 in Alaska.
Production Act to fall far short of expectations. (See report of Special
Twenty percent of the petroleum available in Reserve No. 4, or such
amount as the President may determine to be necessary for national
Subcommittee on Department of Defense Energy Resources and De-
security, would be utilized for the National Strategic Petroleum Re-
velopment referenced above.)
serve. The remainder would go to the public economy.
Further, Subcommittee testimony reveals that domestic crude oil
The authority would be granted to develop the reserves on and off
capacity at the present time is in the vicinity of 91/2 million barrels of
the reservation.
oil per day. That results in a dependency on foreign sources of up-
wards to 71/2 million barrels per day. With an embargo or interdiction
ARMED SERVICES COMMITTEE PROPOSAL-A SPECIFIC BLUEPRINT
of foreign supplies during any national emergency or war, in which
military needs could be safely pegged at 1.6 million barrels per day,
The Problems
any invocation of the Defense Production Act under such circum-
The current Armed Services Committee hearings on H.R. 2633,
stances would likely create a catastrophe for the econmy. In effect, the
H.R. 2650 and H.R. 49, as amended by the Interior and Insular Affairs
country would be asked to operate on something less than one-half its
Committee, as well as the inquiry by our Special Subcommittee on
current daily consumption of 17 million barrels of oil.
Department of Defense Energy Resources and Requirements in early
Suggestions have been made that the Defense Production Act should
1974 (House Armed Services Committee Document No. 93-48), made
be amended as it is not workable. In fact, the fault does not lie with
it crystal clear that our national security requires the assurance that
12
13
our armed forces have enough fuel to supply their needs in time of na-
pipeline and shipping terminals. The target for pipeline capacity
tional emergency or war. Thus, it is necessary to insure, insofar as is
at Elk Hills is set at 350,000 barrels per day.
possible, that in tampering with the petroleum reserves for production,
Provide for the establishment of a study group to inquire into
the reserves are completely protected from depletion before any alter-
the feasibility of, locations, size and cost of creating a National
nate oil sources in them may be established. As one Committee member
Strategic Petroleum Reserve (military), and report at the end
SO aptly put it, "Our ships burn oil, not dollars." The Joint Chiefs of
of one year following enactment of the legislation.
Staff jointed in that determination until most recently, when they, not
Require the Secretary to report to the Congress annually detail-
too surprisingly, fell in line with their Commander-in-Chief to support
ing the status of exploration and development, production
his Energy Independence Act of 1975, which Committee testimony re-
achieved, status of pipeline construction and procurement of
veals was not referred to the Chiefs for consideration until after it
equipment, any recommendations for continued production be-
was in final draft form.
yond the three-year period and plans for further exploration, de-
In some quarters, great reliance has been placed on the potential of
velopment and production at Petroleum Reserve No. 4.
Petroleum Reserve No. 4. But its potential is unproven, and the proven
Provide for production authorization of Elk Hills to be con-
reserves at Elk Hills should remain available for emergency use, while
ditioned upon the Secretary of the Navy reaching an agreement
at the same time, the field should be brought to a complete state of
with the private owner to continue operation of Elk Hills under
readiness to provide the required quick reaction time in fulfilling its
a unitized planned contract, which adequately protects the public
mission.
interest.
Also, current plans regarding proposals for strategic storage of oil
The Committee is of the opinion that its amendments to H.R. 49
are SO inadequate as to require considerable study and detailed plan-
present definitive authority for proceeding to produce the Naval Pe-
ning. The Committee could find little hard evidence as to where they
troleum Reserves. Also, the Committee hearings and deliberations
will be located, how much they will cost, how the crude oil will be
contain clear guidance as to where the program is going, what it seeks
transported to refineries, or exactly how long it will take to construct
to accomplish, and where there will be terminations to allow for re-
them.
examination of the principles involved, in the context of the problems
As indicated earlier in this report, the Naval Petroleum Reserve at
existing at that time. For example, when the Alaska pipeline now
Elk Hills is operated under a unit plan contract with Standard Oil
under construction commences delivery of its capacity of two million
of California, which has kept the field largely shut-in. This agreement
barrels of oil per day to the west coast in about three years, the require-
resulted from Standard Oil owning approximately 20 percent of Naval
ments for any continued production of the Naval Petroleum Reserves
Petroleum Reserve No. 1. The unit plan was authorized by enabling
will be in need of fresh review.
legislation on June 17, 1974 (10 USC 7422 (b), 7426), which confined
production to that needed for national defense purposes. The problem
DEPARTMENTAL POSITIONS
that arose was whether producing Elk Hills would result in a possible
breach of contract. While Standard Oil witnesses indicated that any
Since H.R. 49 was referred sequentially to the House Armed Serv-
production at Elk Hills would be unrealistic under other than a unit
ices Committee under the new House rules after being reported by the
plan, the problem was of serious concern to the Committee.
Committee on Interior and Insular Affairs, with a reporting date of
Finally, the Committee recognizes that there is a need to find addi-
April 19, 1975, formal, written Departmental positions addressed to
tional sources of domestic crude oil supply at the earliest possible time
this Committee could not be obtained in a timely fashion. Accordingly,
to reduce the growing domestic demand for foreign oil.
the positions reported herein are derived from the testimony of Depart-
mental witnesses during the course of Subcommittee hearings.
The Blueprint
To satisfy the problems raised by proposals to produce the Naval
Department of Interior
Petroleum Reserves, the Armed Services Committee amendments
Honorable Jack W. Carlson, Assistant Secretary of the Interior for
would accomplish the following:
Energy and Minerals:
Provide production of the Petroleum Reserves for a period not
Mr. Carlson stated repeatedly that the Department supports the
to exceed three years, at a rate not to exceed 200,000 barrels per
President's program laid out in the Energy Independence Act of
day.
1975 (H.R. 2633), but would not make a direct statement supporting
Such oil produced will be sold or exchanged for the exclusive
or disapproving H.R. 49. Carlson did state:
use of the military services.
In several important respects the Act proposed by the Presi-
Provide for a Naval Petroleum and Oil Shale Reserves Special
dent differs from H.R. 49.
Fund, into which will flow the proceeds of such sales, and any
separate monies appropriated for the Naval Petroleum Reserves.
With regard to the question of who may better operate Elk Hills,
The Special Fund (which would be subject to the Congressional
Secretary Carlson stated:
appropriations process) would be used for the exploration, devel-
On NPR No. 1 there is more special knowledge content
opment, conservation and production of the reserves and the con-
associated with that and would give the Navy more of an
struction of facilities, both on and outside the reserves, including
advantage in managing properly there as opposed to NPR
No. 4
14
15
On the same subject the Secretary stated
creased deliverability of POL in an emergency. In effect, H.R.
We proposed the President's program. The President's pro-
49 removes the petroleum reserves from their national defense
gram has the Navy doing the program
The Administra-
role and, as such, would adversely impact on the ability of the
tion's position is to support the President's approach, which
U.S. Armed Forces to deter war and to defeat aggression if
is the Navy approach.
deterrence fails.
In answer to a question as to whether the President supports enact-
Federal Energy Administration
ment of H.R. 49 the Secretary stated
Honorable Frank G. Zarb, Administrator:
The President supports his own legislation.
When asked the question, are you opposed to H.R. 49, Mr. Zarb
stated
And again with regard to H.R. 49
In its current form, yes, sir.
We would like to see some improvements to it
Finally, the Secretary stated
In essence, Mr. Zarb strongly favored the concept of the President's
Energy Independence Act of 1975.
Gentlemen, H.R. 49 is not our bill
This is not our pre-
Department of Justice
ferred way to go.
Honorable Keith Clearwaters, Assistant Attorney General, Anti-
Department of Defense
trust Division:
Honorable Jack L. Bowers, Assistant Secretary of the Navy (In-
stallations and Logistics) ;
H.R. 49 would thus appear to provide for a broad and ill-
defined power to establish what are called national petroleum
In contrast to the Energy Independence Act it is felt that
reserves on almost all public lands throughout the United
H.R. 49 is distinctly lacking in necessary detailed plans
States. But, as the Interior Committee report makes clear,
In addition, there is no urgency for exploration in NPR No. 4.
these broad powers are specifically aimed at existing naval
To summarize,
there is no plan in H.R. 49 for strategic
petroleum reserves, not other lands. The bill would substitute
petroleum reserves.
the Interior Department for the traditional administration of
Vice Admiral T. R. Weschler, Director for Logistics, Joint Chiefs
the Navy and contemplates an opening of the reserves, except
of staff:
NPR No. 4 to full production by outside parties. In Alaska,
H.R. 49, it appears, would not further the essential task of
power to proceed beyond exploration is barred without fur-
bringing the reserves to an adequate state of readiness any
ther Congressional authorization.
sooner than existing plans. In fact, it may hinder progress
As for the competitive safeguards, we prefer those which
were carefully devised by the Administration in consultation
When asked the question, with adequate funding, are you fully
with the Department of Justice to deal with specific problems
confident that the Navy could develop Elk Hills as expeditiously and
in a comprehensive plan of development. The standards pro-
well as any other agency in the Nation, the Admiral replied:
vided in H.R. 49 appear to be less precisely drawn and could
Yes, sir. I see no reason why not.
provide serious problems in interpretation and administra-
Rear Admiral C. Monroe Hart, Director for Energy, Office of Assist-
tion. Based upon the foregoing, we favor the administration
bill over H.R. 49.
ant Secretary of Defense (Installations and Logistics) :
H.R. 49 makes no provision for emergency supply augmen-
COMMITTEE POSITION
tation. The Department of Defense does not support enact-
mentof H.R. 49.
Hearings were held on H.R. 49 on March 24, 24 and 26 and April 9,
The Admiral supported the principles embodied in Titles I and II of
1975. On April 15, 1975, the Committee on Armed Services ordered the
the President's Energy Independence Act of 1975.
bills, with amendments, favorably reported to the House by a vote of
28 to 3.
Vice Admiral Harry D. Train II, Director of the Joint Staff, Joint
FISCAL DATA
Chiefs of Staff
"The Naval Petroleum Reserves belong to the Nation and
A start-up funding of $10.3 million would be required for FY 75.
can be used or preserved for whatever purpose the people de-
Thereafter, proceeds from the sale of oil from NPR's 1, 2 and 3 would
sire, as the Congress directs, through appropriately enacted
provide funds for all expenses and create a surplus of approximately
legislation. As such, the provisions of H.R. 49 are of direct
$640 million at the end of Fiscal Year 1979. Tabulated below are the
and immediate concern. H.R. 49 does not provide for reten-
estimated expenses and income for the three year limit of this legis-
tion of any reserves, does not expedite exploration and de-
lation. The Committee estimates agree with the estimates provided by
velopment of NPR No. 4, and does not directly insure an in-
the Department of the Navy.
16
17
ESTIMATED EXPENDITURES AND INCOME-H.R. 5919 AND/OR TITLE II OF H.R. 49
[In thousands of dollars]
Fiscal year-
1975
1976
1977
1978
1979
Total
ESTIMATED EXPENSES
NPR 1--Elk Hills:
Demothballing existing facilities
000
000
Pipeline tie-in to Arco, Socal, Tosco
1, 100
1,100
Pipeline tie-in to Union
2,100
2, 100
Build and/or acquire PL to Point Hueneme
500
25,000
20, 000
5, 000
1, 000
51,500
Build HP gas line to North Coles levee
1,000
4,000
5,000
Production (lifting)-costs at 25c/bbl
12,000
13,000
14,500
39,500
Exploration drilling (50 wells)
6, 500
8, 400
7,500
22,400
Development drilling (829 wells)
94,800
105,700
93,900
65, 100
359,500
Mothballing facilities
1, 000
1, 000
Total
5, 700
142,300
147,100
120,900
67, 100
483, 100
NPR 2-Buena Vista: No expenses incurred; income
from royalty.
NPR 3-Teapot Dome:
Well work-over (clean out)
1,500
500
Exploration drilling (22 wells total)
900
600
650
650
2, 800
Development drilling (100 wells per year)
10,000
10,000
10,000
10,000
40,000
Oil and gas processing facilities
5, 000
1,000
750
600
600
7, 950
Production (lifting) costs at 50c/bbl
100
832
1, 202
1,572
500
4, 206
Mothballing facilities
500
500
Total
14, 232
12, 552
12, 822
12, 250
56,956
In compliance with the Rules of the House of Representatives, there is herewith printed in parallel columns the
text of provisions of existing law which would be repealed or amended by the various provisions of the bill as reported.
THE BILL As REPORTED
(b) The analysis of such chapter 641 is amended-
(1) by inserting immediately before
"7421. Jurisdiction and control."
"7420. Definitions.";
(2) by striking out
"7432. Expenditures appropriations available."
and inserting in lieu thereof the following:
"7432. Naval petroleum and oil shale reserve special fund."
(1) Immediately before section 7421 insert the follow-
(1) 'national defense' includes the needs of, and
the planning and preparedness to meet, essential de-
fense industrial and military emergency energy re-
quirements relative to the national safety, welfare,
ing new section:
"§ 7420. Definitions
(a) In this chapter-
and economy, particularly resulting from foreign
5, 100
NPR 4-North Slope, Alaska:
Seismic survey (10,000 line miles)
24,500
18, 600
9, 300
5, 100
57,500
military or economic actions;
Exploration drilling (26 wells)
30,200
50,800
38,500
43,600
163,100
Total
54,700
69, 400
47,800
48, 700
220,600
Strategic storage study
1, 000
1, 000
Naval Petroleum and Oil Shale Res. Administration
8, 000
8, 000
8, 000
8, 000
32,000
Total expenses
11, 800
219, 232
189, 522
136, 050
793,656
NPR 1
1,223,860
NPR 2
300
2,070
1, 870
1,690
1, 530
78,000
CHANGES IN EXISTING LAW
the following:
237,052
and
ESTIMATED INCOME
(Crude oil value of $10/bbl)
345,600
424,130
424,130
30,000
7, 460
NPR 3
1,200
26,300
58,900
39,600
204,000
Total income
1,500
373,970
504,000
484,720
71, 130
1,
435,
320
Net income
(10,
300)
154,
738
266, 948
295, 198
(64, 920)
641, 664
1 Fiscal year 1977 includes a 3-mo. transition period to adjust to a new fiscal year commencing Oct. 1, 1977.
INFLATION IMPACT STATEMENT
The enactment of this legislation should have a positive affect on
the economy in that a supply of up to 200,000 barrels a day will be
flowing to the armed forces of the United States, relieving the civilian
economy of supplying that amount, and, in turn, hopefully reducing
foreign oil imports by a like amount, with consequent favorable effect
on the balance-of-payments. In addition, the proceeds of the oil to the
EXISTING LAW
military would go into a special fund to support further exploration,
development and production in the Naval Petroleum Reserves over
the three-year period, thus, relieving the Treasury of that burden, ex-
cept for the starting up cost of $10,300,000 as outlined above under
fiscal data. In view of the above, the Committee does not consider that
CHAPTER 641.-NAVAL PETROLEUM RESERVES
the financial aspects of these amendments contain an inflation factor.
7421. Jurisdiction and control.
7422. Administration.
7423. Periodic re-examination of production requirements.
7424. Protection of oil reserves; contracts for conservation.
7425. Acquisition by condemnation and purchase.
7426. Cooperative or unit plans affecting naval petroleum reserve
numbered 1.
7427. Cooperative or unit plans in the naval petroleum reserves.
7428. Agreement and leases: provision for change.
7429. Re-lease of certain lands lessee's preferential right.
7430. Disposition of products.
7431. Requirements as to consultation and approval.
OVERSIGHT FINDINGS
7432. Expenditures: appropriations chargeable.
7433. Disposition of royalties.
7434. Quarterly reports to Armed Services Committees.
The Committee supports a continuing need for Naval Petroleum
7435. Foreign interest.
Reserve oversight responsibilities to rest exclusively in the House
7436. Regulations.
7437. Violations by lessee.
7438. Exclusion of naval oil-shale reserves.
Armed Services Committee, as provided in the House rules.
Sec.
EXISTING LAW
THE BILL As REPORTED
"(2) 'naval petroleum and oil shale reserves' means
the naval petroleum and oil shale reserves established
by this chapter, including Naval Petroleum Reserve
Numbered 1 (Elk Hills), located in Kern County, Cal-
ifornia, established by Executive order of the Presi-
dent on September 2, 1212; Naval Petroleum Reserve
Numbered 2 (Buena Vista), located in Kern County,
California, established by Executive order of the
President on December 13, 1912; Naval Petroleum
Reserve Numbered 3 (Teapot Dome), located in Wyo-
ming, established by Executive order of the Presi-
dent on April 30, 1915; Naval Petroleum Reserve
Numbered 4, Alaska, on the north slope of the Brooks
18
Range, established by Executive order of the Presi-
dent of February 27, 1923; Oil Shale Reserve Num-
bered 1, located in Colorado, established by Executive
order of the President of December 6, 1916, as
amended by Executive order of June 12, 1919; Oil
Shale Reserve Numbered 2, located in Utah, estab-
ished by Executive order of the President of Decem-
ber 6, 1916; and Oil Shale Reserve Numbered 3, lo-
cated in Colorado, established by Executive order of
the President of September 27, 1924;
(3) 'petroleum' includes crude oil, associated
gases, natural gasoline, and other realted hydrocar-
bons, oil shale, and the products of any of such re-
sources; and
'(4) 'Secretary' means the Secretary of the Navy.".
§ 7421. Jurisdiction and control
Section 7421 (a) is amended—
(a) The Secretary of the Navy shall take possession of
(A) by striking out "for naval purposes" and in-
all properties inside the naval petroleum and oil shale
serting in lieu thereof "for use of the Armed Forces";
reserves that are or may become subject to the control of
and
and use by the United States for naval purposes, except
as otherwise provided in section 7438 hereof.
(b) The Secretary has exclusive jurisdiction and con-
(B) by striking out "section 7438 hereof" and in-
trol over those lands inside naval petroleum reserves num-
serting in lieu thereof "this chapter".
bered 1 and 2 that are covered by leases granted under
sections 181-184, 185-188, 189-194, 201, 202-209, 211-214
223, 224-226, 226d, 226e, 227-229a, 241, 251, and 261-263
of title 30, and shall administer those leases. As amended
Oct. 11, 1962, Pub. L. 87-796, § (1), 76 Stat. 904.
§ 7422. Administration
(a) Except as otherwise provided in section 7438 hereof,
the Secretary of the Navy, directly or by contract, lease,
or otherwise, shall explore, prospect, conserve, develop,
use, and operate the naval petroleum and oil shale reserves
in his discretion, subject to approval by the President.
(b) The naval petroleum and oil shale reserves and
lands outside naval petroleum reserve numbered 1 covered
by contracts under section 7426 of this title, shall be used
and operated for-
(1) the protection, conservation, maintenance, and
testing of those reserves; or
(2) the production of petroleum, gas, oil shale and
products thereof whenever and to the extent that the
Secretary, with the approval of the President, finds
that it is needed for national defense and the produc-
tion is authorized by a joint resolution of Congress.
EXISTING LAW
THE BILL As REPORTED
(c) The Secretary of the Navy may under subsection
Section 7422 is amended by adding at the end thereof the
(a) develop the South Barrow gas field, naval petroleum
following new subsection:
reserve numbered 4, to supply gas to installations of the
"(d) (1) In order to place certain naval petroleum re-
Department of Defense and other agencies of the United.
serves in a proven state of readiness to produce petroleum,
States located at or near Point Barrow, Alaska, the native
the Secretary is authorized-
village of Barrow, and other communities and installa-
"(A) to explore, develop, operate, and produce
tions at or near Point Barrow, Alaska. As amended
petroleum, from Naval Petroleum Reserves Numbered
Aug. 24, 1962, Pub. L. 87-599, § 1, 76 Stat. 401; Oct. 11,
1, 2, and 3 at a rate consistent with sound oilfield
1962, Pub. L. 87-796, § 1 (2), 76 Stat. 904.
engineering practices up to two hundred thousand
barrels per day for a period not to exceed three years
commencing ninety days after enactment of this legis-
lation; and
(B) to construct or procure pipelines and asso-
ciated facilities for transporting oil, associated liquids,
20
and gases, from Naval Petroleum Reserves Numbered
1, 2, and 3 to the points where such production will be
refined or shipped.
Such pipelines at Naval Petroleum Reserve Numbered 1
shall have a combined delivery capability of not less than
three hundred and fifty thousand barrels per day, and
shall be fully operable by three years after the date of
enactment of this subsection.
"(2) The production authorization set forth in para-
graph (1) (A) of this subsection is conditioned upon the
Secretary reaching an agreement with the private owner
to continue operation of Naval Petroleum Reserve Num-
bered 1 under a unitized plan contract which adequately
protects the public interest.
(3) The production of petroleum authorized under this
subsection is not subject to the provisions of subsection
(b) (2) of this section relating to Presidential approval or
congressional authorization.".
§ 7423. Periodic re-examination of production re-
quirements
The Secretary of the Navy shall from time to time re-
Section 7423 is amended by inserting "(a)" immediately
examine the need for the production of petroleum or prod-
before "The Secretary"; and by adding at the end thereof
ucts from oil shale for national defense when that produc-
the following new subsection:
21
tion is authorized under section 7422 of this title. If he
'(b) During the three-year period of production au-
finds that the authorized quantity is no longer needed, he
thorized by subsection (d) of section 7422 (during which
shall reduce production to the amount currently needed
three-year period the consultation requirements of section
for national defense. As amended Oct. 11, 1962, Pub. L.
7431 (3) are waived), the Secretary shall submit annual
87-796, § 1(3), 76 Stat. 904.
reports to the Armed Services Committees of the Senate
and the House of Representatives detailing-
"(1) the status of the exploration and development
program at each of the naval petroleum reserves;
"(2) the production which has been achieved at
each of the naval petroleum reserves pursuant to that
authorization, including the disposition of such pro-
duction and the proceeds realized therefrom;
(3) the status of the pipeline construction and
procurement authorized by such subsection (d) ;
EXISTING LAW
THE BILL As REPORTED
"(4) any need for modification of the production
levels authorized by such subsection (d), including
any recommendation for continuing production be-
yond the three-year period provided in such sub-
section; and
(5) the plans for further exploration, develop-
ment and production at Naval Petroleum Reserve
Numbered 4."
§ 7430. Disposition of products
(a) The Secretary of the Navy in administering the
naval petroleum and oil shale reserves under this chapter
shall use, store, sell, or exchange for other petroleum or
refined products, the oil and gas products, including the
22
royalty products, oil shale and products therefrom pro-
duced, from lands in the naval petroleum and oil shale
reserves, including gas products from lands in the South
Barrow gas field of naval petroleum reserve numbered 4,
and lands outside petroleum reserve numbered 1 covered
by joint, unit, or other cooperative plans for the benefit of
the United States.
(5) Section 7430(b) is amended to read as follows:
(b) Each sale of petroleum, gas, other hydrocarbons, oil
(b) Notwithstanding any other provision of law, each
shale, or products therefrom, under this section shall be
sale of the United States share of petroleum, gas, other
made by the Secretary at public sale to the highest quali-
hydrocarbons, oil shale, or products therefrom, shall be
fied bidder at such time, in such amounts, and after such
made by the Secretary at public sale to the highest quali-
advertising as the Secretary considers proper. As
fied bidder at such time, in such amounts, and after such
amended Aug. 24, 1962, Pub. L. 87-599, § 2, 76 Stat. 401;
advertising as the Secretary considers proper and without
Oct. 11, 1962, Pub. L. 87-796, $ (6), 76 Stat. 905.
regard to Federal, State, or local regulations controlling
sales or allocation of petroleum products.".
(6) Section 7430 is further amended by adding at the
end thereof the following new subsection:
(c) Any disposition of the United States share of the
production authorized by section 7422(d) shall be con-
ducted in such a manner as to insure that an amount of pe-
troleum products equal in value to the crude oil and asso-
ciated gases and liquids supplied from the naval petroleum
reserves shall be made available exclusively to the armed
forces of the United States. Any disposition of that pro-
duction shall be SO arranged as to give full and equal op-
portunity for acquisition of the petroleum and associated
products by all interested companies, including major and
independent oil refineries alike.".
Section 7432 is amended to read as follows:
§ 7432. Expenditures: appropriations chargeable
"§ 7432. Naval petroleum and oil shale reserves
23
special fund
(a) Expenses incurred by the Secretary of the Navy
"(a) There is hereby established on the books of the
with respect to the naval pretroleum and oil shale reserves
Treasury Department a special fund designated the 'naval
shall be paid from appropriations made available for the
petroleum and oil share reserves special fund'. There shall
purposes specified in this chapter.
be credited to such fund-
"(1) all proceeds realized under this chapter from
the disposition of the United States share of petro-
leum or refined products, oil and gas products, includ-
ing royalty products;
(2) the net proceeds, if any, realized from sales or
exchanges within the Department of Defense of re-
fined petroleum products accruing to the benefit of
any component of that Department as the result of
any such sales or exchanges; and
EXISTING LAW
THE BILL As REPORTED
(3) such additional sums as have been, or may be,
appropriated for the maintenance, operation, explo-
ration, development, and production of the naval
petroleum and oil share reserves.
(b) Expenditures necessary to carry out this chapter
(b) Funds available in the naval petroleum and oil
shall be made under the direction of the President, who
shale reserve special fund shall be available for expen-
shall submit estimates for these expenditures as prescribed
diture in such sums as are specified in annual congres-
by law. As amended Oct. 11, 1962, Pub. L. 87-796, § (8),
sional appropriations Acts for the expenses of-
76 Stat. 905.
"(1) exploration, prospecting, conservation, devel-
opment, use, operation, and production of the naval
petroleum and oil shale reserves as authorized by this
chapter;
24
"(2) production, including preparation for produc-
tion as authorized by this Act, or as may hereafter be
authorized; and
(3) the construction and operation of facilities
both within and outside the naval petroleum and oil
shale reserves incident to the production and the de-
livery of crude petroleum and derivatives, including
pipelines and shipping terminals.
(c) The budget estimates for annual appropriations
from the naval petroleum and oil shale reserve special fund
shall be prepared by the Office of Naval Petroleum and Oil
Shale Reserves and shal be presented by the President in-
dependently of the budget of the Department of the Navy
and the Department of Defense.
"(d) Contracts obligating only such funds as are ap-
propriated and made available annually may be entered
into by the Secretary for periods of not more than five
years renewable for a like term.".
§ 7433. Disposition of royalties
(a) Any oil, gas, gasoline or other substance accruing
Section 7433 (b) is amended by adding immediately be-
to the United States as royalty from any lease under this
fore the period at the end thereof the following: "and
chapter shall be delivered to the United States, or shall be
credited to the naval petroleum and oil shale reserve special
paid for in money, as the Secretary of the Navy elects.
fund".
(b) All money accruing to the United States from lands
in the naval petroleum and oil shale reserves shall be cov-
ered into the Treasury. As amended Oct. 11, 1962, Pub.L.
87-796, § 1(9), 76 Stat. 905.
(a) The Secretary of the Navy shall establish a study
group which shall investigate the feasibility of creating a
25
national strategic petroleum reserve (military) (herein-
after in this section referred to as the "reserve"). Any such
reserve should include petroleum stored at strategic loca-
tions, or available for delivery to such locations, and in-
clude facilities for storage, transportation, or processing
thereof. In computing the amount of petroleum to be stored
in such reserve, the peacetime operating stocks and pre-
positioned war reserve stocks of the Department of De-
fense shall not be included. Such reserve should be in addi-
tion to any national strategic petroleum reserve (civilian)
which may be otherwise provided for.
26
27
SUMMARY
Background and Purpose
H.R. 49 was originally referred to the Committee on Interior and
Insular Affairs since it proposed to establish National Petroleum Re-
THE BILL As REPORTED
(b) The investigation required under subsection (a)
shall include, but need not be limited to, determinations
with respect to the size, scope, objectives, and all cost fac-
tors associated with the establishment of the reserve. In
arriving at its findings and recommendations, the study
group shall consult with, and seek, the position of the
Joint Chiefs of Staff relative to the overall posture of the
(c) Not later than one year after the date of the enact-
ment of this Act, the Secretary of the Navy shall report to
the Congress the findings and recommendations of the
serves to satisfy the petroleum needs of the Nation. However, a close
examination of the bill, as amended by the Interior and Insular Affairs
Committee, clearly indicated that its main purpose was to open up the
Naval Petroleum Reserve at Elk Hills for commercial production and
nullify existing statutory protection of the reserves for defense pur-
poses. Accordingly, since the Naval Petroleum Reserves fall within
the exclusive jurisdiction of the House Armed Services Committee,
and after a request for consideration of H.R. 49 in this Committee,
the Speaker referred the bill sequentially to the Committee, as pro-
vided for in the new House rules, with a reporting deadline of April 19,
1975.
House Armed Services Committee Amendments
In the Committee amendments, the language proposed by the In-
terior and Insular Affairs Committee would be left intact except that
the Naval Petroleum Reserves would be treated in a separate title,
which would result in honoring the jurisdiction of the Interior and
study group.
Insular Affairs Committee over all public lands other than the Naval
Petroleum Reserves, which by statute and the rules of the House, are
reserve.
within the sole legislative jurisdiction of the Armed Services Com-
mittee. The new title, contained in the Armed Services Committee
amendment, would provide specific conditions under which the Naval
Petroleum Reserves would be explored, developed and produced.
The most significant provisions would require a production limit of
200,000 barrels per day for a period not to exceed three years and the
oil would be sold exclusively to the Department of Defense, with the
proceeds placed in a special fund to be used for further exploration,
development and production of the Naval Petroleum Reserves. There
would be a study regarding the establishment of a National Strategic
Petroleum Reserve (military).
Fiscal Data
A start-up funding of $10,300,000 would be required in FY 75.
Thereatfer, proceeds from the sale of the petroleum produced would
EXISTING LAW
cover costs and create a surplus which would amount to $640 million
at the end of FY 79.
Departmental Position
The Department of Defense opposes the legislation as it was referred
to this Committee, but has not taken a position on the amendments.
The Department of Defense favors H.R. 2633, the Energy Independ-
ence Act of 1975, which is the Administration bill.
Committee Position
The Committee on Armed Services on April 15, 1975 favorably re-
ported the bill, with amendments, by a vote of 28 to 3.
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPT. 94-81,
1st Session
Part 3
AUTHORIZING THE SECRETARY OF THE INTERIOR TO ESTABLISH ON
CERTAIN PUBLIC LANDS OF THE U.S. NATIONAL PETROLEUM RE-
SERVES THE DEVELOPMENT OF WHICH NEEDS TO BE REGULATED
IN A MANNER CONSISTENT WITH THE TOTAL ENERGY NEEDS OF
THE NATION AND FOR OTHER PURPOSES
APRIL 22, 1975.-Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed.
Mr. HALEY, from the Committee on Interior and Insular Affairs,
submitted the following
SUPPLEMENTAL REPORT TO PART 1
[To accompany H.R. 49]
The Committee on Interior and Insular Affairs, to whom was re-
ferred the bill (H.R 49) to authorize the Secretary of the Interior to
establish on certain public lands of the United States national netro-
leum reserves the development of which needs to be regulated in a man-
ner consistent with the total energy needs of the Nation, and for other
purposes, having reported favorably thereon, with an amendment, sub-
mits the following supplemental information:
PURPOSE
The purpose of this supplementary report is to provide the House
with information additional to that contained in the original report
of the Committee on Interior and Insular Affairs on H.R. 49, (House
Report 94-81, Part 1) with respect to the inflationary impact state
ment required by the House Rules.
COMMENTS IN ORIGINAL REPORT RELATING TO INFLATION IMPACT
Rule XI, clause 2 (1) (4) requires a "detailed analytical statement as
to whether the enactment of such bill * * * may have an inflationary
impact on prices and costs in the operation of the national economy.
The report (House Report 94-81, Part 1) filed by this Committee con-
tains the following statements:
The potential 300,000 barrels per day of production from
Elk Hills could replace a like amount of imported crude oil.
At current prices this would reduce our balance of payments
38-006
GERALD FORD LIBRARY
2
3
deficit by about $1.3 billion and return to the U.S. Treasury
All of these things will, of course, have a favorable effect on the
approximately $1 billion per year. (page 3)
economy and should be counter inflationary. The adverse impact of
H.R. 49, by authorizing a naval petroleum reserve to be in-
these oil imports in the American economy is universally recognized.
cluded in a national petroleum reserve, would lift these re-
Nothing has had a worse effect on inflation than spiraling petroleum
strictions on production and would permit the reserves to be
prices-transportation costs àre up for virtually all forms of Ameri-
developed in order to meet the total energy needs of the na-
can enterprise from the operation of basic farm machinery and de-
tion, including but not limited to national defense. (page 3)
livery vans to international airlines; utility costs for everything from
Production [at Elk Hills] of 160,000 barrels per day could
manufacturing operations to the illumination of government offices
be obtained in less than six months and the reserve is capable
have skyrocketed; and the workingman's costs for essential day-to-
of production of 300,000 barrels per day within one year. The
day commuting and simple recreational desires have sometimes become
Committee notes that this amount represents approximately
prohibitive. Limiting production of known domestic oil supplies to
40 percent of the President's goal of reducing U.S. depend-
200,000 barrels per day for 3 years, as has been suggested by some,
ence on foreign crude imports by 800,000 barrels per day
may have some limited benefit for the economy, but it stands to
within one year. The total reserve is estimated to be 1.5 billion
reason that greater long-term benefits will result from a more endur-
barrels of oil and over 1.2 trillion cubic feet of natural gas.
ing program like that proposed in H.R. 49. Not only must produc-
(page 6)
tion commence promptly, but the Secretary of the Interior, who has
Since section 3 of H.R. 49 requires the Secretary of the Interior to
responsibility for managing the Nation's natural resources, should
develop plans for each area under his jurisdiction, explaining in detail
make every effort to explore and develop new domestic sources of
the method of development and production proposed, it was recog-
supply wherever possible, including exploration of Naval Petroleum
nized that any accurate estimate of its inflationary impact could not
Reserve No. 4 in Alaska. Such a task should not be assigned to the
be ascertained until, the plans are presented to the Congress (which,
Secretary of the Navy whose basic function it is to manage the naval
incidentally, under the bill, would not become effective for 60 days SO
forces and not to manage the Nation's natural resources.
that the Congress will have an opportunity to review and perhaps dis-
CONCLUSION
approve each plan). H.R. 49 provides the authority for the Secretary
to establish national petroleum reserves and to prepare plans for their
In contrast with some proposals, ultimately the enactment of H.R.
development and production. At that time the Congress will have the
49 as recommended by the Committee on Interior and Insular Affairs
necessary information to make a reasonably accurate assessment of
should have a deflationary impact on prices and costs in the opera-
the actual inflationary impact.
tion of the national economy, should result in a substantial reduction
in the balance of payments, and should produce significant revenues
PARAMETERS OF POTENTIAL ECONOMIC IMPACT
for the Federal Treasury.
If H.R. 49 as recommended by the Committee on Interior and In-
sular Affairs is enacted, production of oil and gas in some areas could
commence promptly. Production at Naval Petroleum Reserve No. 1
could reach 160,000 barrels per day within 6 months and that reserve
is capable of producing 300,000 barrels per day within 1 year. In
addition, this reserve contains 1.2 trillion cubic feet of natural gas.
Add to this the privately owned share (20 percent of the total)
of the Elk Hills Reserve and the potential of producing another
2,650 barrels of oil from Naval Petroleum Reserves No. 2 and No. 3
and 20,000 barrels per day by private companies on private land now
foreclosed by court order, and it is readily recognizable that such
production, if permitted, could have a substantial effect on the avail-
able domestic supply. Several very beneficial effects would result—
it would lessen-though not eliminate-our reliance on foreign
sources of supply of oil;
it would have the very favorable effect of reducing the balance
of payments by nearly $1.5 billion;
it would produce non-tax revenues for the U.S. Treasury total-
ing $1.0 billion per year or more; thus helping greatly in these
times of budgetary deficits.
H.R. 81
H.R. 81
94TH CONGRESS
~
HOUSE OF REPRESENTATIVES
REPORT
1st Session
No. 94-156
FULLY EXPLORE, FULLY DEVELOP, AND PRODUCE THE NAVAL PE-
TROLEUM RESERVES WITH THE REVENUE DERIVED THEREFROM
TO BE PLACED IN A SPECIAL FUND FOR SUCH EXPLORATION, DE-
VELOPMENT, AND PRODUCTION, FOR PRODUCTION TO BE APPLIED
TO THE PETROLEUM NEEDS OF THE DEPARTMENT OF DEFENSE
AND FOR THE ESTABLISHMENT OF A STUDY GROUP TO INVESTI-
GATE THE FEASIBILITY OF CREATING A NATIONAL STRATEGIC
PETROLEUM (MILITARY), AND FOR OTHER PURPOSES
APRIL 18, 1975.-Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mr. HÉBERT, from the Committee on Armed Services,
submitted the following
REPORT
[To accompany H.R. 5919]
The Committee on Armed Services, to whom was referred the bill
(H.R. 5919) to fully explore, fully develop, and produce the naval
petroleum reserves with the revenue derived therefrom to be placed
in a special fund for such exploration, development, and production,
for production to be applied to the petroleum needs of the Depart-
ment of Defense and for the establishment of a study group to in-
vestigate the feasibility of creating a National Strategic Petroleum
Reserve (military), and for other purposes, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
The amendment is as follows:
On page 6, line 14, after the word "available" add the word
"exclusively".
EXPLANATION OF THE AMENDMENT
This technical amendment was adopted by the Committee during its
hearings on the bill to insure that all of the oil produced under the
provisions of H.R. 5919 would be purchased by the armed forces of
the United States only.
PURPOSE
H.R. 4919 proposes to fully explore, fully develop, and produce the
Naval Petroleum Reserves with the revenue derived therefrom to be
placed in a special fund for such exploration, development, and pro-
38-006
2
13
duction, and for production to be applied to the petroleum needs of
rives 647 barrels per day in royalty oil at NPR No. 2. In 1974 U.S.
the Department of Defense and for the establishment of a study group
income from this reserve was $1.5 million.
to investigate the feasibility of creating a National Strategic Petro-
NPR No. 3 is located at Teapot Dome, Wyo. It is wholly-owned by
leum Reserve (military), and for other purposes.
the United States. It has a proven reserve of 42.5 million barrels.
There are 150 wells on the reserve. It has a present production capa-
THE CLEAN BILL
bility of 2,000 barrels per day. The 1974 income of the United States
The legislation was originally referred to the House Armed Serv-
from Teapot Dome production was $1.1 million.
ices Committee as Title I of H.R. 2633 and H.R. 2650, the President's
NPR No. 4 is located on the North Slope in Alaska. It is wholly-
Energy Independence Act of 1975, which has reference to the Naval
owned by the United States. It is largely unexplored and almost com-
Petroleum Reserves. At the same time, additional titles of that bill
pletely undeveloped. The reserve is estimated at between 10 billion
were referred to the Committee on Interstate and Foreign Commerce,
and 33 billion barrels. However, only 100 million barrels of reserves
Committee on Ways and Means and Committee on Banking, Currency
have been proven. The rest, of course, must be proven in subsequent
and Housing. A clean bill, H.R. 5919, was introduced for the considera-
exploration.
tion of the Full Committee due to differences with the Departmental
The exploration program in fiscal year 1975 consists of 3,500 miles of
proposal.
seismic exploration and two exploratory wells. One gas well has been
During its deliberations, the Committee also had before it H.R. 49,
completed, and is capable of producing 500,000 cubic feet of gas per
as amended by the Interior and Insular Affairs Committee, which was
day. The second exploration well was started on March 17 of this
referred sequentially to the House Armed Services Committee. That
year.
bill would create national petroleum reserves, to include the Naval
EXISTING LAW
Petroleum Reserves.
Chapter 641, title 10, United States Code, deals with Naval Petro-
BACKGROUND
leum Reserves. Section 7422 grants the Secretary of the Navy exclu-
sive jurisdiction and control of the reserves and directs him to explore,
THE ESTABLISHMENT AND LOCATION OF THE RESERVES
prospect, conserve, develop, use and operate those reserves.
There are four naval petroleum reserves: No. 1, Elk Hills; No. 2,
The production of the reserves is limited to that which is necessary
Buena Vista Hills, in Kern County, Calif.; No. 3, Teapot Dome, Wyo.;
for protection, conservation, testing and maintenance. For any pro-
No. 4, on the North Slope in Alaska, immediately to the west of the
duction beyond that, the Secretary of the Navy must find that it is
Prudhoe Bay commercial oil field. All of those reserves were estab-
needed for national defense, that finding must be approved by the
lished between 1912 and 1923.
President and the production must be authorized by joint resolution
In addition, there are three naval oil shale reserves: Nos. 1 and 3 in
of Congress.
RECENT COMMITTEE OVERSIGHT ACTIONS
Colorado; No. 2 in Utah, established in 1916 and 1924.
Those oil shale reserves are undeveloped. The only current activity
During October 1973, the Investigating Subcommittee conducted
at any of those reserves is in providing shale for use in an experimental
hearings following a public statement by President Nixon that Naval
retort process of Paraho Development Corp.
Petroleum Reserve No. 1 at Elk Hills should be opened up to meet the
Approximately 20 percent of Naval Petroleum Reserve No. 1 at Elk
fuel needs of the west coast. In its report on November 13, 1973, the
Hills is owned by Standard Oil Co. of California. It has been oper-
Subcommittee indicated that an energy crisis was upon the Nation and
ated under a unit plan contract since 1944, which has kept the field
that the statutory restriction on the use of the Naval Petroleum Re-
largely shut-in.
serves should not be amended.
There are over 1 billion barrels in proven reserves in this field, and
During the period January through May 1974, a Special Subcom-
1.2 billion thousand cubic feet of gas reserve. There are more than
mittee on Department of Defense Energy Resources and Require-
1,000 wells in existence on NPR No. 1. It has a current production
ments, chaired by Congressman Otis G. Pike (D-NY), held extensive
capability of 160,000 barrels per day, which could be expanded by
hearings on the overall defense energy question, with particular ref-
further development of the field to 400,000 barrels per day.
erence to the Naval Petroleum Reserves. In its principal findings the
Since June 1974, 42 new wells have been drilled at Elk Hills. They
Subcommittee held that production of Elk Hills Petroleum Reserve
have proved an additional 100 million barrels of reserve. In 1974 the
beyond the statutory limits was not warranted at that time and that
U.S. income from this reserve was $2.5 million.
the exploration and development of Reserves 1 and 4 at Elk Hills
NPR No. 2 is located at Buena Vista Hills, Calif. Two-thirds of this
and Alaska must be completed as rapidly as time and resources permit.
reserve is privately owned and one-third is U.S. owned. There are more
That report showed particular concern over the inadequate response
than 20 million barrels proven reserve remaining at Buena Vista Hills.
to fulfilling defense petroleum needs when the Defense Production
It is fully developed and producing. The United States presently de-
Act of 1950 was invoked during the 1973 fuel crisis.
4
5
READINESS AND DELIVERABILITY
TEAPOT DOME (RESERVE NO. 3)
ELK HILLS (RESERVE NO. 1)
There are no refinery or pipeline constraints at Teapot. Whatever
Two figures have been popularly used in discussing the oil to be
crude cannot be handled in local refineries can be piped out to refiner-
delivered from Elk Hills-160,000 barrels per day and 300,000 barrels
ies with considerable excess capacity. The real problems involve lead
time on equipment necessary to increase production.
per day. The facts are that with present facilities the maximum amount
of deliverable oil is 30,000 barrels per day, which is a constraint result-
The field is currently being developed under a five-year program at
ing from the fact that only one pipeline exists to carry the oil off the
a cost of $54 million. Under that plan peak production would come at
Reserve, and that is owned by the operating partner, Standard of
the end of the second year, producing some 18,000 to 20,000 barrels
per day.
California.
THE CONCEPT
Testimony indicates that three tie-ins to existing privately owned
lines off the Reserve could be completed in a 60- to 90-day period at a
H.R. 2633, THE PRESIDENT'S ENERGY INDEPENDENCE ACT OF 1975
cost of about $1.1 million, and would result in increased capacity to
130,000 barrels per day. An additional $1 million would be required to
The basic concept embodied in this proposal would continue the
demothball the necessary wells. However, that figure would remain
Naval Petroleum Reserves in the custody of the Secretary of the Navy
constant for a period of about 30 months at which time the completion
but would place the basic decison making process in the hands of the
of a fourth tieline and pumping facility would increase capacity to
President. In that bill national security would take on a broad defi-
155,000 barrels per day-a figure which represents total pipeline spare
nition, to include essential civilian and military emergency energy
capacity. That figure, coincidently, would also require additional gas
requirements.
pipelines and processing capability, with a total additional cost of $5
The proposal would provide for the establishment of National Stra-
million.
tegic Petroleum Reserves in unidentified facilities at unidentified loca-
Thus, the earliest that Elk Hills could reach a capacity of 155,000
tions, to include a civilian reserve of 1 billion barrels of oil and a mili-
barrels per day would be close to 30 months after authority is granted.
tary reserve of 300 million barrels of oil.
Any capacity beyond that figure would require additional pipeline
The President could produce the Naval Petroleum Reserves to sup-
facilities to the coast. The Navy is currently negotiating for a 20-inch
ply the strategic petroleum reserve, to generate funds for deposit in a
line now in place which would meet a marine terminal at Port
National Strategic Petroleum Reserve Special Fund, and to replenish
Hueneme. Because of necessary additional connections, that line would
military peacetime opearting stocks and prepositioned war reserve
require a three-year lead time which could be stretched due to expected
stocks.
critical environmental impact problems.
Monies from the special fund could be used to explore, develop and
Although some of the pipeline owners might be interested in making
produce the Naval Petroleum Reserves, but the proposal would place
these tie-ins at their own expense with the belief that their costs could
no limit on the production of the reserves.
be recouped over several years of use of the lines, none are willing to
The bill would allow the use of private capital in exploring and
undertake these costs for a limited open-up of the field. Believing that
developing Petroleum Reserve No. 4 in Alaska.
it would be in the best interests of national defense for the Navy to
Twenty percent of the petroleum available in Reserve No. 4, or such
have the capability to transport petroleum off the Reserve, the Com-
amount as the President may determine to be necessary for national
mittee Bill would authorize the Navy to make these tie-ins and also
security, would be utilized for the National Strategic Petroleum Re-
to acquire and/or construct a line to a marine terminal to transport a
serve. The remainder would go to the public economy.
large quantity of petroleum. This could free the Navy from the con-
The authority would be granted to develop the reserves on and off
straints imposed by privately owned pipelines.
the reservation.
It is important to note that production of the field during the in-
terim period now through fiscal year 1979 will reduce the maximum
ARMED SERVICES COMMITTEE PROPOSAL-A SPECIFIC BLUEPRINT
capability of the field.
THE PROBLEMS
BUENA VISTA (RESERVE NO. 2)
The current Armed Services Committee hearings on H.R. 2633,
As noted earlier in this report, almost two-thirds of this field is pri-
H.R. 2650 and H.R. 49, as amended by the Interior and Insular Affairs
vately owned, and the field has been in production since the 1920's, with
Committee, as well as the inquiry by our Special Subcommittee on De-
the Navy producing its portion in order to prevent losing its oil to
partment of Defense Energy Resources and Requirements in early
adjacent owners. The Navy receives about 647 barrels of oil per day in
1974 (House Armed Services Committee Document No. 93-48), made
royalty oil from Buena Vista.
it crystal clear that our national security requires the assurance that
our armed forces have enough fuel to supply their needs in time of
6
7
national emergency or war. Thus, it is necessary to insure, insofar as
pipeline and shipping terminals. The target for pipeline capacity
is possible, that in tampering with the petroleum reserves for produc-
at Elk Hills is set at 350,000 barrels per day.
tion, the reserves are completely protected from depletion before any
Provide for the establishment of a study group to inquire into
alternate oil sources in them may be established. As one Committee
the feasibility of, locations, size and cost of creating a National
member SO aptly put it, "Our ships burn oil, not dollars." The Joint
Strategic Petroleum Reserve (military), and report at the end of
Chiefs of Staff jointed in that determination until most recently, when
one year following enactment of the legislation.
they, not too surprisingly, fell in line with their Commander-in-Chief
Require the Secretary to report to the Congress annually detail-
to support his Energy Independence Act of 1975, which Committee
ing the status of exploration and development, production
testimony reveals was not referred to the Chiefs for consideration
achieved, status of pipeline construction and procurement of
until after it was in final draft form.
equipment, any recommendations for continued production be-
In some quarters, great reliance has been placed on the potential of
yond the three-year period and plans for further exploration, de-
Petroleum Reserve No. 4. But its potential is unproven, and the proven
velopment and production at Petroleum Reserve No. 4.
reserves at Elk Hills should remain available for emergency use, while
Provide for production authorization of Elk Hills to be con-
at the same time, the field should be brought to a complete state of
ditioned upon the Secretary of the Navy reaching an agreement
readiness to provide the required quick reaction time in fulfilling its
with the private owner to continue operation of Elk Hills under
mission.
a unitized plan contract, which adequately protects the public
Also, current plans regarding proposals for strategic storage of oil
interest.
are SO inadequate as to require considerable study and detailed plan-
The Committee is of the opinion that H.R. 5919 presents definitive
ning. The Committee could find little hard evidence as to where they
authority for proceeding to produce the Naval Petroleum Reserves.
will be located, how much they will cost, how the crude oil will be
Also, the Committee hearings and deliberations contain clear guidance
transported to refineries, or exactly how long it will take to construct
as to where the program is going, what it seeks to accomplish, and
them.
where there will be terminations to allow for reexamination of the
As indicated earlier in this report, the Naval Petroleum Reserve at
principles involved, in the context of the problems existing at that
Elk Hills is operated under a unit plan contract with Standard Oil
time. For example, when the Alaska pipeline now under construction
of California, which has kept the field largely shut-in. This agreement
resulted from Standard Oil owning approximately 20 percent of Naval
commences delivery of its capacity of two million barrels of oil per
Petroleum Reserve No. 1. The unit plan was authorized by enabling
day to the west coast in about three years, the requirements for any
legislation on June 17, 1974 (10 USC 7426), which confined
continued production of the Naval Petroleum Reserves will be in need
of fresh review.
production to that needed for national defense purposes. The prob-
DEPARTMENTAL POSITIONS
lem that arose was whether producing Elk Hills would result in a
possible breach of contract. While Standard Oil witnesses indicated
The Executive Department comments concerning recommendations
that any production at Elk Hills would be unrealistic under other
for the enactment of H.R. 2633 and H.R. 2650 are contained in the
than a unit plan, the problem was of serious concern to the Committee.
President's letter of January 30, 1975 reproduced below. Also, the
Finally, the Committee recognizes that there is a need to find addi-
following representatives of the Executive Branch testified before the
tional sources of domestic crude oil supply at the earliest possible
Investigations Subcommittee supporting the provisions of the Presi-
time to reduce the growing domestic demand for foreign oil.
dent's Energy Independence Act of 1975:
Department of Interior-Honorable Jack W. Carlson, Assis-
THE BLUEPRINT
tant Secretary of the Interior for Energy and Minerals.
To satisfy the problems raised by proposals to produce the Naval
Department of Defense-Honorable Jack L. Bowers, Assistant
Petroleum Reserves, H.R. 5919 would accomplish the following:
Secretary of the Navy (Installations and Logistics) ; Vice Ad-
Provide production of the Petroleum Reserves for a period not
miral T. R. Weschler, Director for Logistics, Joint Chiefs of
to exceed three years, at a rate not to exceed 200,000 barrels per
Staff; Rear Admiral C. Monroe Hart, Director for Energy, Of-
fice of Assistant Secretary of Defense (Installations and Logis-
day.
Such oil produced will be sold or exchanged for the exclusive
tics) ; and Vice Admiral Harry D. Train II, Director of the Joint
Staff, Joint Chiefs of Staff.
use of the military services.
Provide for a Naval Petroleum and Oil Shale Reserves Special
Federal Energy Administration-Honorable Frank G. Zarb,
Administrator.
Fund, into which will flow the proceeds of such sales, and any
separate monies appropriated for the Naval Petroleum Reserves.
Department of Justice-Honorable Keith Clearwaters, Assis-
The Special Fund (which would be subject to the Congressional
tant Attorney General, Antitrust Division.
appropriations process) would be used for the exploration, devel-
Since H.R. 5919 was introduced as a clean bill, specific Depart-
mental comments on that measure are not available. However, it is in-
opment, conservation and production of the reserves and the con-
struction of facilities, both on and outside the reserves, including
teresting to not that Vice Admiral T. R. Weschler, representing the
Joint Chiefs of Staff, in his original testimony on March 25, 1975, ap-
9
8
peared to favor some general restriction on the production of the Naval
A more detailed summary of my legislative proposals is enclosed.
Petroleum Reserve at Elk Hills until such time as more definitive in-
My tax proposals already presented by the Secretary of the Treasury
would:
formation on the proven reserve at Petroleum Reserve No. 4 in Alaska
is available. However, later testimony from the Director of the Joint
(1) place an excise tax of $2 per barrel on all domestic crude
Staff, Joint Chiefs of Staff, favored the enactment of the Energy
oil and an import fee of $2 on all imported crude oil and petroleum
Independence Act, evidently, since it represents the position of the
products to help reduce the demand for oil, promote domestic
Commander-in-Chief.
refining and encourage the development of new sources of energy;
THE WHITE HOUSE,
(2) impose a tax on all domestic crude oil in order to capture
Washington, anuary 30, 1975.
windfall profits;
(3) place an excise tax on natural gas equivalent to the $2:
The SPEAKER OF THE HOUSE OF REPRESENTATIVES.
tax on oil to reduce natural gas demand;
DEAR MR. SPEAKER: In my State of the Union address earlier this
(4) provide additional tax credits for public utilities to pro-
month, I outlined the dimensions of our interrelated economic and
vide equal tax treatment with other industries and promote the
energy problems and proposed comprehensive and far-reaching meas-
construction of needed electric generating facilities;
ures for their solution.
(5) provide tax credits for homeowners who install additional
The measures I described included both Executive and Congres-
insulation to reduce energy consumption;
sional actions. Because further delay is intolerable, I have already
(6) return to the economy the revenue from energy conserva-
taken administrative action to deal with our energy problems, includ-
tion taxes to offset higher energy costs, particularly for low and
ing issuance of a proclamation to impose increased fees on imported
middle income citizens and to help restore jobs and production.
oil. The Secretary of the Treasury has already presented my detailed
The 13 titles of this bill, coupled with appropriate tax measures,
energy tax proposals to the House Ways and Means Committee.
are essential to the eventual attainment of our common goal of energy
I am enclosing a proposed omnibus energy bill the Energy Independ-
independence. Prompt action on all these measures is essential.
ence Act of 1975-which, along with the tax proposals already pre-
I cannot stress too much the sense of urgency I feel about these
sented, will provide the combined authorities that are necessary if
proposals and the need for their swift consideration by the Congress
we are to deal seriously and effectively with the Nation's pressing
as a basis for the earliest possible enactment into law. Without these
energy problems.
measures, we face a future of shortages and dependency which the
We have delayed too long in taking decisive actions to reduce our
Nation cannot tolerate and the American people will not accept.
dependence on foreign energy sources and to eliminate our vulner-
Sincerely,
ability to energy disruptions such as we experienced last winter-
GERALD R. FORD:
or worse.
In the near term, enactment of the proposed legislation along with
SUMMARY OF PROPOSED LEGISLATION To INCREASE DOMESTIC ENERGY
certain Administrative actions would reduce oil imports by one mil-
SUPPLY AND AVAILABILITY
lion barrels per day by the end of this year, and two million barrels
per day by the end of 1977. Over the mid-term (1975-1985), enact-
Title I of the Energy Independence Act of 1975 would authorize
ment of the proposed legislation will insure that domestic supplies of
the production of petroleum from the Naval Petroleum Reserves to
energy are substantially increased, that the growth in energy demand
top off Defense Department storage tanks, with the remainder sold
is reduced substantially and that we develop effective protection from
at auction or exchanged for refined petroleum products used by the
future energy embargoes or energy emergencies. In the long term,
military or used to fill a National Strategic Petroleum Reserve. Reve-
my proposals will allow our Nation to once again supply a signifi-
nues generated from the sale of oil produced from the Naval Petroleum
cant share of the energy needs of the free world.
Reserves would be used to finance the further exploration, develop-
The legislative program I have proposed will:
ment and production of the Reserves, including NPR #4 in Alaska,
(1) encourage early development of our oil, natural gas and
as well as to create the National Strategic Petroleum Reserve. At
coal resources;
least 20%, or such other amount as determined by the President, of the
(2) help speed the siting and construction of nuclear and other
oil eventually produced from NPR #4 would be earmarked for mili-
energy facilities;
tary needs and for the National Strategic Petroleum Reserve and the
(3) reduce energy consumption by mandating thermal stand-
remainder made available to the domestic economy. Although the oil
ards for new homes and commercial buildings and assisting per-
reserves contained in NPR #4 are largely unexplored and significant
sons with low incomes in winterizing their homes:
production is not expected before 1982, it is anticipated that NPR #4
(4) encourage investment in the development of new domestic
will provide a minimum of 2 million barrels of oil per day by 1985.
energy resources;
Title I would also grant the Department of the Navy authority to ac-
(5) establish a strategic petroleum reserve to guard against
quire, construct, fill and maintain a military strategic petroleum
future import disruptions; and
reserve of 300 million barrels as part of the National Strategic Petro-
leum Reserve.
(6) authorize certain standby authorities to cope with potential
embargoes or energy emergencies.
H. Rept. 94-156-2
10
11
COMMITTEE POSITION
INFLATION IMPACT STATEMENT
The Committee on Armed Services, by a vote of 28 to 3, favorably
reported H.R. 5919, as amended.
The enactment of this legislation should have a positive effect on
the economy in that a supply of up to 200,000 barrels a day will be
FISCAL DATA
flowing to the armed forces of the United States, relieving the civilian
economy of supplying that amount, and, in turn, hopefully reducing
A start-up funding of $10.3 million would be required for FY 75.
foreign oil imports by a like amount. with consequent favorable effect
Thereafter, proceeds from the sale of oil from NPR's 1, 2 and 3 would
on the balance-of-payments. In addition, the proceeds of the oil to
provide funds for all expenses and create a surplus of approximately
the military would go into a special fund to support further explora-
$640 million at the end of Fiscal Year 1979. Tabulated below are the
tion, development and production in the Naval Petroleum Reserves
estimated expenses and income for the three year limit of this legisla-
over the three-year period, thus, relieving the Treasury of that bur-
tion. The Committee estimates agree with the estimates provided by
den, except for the starting up cost of $10,300,000 as outlined above
the Department of the Navy.
under fiscal data. In view of the above, the Committee does not con-
ESTIMATED EXPENDITURES AND INCOME-H.R. 5919 AND/OR TITLE II OF H.R. 49
sider that the financial aspects of this bill contain an inflation factor.
[In thousands of dollars]
OVERSIGHT FINDINGS
Fiscal year-
The Committee indicated a continuing need for Naval Petroleum
1975
1976
1977
1978
1979
Total
Reserve oversight responsibilities to rest exclusively in the House
Armed Services Committee as stated in the provisioins of Rule X of
ESTIMATED EXPENSES
the House rules,
NPR 1-Elk Hills:
Demothballing existing facilities
000
1,000
Pipeline tie-in to Arco, Socal, Tosco
1, 100
1,100
Pipeline tie-in to Union
2,100
2,100
Build and/or acquire PL to Port Hueneme
500
25,000
20,000
5,000
1, 000
51,500
Build HP gasline to North Coles levee
1,000
4, 000
5, 000
Production (lifting) costs at 25e/bbi
12,000
13,000
14, 500
39,500
Exploration drilling (50 wells)
6, 500
8, 400
7,500
22,400
Development drilling (829 wells)
94,800
105,700
93,900
65, 100
359,500
Mothballing facilities
1,000
1, 000
Total
5, 700
142,300
147, 100
120,900
67, 100
483,100
NPR 2-Buena Vista: No expenses incurred; income
from royalty.
NPR 3-Teapot Dome:
Well work-over (clean out)
1, 500
1, 500
Exploration drilling (22 wells total)
900
600
650
650
2,800
Development drilling (100 wells per year)
10,000
10,000
10,000
10, 000
40,000
Oil and gas processing facilities
5, 000
1, 000
750
600
600
7, 950
Production (lifting) costs at 506/bbl
100
832
1, 202
1, 572
500
4, 206
Mothballing facilities
500
500
Total
5, 100
14, 232
12,552
12, 822
12,250
56,956
NPR 4-North Stope, Alaska:
Seismic survey (10,000 line miles)
24,500
18, 600
9, 300
5, 100
57,500
Exploration drilling (26 wells)
30,200
50,800
38, 500
43,600
163,100
Total
54,700
69,400
47,800
48, 700
220,600
Strategic storage study
000
1, 000
Naval Petroleum and Oil Shale Res. Administration
8, 000
8, 000
8, 000
8, 000
32,000
Total expenses
11, 800
219, 232
237,052
189, 522
136, 050
793, 656
ESTIMATED INCOME
(Crude oil value of $10bbl)
NPR 1
345,600
424,130
424,130
30, 000
1,223,860
NPR 2
300
2,070
1,870
690
1, 530
7, 460
NPR 3
1, 200
26,300
78,000
58,900
39,600
204,000
Total income
1, 500
373,970
504,000
484,720
71, 130
1, 435, 320
Net income
(10, 300)
154, 738
266, 948
295, 198
(64, 920)
641, 664
Fiscal year 1977 includes a 3-mo. transition period to adjust to a new fiscal year commencing Oct. 1, 1977.
CHANGES IN EXISTING LAW
In compliance with the Rules of the House of Representatives, there is herewith printed in parallel columns the
text of provisions of existing law which would be repealed or amended by the various provisions of the bill as re-
ported.
EXISTING LAW
THE BILL AS REPORTED
CHAPTER 641-NAVAL PETROLEUM RESERVES
The analysis of such chapter 641 is amended—
SEC.
(1) by inserting immediately before
7421. Jurisdiction and control.
"7421. Jurisdiction and control."
12
7422. Administration.
7423. Periodic re-examination of production requirements.
the following:
7424. Protection of oil reserves; contracts for conservation.
7425. Acquisition by condemnation and purchase.
"7420. Definitions.";
7426. Cooperative or unit plans affecting naval petroleum reserve
and
numbered 1.
7427. Cooperative or unit plans in the naval petroleum reserves.
(2) by striking out
7428. Agreement and leases provision for change.
7429. Re-lease of certain lands: lessee's preferential right.
"7432. Expenditures: appropriations available."
7430. Disposition of products.
7431. Requirements as to consultation and approval.
and inserting in lieu thereof the following:
7432. Expenditures appropriations chargeable.
"7432. Naval petroleum and oil shale reserve special fund."
7433. Disposition of royalties.
7434. Quarterly reports to Armed Services Committees.
7435. Foreign interest.
7436. Regulations.
7437. Violations by lessee.
7438. Exclusion of naval oil-shale reserves.
(1) Immediately before section 7421 insert the fol-
lowing new section:
"§ 7420. Definitions
" (a) In this chapter-
(1) 'national defense' includes the needs of, and
the planning and preparedness to meet, essential de-
fense industrial and military emergency energy re-
quirements relative to the national safety, welfare,
and economy, particularly resulting from foreign
military or economic actions;
(2) 'naval petroleum and oil shale reserves' means
the naval petroleum and oil shale reserves established
by this chapter, including Naval Petroleum Reserve
Numbered 1 (Elk Hills), located in Kern County,
California, established by Executive order of the
13
President on September 2, 1912; Naval Petroleum
Reserve Numbered 2 (Buena Vista), located in Kern
County, California, established by Executive order
of the President on December 13, 1912; Naval Pe-
troleum Reserve Numbered 3 (Teapot Dome), located
in Wyoming, established by Executive order of the
President on April 30, 1915; Naval Petroleum Reserve
Numbered 4, Alaska, on the north slope of the Brooks
Range, established by Executive order of the Presi-
EXISTING LAW
THE BILL AS REPORTED
dent of February 27, 1923; Oil Shale Reserve Num-
bered 1, located in Colorado, established by Executive
order of the President of December 6, 1916, as
amended by Executive order of June 12, 1919; Oil
Shale Reserve Numbered 2, located in Utah, estab-
lished by Executive order of the President of Decem-
ber 6, 1916; and Oil Shale Reserve Numbered 3, lo-
cated in Colorado, established by Executive order of
the President of September 27, 1924;
"(3) 'petroleum' includes crude oil, associated gases,
natural gasoline, and other related hydrocarbons, oil
shale, and the products of any of such resources; and
14
"(4) 'Secretary' means the Secretary of the Navy.".
§ 7421. Jurisdiction and control
Section 7421 (a) is amended-
(a) The Secretary of the Navy shall take possession of
(A) by striking out "for naval purposes" and in-
all properties, inside the naval petroleum and oil shale
serting in lieu thereof "for use of the Armed Forces";
reserves that are or may become subject to the control of
and
and use by the United States for naval purposes, except as
(B) by striking out "section 7438 hereof" and in-
otherwise provided in section 7438 hereof.
serting in lieu thereof "this chapter".
(b) The Secretary has exclusive jurisdiction and con-
trol over those lands inside naval petroleum reserves num-
bered 1 and 2 that are covered by leases granted under sec-
tions 181-184, 185-188, 189-194, 201, 202-209, 211-214, 223,
224-226, 226d, 226e, 227-229a, 241, 251, and 261-263 of title
30, and shall administer those leases. As amended Oct. 11,
1962, Pub. L. 87-796, § 1(1), 76 Stat. 904.
§ 7422. Adminisration
Section 7422 is amended by adding at the end
(a) Except as otherwise provided in section 7438 hereof,
thereof the following new subsection:
the Secretary of the Navy, directly or by contract, lease, or
(d) (1) In order to place certain naval petroleum re-
otherwise, shall explore, prospect, conserve, develop, use,
serves in a proven state of readiness to produce petroleum,
and operate the naval petroleum and oil shale reserves in
the Secretary is authorized-
his discretion, subject to approval by the President.
(A) to explore, develop, operate, and produce pe-
(b) The naval petroleum and oil shale reserves and
troleum, from Naval Petroleum Reserves Numbered 1,
lands outside naval petroleum reserve numbered 1 cov-
2, and 3 at a rate consistent with sound oilfield engi-
ered by contracts under section 7426 of this title, shall be
neering practices up to two hundred thousand barrels
used and operated for—
per day for a period not to exceed three years com-
(1) the protection, conservation, maintenance, and
mencing ninety days after enactment of this legisla-
testing of those reserves; or
tion; and
(2) the production of petroleum, gas, oil shale and
(B) to construct or procure pipelines and associ-
products thereof whenever and to the extent that the
ated facilities for transporting oil, associated liquids,
Secretary, with the approval of the President, finds
and gases, from Naval Petroleum Reserves Numbered
that it is needed for national defense and the produc-
1, 2, and 3 to the points where such production will be
15
tion is authorized by a joint resolution of Congress.
refined or shipped.
(c) The Secretary of the Navy may under subsection
Such pipelines at Naval Petroleum Reserve Numbered 1
(a) develop the South Barrow gas field, naval petroleum
shall have a combined delivery capability of not less than
reserve numbered 4, to supply gas to installations of the
three hundred and fifty thousand barrels per day, and
Department of Defense and other agencies of the United
shall be fully operable by three years after the date of
States located at or near Point Barrow, Alaska, the native
enactment of this subsection.
village of Barrow, and other communities and installa-
"(2) The production authorization set forth in para-
tions at or near Point Barrow, Alaska. As amended Aug.
graph (1) (A) of this subsection is conditioned upon the
24, 1962, Pub. L. 87-599, §1, 76 Stat. 401; Oct. 11, 1962,
Secretary reaching an agreement with the private owner
Pub. L. 87-796, § 1(2), 76 Stat. 904.
to continue operation of Naval Petroleum Reserve Num-
bered 1 under a unitized plan contract which adequately
protects the public interest.
EXISTING LAW
THE BILL AS REPORTED
"(3) The production of petroleum authorized under
this subsection is not subject to the provisions of subsection
(b) (2) of this section relating to Presidential approval or
congressional authorization.".
§ 7423. Periodic re-examination of production re-
Section 7423 is amended by inserting "(a)" immediately
quirements
before "The Secretary"; and by adding at the end thereof
The Secretary of the Navy shall from time to time re-
the following new subsection:
examine the need for the production of petroleum or prod-
(b) During the three-year period of production au-
ucts from oil shale for national defense when that produc-
thorized by subsection (d) of section 7422 (during which
tion is authorized under section 7422 of this title. If he
three-year period the consultation requirements of section
finds that the authorized quantity is no longer needed, he
7431 (3) are waived), the Secretary shall submit annual
shall reduce production to the amount currently needed
reports to the Armed Services Committees of the Senate
for national defense. As amended Oct. 11, 1962, Pub. L.
and the House of Representatives detailing-
87-796, § 1(3), 76 Stat. 904.
'(1) the status of the exploration and development
16
program at each of the naval petroleum reserves;
"(2) the production which has been achieved at
each of the naval petroleum reserves pursuant to that
authorization, including the disposition of such pro-
duction and the proceeds realized therefrom;
(3) the status of the pipeline construction and
procurement authorized by such subsection (d)
'(4) any need for modification of the production
levels authorized by such subsection (d), including
any recommendation for continuing production be-
yond the three-year period provided in such subsec-
tion; and
(5) the plans for further exploration, develop-
ment and production at Naval Petroleum Reserve
Numbered 4,"
§ 7430. Disposition of products
(a) The Secretary of the Navy in administering the
naval petroleum and oil shale reserves under this chapter
shall use, store, sell, or exchange for other petroleum or
refined products, the oil and gas products, including roy-
alty products, oil shale and products therefrom produced,
from lands in the naval petroleum and oil shale reserves,
including gas products from lands in the South Barrow
gas field of naval petroleum reserve numbered 4, and lands
outside petroleum reserve numbered 1 covered by joint,
unit, or other cooperative plans for the benefit of the
United States.
(b) Each sale of petroleum, gas, other hydrocarbons,
(5) Section 7430 is amended to read as follows:
oil shale, or products therefrom, under this section shall be
'(b) Notwithstanding any other provision of law, each
made by the Secretary at public sale to the highest quali-
sale of the United States share of petroleum, gas, other
fied bidder at such time, in such amounts, and after such
hydrocarbons, oil shale, or products therefrom, shall be
advertising as the Secretary considers proper. As amended
made by the Secretary at public sale to the highest quali-
Aug. 24, 1962, Pub. L. 87-599, § 2, 76 Stat. 401; Oct. 11,
fied bidder at such time, in such amounts, and after such
17
1962, Pub. L. 87-796, § 1(6), 76 Stat. 905.
advertising as the Secretary considers proper and with-
out regard to Federal, State, or local regulations control-
ling sales or allocation of petroleum products.".
(6) Section 7430 is further amended by adding at
the end thereof the following new subsection:
(c) Any disposition of the United States share of the
production authorized by section 7422 (d) shall be con-
ducted in such a manner as to insure that an amount of
petroleum products equal in value to the crude oil and asso-
ciated gases and liquids supplied from the naval petro-
leum reserves shall be made available exclusively to the
armed forces of the United States. Any disposition of
that production shall be SO arranged as to give full and
equal opportunity for acquisition of the petroleum and as-
sociated products by all interested companies, including
major and independent oil refineries alike.".
EXISTING LAW
THE BILL AS REPORTED
Section 7432 is amended to read as follows:
§ 7432. Expenditures: appropriations chargeable
"§ 7432. Naval petroleum and oil shale reserves spe-
(a) Expenses incurred by the Secretary of the Navy
cial fund
with respect to the naval petroleum and oil shale reserves
shall be paid from appropriations made available for the
" (a) There is hereby established on the books of the
Treasury Department a special fund designated the 'naval
purposes specified in this chapter.
petroleum and oil shale reserves special fund'. There shall
(b) Expenditures necessary to carry out this chapter
be credited to such fund-
shall be made under the direction of the President, who
(1) all proceeds realized under this chapter from
shall submit estimates for these expenditures as prescribed
the disposition of the United States share of petro-
by law. As amended Oct. 11, 1962, Pub. L. 87-796, § (8),
leum or refined products, oil and gas products, includ-
18
76 Stat. 905.
ing 66 royalty products;
(2) the net proceeds, if any, realized from sales
or exchanges within the Department of Defense of re-
fined petroleum products accruing to the benefits of
any component of that Department as the result of
any such sales or exchanges; and
" (3) such additional sums as have been, or may be,
appropriated for the maintenance, operation, explora-
tion, development, and production of the naval pe-
troleum and oil shale reserves.
(b) Funds available in the naval petroleum and oil
shale reserve special fund shall be available for expendi-
ture in such sums as are specified in annual congressional
appropriations Act for the expenses of-
" (1) exploration, prospecting, conservation, devel-
opment, use, operation, and production of the naval
petroleum and oil shale reserves as authorized by this
chapter;
(2) production, including preparation for produc-
tion as authorized by this Act, or as may hereafter be
authorized; and
" (3) the construction and operation of facilities
both within and outside the naval petroleum and oil
shale reserves incident to the production and the de-
livery of crude petroleum and derivatives, including
pipelines and shipping terminals.
(c) The budget estimates for annual appropriations
from the naval petroleum and oil shale reserve special fund
shall be prepared by the Office of Naval Petroleum and Oil
Shale Reserves and shall be presented by the President in-
19
dependently of the budget of the Department of the Navy
and the Department of Defense.
" (d) Contracts obligating only such funds as are ap-
propriated and made available annually may be entered
into by the Secretary for periods of not more than five
years renewable for a like term.".
20
21
SUMMARY
BACKGROUND AND PURPOSE
The legislation was originally referred to the House Armed Serv-
ices Committee as Title I of H.R. 2633 and H.R. 2650, the President's
Section 7433 (b) is amended by adding immediately
before the period at the end thereof the following: "and
credited to the naval petroleum and oil reserve special
(a) The Secretary of the Navy shall establish a study
group which shall investigate the feasibility of creating a
national strategic petroleum reserve (military) (here-
inafter in this section referred to as the "reserve"). Any
such reserve should include petroleum stored at strategic
locations, or available for delivery to such locations, and
include facilities for storage, transportation, or processing
thereof. In computing the amount of petroleum to be
stored in such reserve, the peacetime operating stocks and
prepositioned war reserve stocks of the Department of
Defense shall not be included. Such reserve should be in
addition to any national strategic petroleum reserve
(civilian) which may be otherwise provided for.
(b) The investigation required under subsection (a)
shall include, but need not be limited to, determinations
with respect to the size, scope, objectives, and all cost
factors associated with the establishment of the reserve.
In arriving at its findings and recommendations, the study
group shall consult with, and seek, the position of the
Joint Chiefs of Staff relative to the overall posture of the
(c) Not later than one year after the date of the enact-
ment of this Act, the Secretary of the Navy shall report to
the Congress the findings and recommendations of the
Energy Independence Act of 1975, which has reference to the Naval
Petroleum Reserves. H.R. 5919 is a clean bill reflecting the Armed
Services Committee changes in the Administration's proposals.
The most significant provisions of H.R. 5919 would require a pro-
duction limit of 200,000 barrels per day for a period not to exceed
three years in the Naval Petroleum Reserves and the oil would be sold
exclusively to the Department of Defense, with the proceeds placed
in a special fund to be used for further exploration, development and
production of the Naval Petroleum Reserves. Use of the fund would
be subject to the appropriations process. There would be a study re-
garding the establishment of a National Strategic Petroleum Reserve
(military).
FISCAL DATA
A start-up funding of $10,300,000 would be required in FY 75.
Thereafter, proceeds from the sale of the petroleum produced would
special fund".
study group.
cover costs and create a surplus which would amount to $640 million
at the end of FY 79.
reserve.
DEPARTMENTAL POSITION
The Department of Defense favors H.R. 2633 and H.R. 2650, the
Energy Independence Act of 1975, which are duplicate Administra-
tion bills.
COMMITTEE POSITION
The Committee on Armed Services on April 15, 1975 favorably re-
ported the bill as amended in Committee by a vote of 28 to 3.
§ 7433. Disposition of royalties
(a) Any oil, gas, gasoline or other substance accruing
to the United States as royalty from any lease under this
chapter shall be delivered to the United States, or shall be
O
paid for in money, as the Secretary of the Navy elects.
(b) All money accruing to the United States from lands
in the naval petroleum and oil shale reserves shall be
covered into the Treasury. As amended Oct. 11, 1962,
Pub. L. 87-796, § 1 (9), 76 Stat. 905.
94TH CONGRESS
}
HOUSE OF REPRESENTATIVES
REPORT
2d Session
No. 94-942
DEVELOPMENT OF CERTAIN NATIONAL PETROLEUM
RESERVES
MARCH 23, 1976.-Ordered to be printel
Mr. MELCHER, from the committee of conference,
submitted the following
CONFERENCE REPORT
[To accompany H.R. 49]
The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 49) to
authorize the Secretary of the Interior to establish on certain public
lands of the United States national petroleum reserves the develop-
ment of which needs to be regulated in a manner consistent with the
total energy needs of the Nation, and for other purposes, having met,
after full and free conference, have agreed to recommend and do
recommend to their respective Houses as follows:
That the House recede from its disagreement to the amendment
of the Senate and agree to the same with an amendment as follows:
In lieu of the matter proposed to be inserted by the Senate amend-
ment insert the following:
That this Act may be cited as the "Naval Petroleum Reserves
Production Act of 1976".
TITLE I-NATIONAL PETROLEUM RESERVE IN ALASKA
DEFINITION
SEC. 101. As used in this title, the term "petroleum" includes crude
oil, gases (including natural gas), natural gasoline, and other related
hydrocarbons, oil shale, and the products of any of such resources.
DESIGNATION OF THE NATIONAL PETROLEUM RESERVE IN ALASKA
SEC. 102. The area known as Naval Petroleum Reserve Numbered 4,
Alaska, established by Executive order of the President, dated Febru-
ary 27, 1923, except for tract Numbered 1 as described in Public Land
Order 2344, dated April 24, 1961, shall be transferred to and admin-
istered by the Secretary of the Interior in accordance with the prom-
FORD
sions of this Act. Effective on the date of transfer all lands within
57-006 0
GERAL
LIBRARY
2
3
such area shall be redesignated as the "National Petroleum Reserve in
(b) Any exploration within the Utukok River, the Teshekpuk
Alaska" (hereinafter in this title referred to as the "reserve"). Sub-
Lake areas, and other areas designated by the Secretary of the Interior
ject to valid existing rights, all lands within the exterior boundaries
containing any significant subsistence, recreational, fish and wildlife,
of such reserve are hereby reserved and withdrawn from all forms of
or historical or scenic value, shall be conducted in a manner which will
entry and disposition under the public land laws, including the min-
assure the maximum protection of such surface values to the extent
ing and mineral leasing laws, and all other Acts; but the Secretary is
consistent with the requirements of this Act for the exploration of the
authorized to (1) make dispositions of mineral materials pursuant to
reserve.
the Act of July 31, 1947 (61 Stat. 681), as amended (30 U.S.C. 601),
(c) The Secretary of the Navy shall continue the ongoing petroleum
for appropriate use by Alaska Natives, (2) make such dispositions of
exploration program within the reserve until the date of the transfer
mineral materials and grant such rights-of-way, licenses, and permits
of jurisdiction specified in section 103 (α). Prior to the date of such
as may be necessary to carry out his responsibilities under this Act,
transfer of jurisdiction the Secretary of the Navy shall-
and (3) convey the surface of lands properly selected on or before
(1) cooperate fully with the Secretary of the Interior providing
December 18, 1975, by Native village corporations pursuant to the
him access to such facilities and such information as he may re-
Alaska Native Claims Settlement Act. All other provisions of law
quest to facilitate the transfer of jurisdiction;
heretofore enacted and actions heretofore taken reserving such lands
(2) provide to the Committees on Interior and Insular Affairs
as a Naval Petroleum Reserve shall remain in full force and effect to
of the Senate and the House of Representatives copies of any re-
the extent not inconsistent with this Act.
ports, plans, or contracts pertaining to the reserve that are re-
quired to be submitted to the Committees on Armed Services of
TRANSFER OF JURISDICTION
the Senate and the House of Representatives; and
(3) cooperate and consult with the Secretary of the Interior
SEC. 103. (a) Jurisdiction over the reserve shall be transferred by
before executing any new contract or amendment to any existing
the Secretary of the Navy to the Secretary of the Interior on June 1,
contract pertaining to the reserve and allow him a reasonable op-
1977.
portunity to comment on such contract or amendment, as the case
(b) With respect to any activities related to the protection of en-
may be.
vironmental, fish and wildlife, and historical or scenic values, the
(d) The Secretary of the Interior shall commence further petroleum
Secretary of the Interior shall assume all responsibilities as of the
exploration of the reserve as of the date of transfer of jurisdiction
date of the enactment of this title. A8 soon as possible, but not later
specified in section 103 (a). In conducting this exploration effort, the
than the effective date of transfer, the Secretary of the Interior may
Secretary of the Interior-
promulgate such rules and regulations as he deems necessary and ap-
(1) is authorized to enter into contracts for the exploration of
propriate for the protection of such values within the reserve.
the reserve, except that no such contract may be entered into until
(c) The Secretary of the Interior shall, upon the effective date of
at least thirty days after the Secretary of the Interior has pro-
the transfer of the reserve, assume the responsibilities and functions of
vided the Attorney General with a copy of the proposed contract
the Secretary of the Navy under any contracts which may be in effect
and such other information as may be appropriate to determine
with respect to activities within the reserve.
legal sufficiency and possible violations under, or inconsistencies
(d) On the date of transfer of jurisdiction of the reserve, all equip-
with, the antitrust laws. If, within such thirty day period, the
ment, facilities, and other property of the Department of the Navy
Attorney General advises the Secretary of the Interior that any
used in connection with the operation of the reserve, including all
such contract would unduly restrict competition or be inconsistent
records, maps, exhibits, and other informational data held by the
with the antitrust laws, then the Secretary of the Interior may
Secretary of the Navy in connection with the reserve, shall be trans-
not execute that contract;
ferred without reimbursement from the Secretary of the Navy to the
(2) shall submit to the Committees on Interior and Insular
Secretary of the Interior who shall thereafter be authorized to use
Affairs of the Senate and the House of Representatives any new
them to carry out the provisions of this title.
plans or substantial amendments to ongoing plans for the explora-
(e) On the date of transfer of jurisdiction of the reserve, the Secre-
tion of the reserve. All such plans or amendments submitted to
tary of the Navy shall transfer to the Secretary of the Interior all
such committees pursuant to this section shall contain a report by
unexpended funds previously appropriated for use in connection with
the Attorney General of the United States with respect to the
the reserve and all civilian personnel ceilings assigned by the Secretary
anticipated effects of such plans or amendments on competition.
of the Navy to the management and operation of the reserve as of
Such plans or amendments shall not be implemented until sixty
January 1, 1976.
days after they have been submitted to such committees; and
ADMINISTRATION OF THE RESERVE
(3) shall report annually to the Committees on Interior and
Insular Affairs of the Senate and the House of Representatives
Sec. 104. (a) Except as provided in subsection (e) of this section,
on the progress of, and future plans for, exploration of the
production of petroleum from the reserve is prohibited and no develop-
reserve.
ment leading to production of petroleum from the reserve shall be
(e) Until the reserve is transferred to the jurisdiction of the Secre-
undertaken until authorized by an Act of Congress.
tary of the Interior, the Secretary of the Navy is authorized to develop
4
5
and continue operation of the South Barrow gas field, or such other
(3) The Secretary of the Interior shall submit a report, together
fields as may be necessary, to supply gas at reasonable and equitable
with the concurring or dissenting views, if any, of any non-Federal
rates to the native village of Barrow, and other communities and in-
representatives of the task force, of the results of such study to the
stallations at or near Point Barrow, Alaska, and to installations of the
Committees on Interior and Insular Affairs of the Senate and the
Department of Defense and other agencies of the United States
House of Representatives within three years after the date of en-
located at or near Point Barrow, Alaska. After such transfer, the
actment of this title and shall include in such report his recommen-
Secretary of the Interior shall take such actions as may be necessary
dations with respect to the value, best use, and appropriate designation
to continue such service to such village, communities, installations, and
of the lands referred to in paragraph (1).
agencies at reasonable and equitable rates.
ANTITRUST PROVISIONS
STUDY OF THE RESERVE
SEC. 106. Unless otherwise provided by Act of Congress, whenever
Sec. 105. (a) Section 164 of the Energy Policy and Conservation
development leading to production of petroleum is authorized, the pro-
Act (89 Stat. 871, 889), is hereby amended by deleting in the first
visions of subsections (g), (h), and (i) of section 7430 of title 10,
sentence "to the Congress" and by inserting in lieu thereof "to the
United States Code, shall be deemed applicable to the Secretary of the
Committees on Interior and Insular Affairs of the Senate and House
Interior with respect to rules and regulations, plans of development
of Representatives".
and amendments thereto, and contracts and operating agreements. All
(b) (1) The President shall direct such Executive departments and/
plans and proposals submitted to the Congress under this title or
or agencies as he may deem appropriate to conduct a study, in con-
pursuant to legislation authorizing development leading to produc-
sultation with representatives of the State of Alaska, to determine
tion shall contain a report by the Attorney General of the United
the best overall procedures to be used in the development, production,
States on the anticipated effects upon competition of such plans and
transportation, and distribution of petroleum resources in the reserve.
proposals.
Such study shall include, but shall not be limited to, a considera-
AUTHORIZATION FOR APPROPRIATIONS
tion of-
SEC. 107. (a) There are authorized to be appropriated to the Depart-
(4) the alternative procedures for accomplishing the devel-
ment of the Interior such sums as may be necessary to carry out the
opment, production, transportation, and distribution of the petro-
provisions of this title.
leum resources from the reserve, and
(b) If the Secretary of the Interior determines that there is an im-
(B) the economic and environmental consequences of such
mediate and substantial increase in the need for municipal services and
alternative procedures.
facilities in communities located on or near the reserve as a direct result
(2) The President shall make semiannual progress reports on the
of the exploration and study activities authorized by this title and that
implementation of this subsection to the Committees on Interior and
an unfair and excessive financial burden will be incurred by such com-
Insular Affairs of the Senate and the House of Representatives begin-
munities as a result of the increased need for such services and fa-
ning not later than six months after the date of the enactment of this
cilities, then he is authorized to assist such communities in meeting the
Act and shall, not later than one year after the transfer of jurisdic-
costs of providing increased municipal services and facilities. The
tion of the reserve, and annually thereafter, report any findings or
Secretary of the Interior shall carry out the provisions of this section
conclusions developed as a result of such study together with appro-
through existing Federal programs and he shall consult with the heads
priate supporting data and such recommendations as he deems desir-
of the departments or agencies of the Federal Government concerned
able. The study shall be completed and submitted to such committees,
with the type of services and facilities for which financial assistance is
together with recommended procedures and any proposed legislation
being made available.
necessary to implement such procedures not later than January 1,
1980.
TITLE II-NAVAL PETROLEUM RESERVES
(c) (1) The Secretary of the Interior shall establish a task force
to conduct a study to determine the values of, and best uses for, the
SEC. 201. Chapter 641 of title 10, United States Code, is amended as
lands contained in the reserve, taking into consideration (4) the
follows:
natives who live or depend upon such lands, (B) the scenic, histori-
(1) Immediately before section 7421 insert the following new
cal, recreational, fish and wildlife, and wilderness values, (C) min-
section:
eral potential, and (D) other values of such lands.
(2) Such task force shall be composed of representatives from the
"§ 7420. Definitions
government of Alaska, the Arctic slope native community, and such
(a) In this chapter—
offices and bureaus of the Department of the Interior as the Secre-
"(1) 'national defense' includes the needs of, and the planning
tary of the Interior deems appropriate, including, but not limited to,
and preparedness to meet, essential defense, industrial, and mili-
the Bureau of Land Management, the United States Fish and Wild-
tary emergency energy requirements relative to the national safe-
life Service, the United States Geological Survey, and the Bureau
ty, welfare, and economy, particularly resulting from foreign mil-
of Mines.
itary or economic actions;
6
7
'(2) 'naval petroleum reserves' means the naval petroleum and
such production is needed for national defense purposes and the
oil shale reserves established by this chapter, including Naval
production is authorized by a joint resolution of Congress.
Petroleum Reserve Numbered 1 (Elk Hills), located in Kern
(c) (1) In administering Naval Petroleum Reserves Numbered 1,
County, California, established by Executive order of the Presi-
2, and 3, the Secretary is authorized and directed-
dent, dated September 2, 1912; Naval Petroleum Reserve Num-
(4) to further explore, develop, and operate such reserves;
bered 2 (Buena Vista), located in Kern County, California, es-
"(B) commencing within ninety days after the date of enact-
tablished by Executive order of the President, dated December 13,
ment of the Naval Petroleum Reserves Production Act of 1976,
1912: Naval Petroleum Reserve Numbered 3 (Teapot Dome),
to produce such reserves at the maximum efficient rate consistent
located in Wyoming, established by Executive order of the Presi-
with sound engineering practices for a period not to exceed six
dent, dated April 30, 1915; Naval Petroleum Reserve Numbered 4,
years after the date of enactment of such Act;
Alaska, established by Executive order of the President, dated
"(C) during such production period or any extension thereof
February 27, 1923 (until redesignated as the National Petroleum
to sell or otherwise dispose of the United States share of such
Reserve in Alaska under the jurisdiction of the Secretary of the
petroleum produced from such reserves as hereinafter provided;
Interior as provided in the Naval Petroleum Reserves Production
and
Act of 1976), Oil Shale Reserve Numbered 1, located in Colorado,
"(D) to construct, acquire, or contract for the use of storage
established by Executive order of the President, dated December 6,
and shipping facilities on and off the reserves and pipelines and
1916, as amended by Executive order dated June 12, 1919; Oil
associated facilities on and off the reserves for transporting petro-
Shale Reserve Numbered 2, located in Utah, established by Execu-
leum from such reserves to the points where the production from
tive order of the President, dated December 6, 1916; and Oil Shale
such reserves will be refined or shipped.
Reserve Numbered 3, located in Colorado, established by Executive
Any pipeline in the vicinity of a naval petroleum reserve not other-
order of the President, dated September 27, 1924;
wise operated as a common carrier may be acquired by the Secretary
(3) 'petroleum' includes crude oil, gases (including natural
by condemnation, if necessary, if the owner thereof refuses to accept,
gas), natural gasoline, and other related hydrocarbons, oil shale,
convey, and transport without discrimination and at reasonable rates
and the products of any of such resources;
any petroleum produced at such reserve. With the approval of the
(4) 'Secretary' means the Secretary of the Navy
Secretary, rights-of-way for new pipelines and associated facilities
(5) 'small refiner' means an owner of a refinery or refineries
may be acquired by the exercise of the right of eminent domain in
(including refineries not in operation) who qualifies as a small
the appropriate United States district court. Such rights-of-way may
business refiner under the rules and regulations of the Small
be acquired in the manner set forth in the Act of February 26, 1931,
Business Administration; and
chapter 307 (46 Stat. 1421; 40 U.S.C. 258(a)), and the prospective
(6) 'maximum efficient rate' means the maximum sustainable
holder of the right-of-way is 'the authority empowered by law to
daily oil or gas rate from a reservoir which will permit economic
acquire the lands' within the meaning of that Act. Such new pipelines
development and depletion of that reservoir without detriment to
shall accept, convey, and transport without discrimination and at rea-
the ultimate recovery.".
sonable rates any petroleum produced at such reserves as a common
(2) Section 7421 (α) is amended—
carrier. Pipelines and associated facilities constructed at or procured
(A) by striking out "of the Navy";
for Naval Petroleum Reserve Numbered 1 pursuant to this subsection
(B) by striking out "and oil shale";
shall have adequate capacity to accommodate not less than three hun-
(σ) by striking out "for naval purposes" and inserting in lieu
dred fifty thousand barrels of oil per day and shall be fully operable
thereof "for national defense purposes"; and
as soon as possible, but not later than three years after the date of
(D) by striking out "section 7438 hereof" and inserting in lieu
enactment of the Naval Petroleum Reserves Production Act of 1976.
thereof 'this chapter".
"(2) At the conclusion of the six-year production period author-
(3) The text of section 7422 is amended to read as follows:
ized by paragraph (1) (B) of this subsection the President may extend
(a) The Secretary, directly or by contract, lease, or otherwise, shall
the period of production in the case of any naval petroleum reserve
explore, prospect, conserve, develop, use, and operate the naval petro-
for additional periods of not to exceed three years each-
leum reserves in his discretion, subject to the provisions of subsection
"(A) after the President requires an investigation to be made,
(c) and the other provisions of this chapter; except that no petroleum
in the case of each extension, to determine the necessity for con-
leases shall be granted at Naval Petroleum Reserves Numbered 1 and 3.
tinued production from such naval petroleum reserve;
(b) Except as otherwise provided in this chapter, particularly
(B) after the President submits to the Congress, at least one
subsection (c) of this section, the naval petroleum reserves shall be
hundred eighty days prior to the expiration of the current
used and operated for
production period prescribed by this section, or any extension
"(1) the protection, conservation, maintenance, and testing of
thereof, a copy of the report made to him on such investigation
those reserves; or
together with a certification by him that continued production
"(2) the production of petroleum whenever and to the extent
from such naval petroleum reserve is in the national interest; and
that the Secretary, with the approval of the President, finds that
8
9
"(C) if neither House of Congress within ninety days after
"(d) Each proposal for sale under this title shall provide that the
receipt of such report and certification adopts a resolution dis-
terms of every sale of the United States share of petroleum from the
approving further production from such naval petroleum reserve.
naval petroleum reserves shall be 80 structured as to give full and
"(3) The production authorization set forth in paragraph (1) (B)
equal opportunity for the acquisition of petroleum by all interested
of this subsection, in the case of Naval Petroleum Reserve Numbered
persons, including major and independent oil producers and
1, is conditioned upon the private owner of any lands or interests
refiners alike. When the Secretary, in consultation with the Secretary
therein within such reserve agreeing with the Secretary to continue
of the Interior, determines that the public interests will be served by
operations of such reserve under a unitized plan contract which ade-
the sale of petroleum to small refiners not having their own adequate
quately protects the public interest; however, if such agreement is not
sources of supply of petroleum, the Secretary is authorized and
reached within ninety days after the date of enactment of the Naval
directed to set aside a portion of the United States share of petroleum
Petroleum Reserves Production Act of 1976 the Secretary is author-
produced for sale to such refiners under the provisions of this section
ized to exercise the authority for condemnation conferred by section
for processing or use in such refineries, except that-
7425 of this chapter.".
'(1) none of the production sold to small refiners may be resold
(4) The first sentence of section 7423 is amended by deleting "of the
in kind;
Navy" and "or products".
"(2) production must be sold at a cost of not less than the pre-
(5) Section 7424 is amended-
vailing local market price of comparable petroleum;
(A) by deleting "of the Navy" in the text of subsection (a)
"(3) the set-aside portion may not exceed 25 per centum of the
preceding clause (1);
estimated annual United States share of the total production from
(B) by deleting "and oil shale" in subsection (a) (1) in the text
all producing naval petroleum reserves; and
preceding subclause (4); and
(4) notwithstanding the provisions of subsection (b) of this
(C) by deleting "in the ground" in clause (1) (4) of sub-
section, the Secretary may, at his discretion if he deems it to be
section (a).
in the public interest, prorate such petroleum among such refiners
(6) Section 7425 is amended by deleting "of the Navy".
for sale, without competition, at not less than the prevailing local
(7) Section 7426 (a) is amended by striking out "the Secretary of
market price of comparable petroleum.
the Navy" and inserting in lieu thereof "Subject to the provisions of
"(e) Any petroleum produced from the naval petroleum reserves,
section 7422 (c), the Secretary".
except such petroleum which is either exchanged in similar quantities
(8) The first and second sentences of section 7427 are amended by
for convenience or increased efficiency of transportation with persons
striking out "of the Navy".
or the government of an adjacent foreign state, or which is temporarily
(9) Section 7428 is amended by striking out "within the naval
exported for convenience or increased efficiency of transportation
petroleum and oil shale reserves shall contain a provision authorizing
across parts of an adjacent foreign state and reenters the United States,
the Secretary of the Navy" and inserting in lieu thereof "within Naval
shall be subject to all of the limitations and licensing requirements of
Petroleum Reserve Numbered 2' and the oil shale reserves shall contain
the Export Administration Act of 1969 (83 Stat. 841) and, in addition,
a provision authorizing the Secretary".
before any petroleum subject to this section may be exported under
(10) The first sentence of section 7429 is amended by deleting "of
the limitations and licensing requirement and penalty and enforce-
the Navy".
ment provisions of the Export Administration Act of 1969, the Presi-
(11) The text of section 7430 is amended to read as follows:
dent must make and publish an express finding that such exports will
(a) In administering the naval petroleum reserves under this chap-
not diminish the total quality or quantity of petroleum available to the
ter, the Secretary shall use, store, or sell the petroleum produced from
United States and that such exports are in the national interest and
the naval petroleum reserves and lands covered by joint, unit, or other
are in accord with the Export Administration Act of 1969.
cooperative plans.
"(f) During the period of production or any extension thereof
"(b) Notwithstanding any other provision of law, each sale of the
United States share of petroleum shall be made by the Secretary at
authorized by section 7422(c), the consultation and approval require-
ments of section 7431 (a) (3) are waived.
public sale to the highest qualified bidder, for periods of not more than
"(g) (1) Prior to the promulgation of any rules and regulations,
one year, at such time, in such amounts, and after such advertising as
plans of development and amendments thereto, and in the entering and
the Secretary considers proper and without regard to Federal, State,
making of contracts and operating agreements relating to the develop-
or local regulations controlling sales or allocation of petroleum
ment, production, or sale of petroleum in or from the reserves, the
products.
"(c) In no event shall the Secretary permit the award of any con-
Secretary shall consult with and give due consideration to the views
tract which would result in any person obtaining control, directly or
of the Attorney General of the United States with respect to matters
indirectly, over more than 20 per centum of the estimated annual
which may affect competition.
United States share of petroleum produced from Naval Petroleum
(2) No contract or operating agreement may be made, issued, or
Reserve Numbered 1.
executed under this chapter until at least thirty days after the Sec-
10
11
retary notifies the Attorney General of the proposed contract or op-
by sections 151 through 166 of the Energy Policy and Conservation
erating agreement. Such notification shall contain such information
Act or that all or any part of such share be exchanged for petroleum
as the Attorney General may require in order to advise the Secretary
of equal value for the purpose of placing such petroleum in such
as to whether such contract or operating agreement may create or
strategic storage facilities.".
maintain a situation inconsistent with the antitrust laws. If, within
(12) Section 7431 is amended-
such thirty day period, the Attorney General advises the Secretary
(A) by inserting (a)" immediately before "The Committees";
that a contract or operating agreement may create or maintain a sit-
(B) by striking out "or oil shale" in clauses (1) and (2) ;
uation inconsistent with the antitrust laws, then the Secretary may not
(C) by striking out "and oil shale" in clauses (2) and (3)
make, issue, or execute that contract or operating agreement.
(D) by striking out "oil and gas (other than royalty oil and
"(h) Nothing in this chapter shall be deemed to confer on any per-
gas), oil shale, and products therefrom" in clause (3) and insert-
son immunity from civil or criminal liability, or to create defenses to
ing in lieu thereof "petroleum (other than royalty oil and gas)
actions, under the antitrust laws.
and
'(i) A8 used in this section, the term 'antitrust laws' means-
(E) by adding at the end thereof the following new subsections:
"(1) the Act entitled 'An Act to protect trade and commerce
'(b) (1) During the period of production authorized by section
against unlaroful restraints and monopolies', approved July 2,
7422 (c), the Secretary shall submit to the Committees on Armed
1890 (15 U.S.C. 1 et seq.), as amended;
Services of the Senate and the House of Representatives any new plans
"(2) the Act entitled 'An Act to supplement existing laws
or substantial amendments to ongoing plans for the exploration, de-
against unlawful restraints and monopolies, and for other pur-
velopment, and production of the naval petroleum reserves.
poses', approved October 15, 1914 (15 U.S.C. 12 et seq.), as
(2) All plans or substantial amendments submitted to the Congress
amended;
pursuant to this section shall contain a report by the Attorney General
"(3) the Federal Trade Commission Act (15 U.S.C. 41 et seq.),
of the United States with respect to the anticipated effects of such
as amended;
plans or amendments on competition. Such plans or amendments shall
"(4) sections 73 and 74 of the Act entitled 'An Act to reduce
not be implemented until sixty days after such plans or amendments
taxation, to provide revenue for the Government, and for other
have been submitted to such committees.
purposes', approved August 27, 1894 (15 U.S.C. 8 and 9), as
(c) During the period of production authorized by section 7422 (c),
amended; or
the Secretary shall submit annual reports as of the first day of the
(5) sections 2, 3, and 4 of the Act of June 19, 1936, chapter
fiscal year to the Committees on Armed Services of the Senate and
592 (15 U.S.C. 13a, 13b, and 21a).
the House of Representatives, and such committees shall cause such
"(j) Any pipeline which accepts, conveys, or transports any petro-
reports to be printed as a Senate or House document, as appropriate.
leum produced from Naval Petroleum Reserves Numbered 1 or Num-
The Secretary shall include in such reports, with respect to each naval
bered 3 shall accept, convey, and transport without discrimination and
petroleum reserve, an explanation in detail of the following:
at reasonable rates any such petroleum as a common carrier insofar as
(1) the status of the exploration, development, and production
petroleum from such reserves is concerned. Every contract entered into
programs;
by the Secretary for the sale of any petroleum owned by the United
"(2) the production that has been achieved, including the dis-
States which is produced from such reserves shall contain provisions
position of such production and the proceeds realized therefrom;
implementing the requirements of the preceding sentence if the con-
(3) the status of pipeline construction and procurement and
tractor owns a controlling interest in any pipeline or any company
problems related to the availability of transportation facilities;
operating any pipeline, or is the operator of any pipeline, which carries
"(4) a summary of future plans for exploration, development,
any petroleum produced from such naval petroleum reserves. The Sec-
production, disposal, and transportation of the production from
retary may promulgate rules and regulations for the purpose of carry-
the naval petroleum reserves; and
ing out the provisions of this section and he, or the Secretary of the
"(5) such other information regarding the reserve as the Secre-
Interior where the authority extends to him, may declare forfeit any
tary deems appropriate.".
contract, operating agreement, right-of-way, permit, or easement held
(13) Section 7432 is amended to read as follows:
by any person violating any such rule or regulation. This section shall
"§ 7432. Naval petroleum reserves special account
not apply to any natural gas common carrier pipeline operated by any
person subject to regulation under the Natural Gas Act or any public
(a) There is hereby established on the books of the Treasury De-
utility subject to regulation by a State or municipal regulatory agency
partment a special account designated as the 'naval petroleum reserves
having jurisdiction to regulate the rates and charges for the sale of
special account. There shall be credited to such account-
natural gas to consumers within the State or municipality.
"(1) all proceeds realized under this chapter from the disposi-
"(k) The President may, at his discretion, direct that all or any
tion of the United States share of petroleum;
part of the United States share of petroleum produced from the naval
(2) the net proceeds, if any, realized from sales or exchanges
petroleum reserves be placed in strategic storage facilities as authorized
within the Department of Defense of refined petroleum products
13
12
"7420. Definitions."
accruing to the benefit of any component of that department as
the result of any such sales or exchanges;
(B) by striking out;
(3) such additional sums as may be appropriated for the main-
"7432. Expenditures; appropriations chargeable."
tenance, operation, exploration, development, and production of
and inserting in lieu thereof the following
the naval petroleum reserves;
(4) such royalties as may accrue under the provisions of sec-
"7432. Naval petroleum reserve special account."
tion 7433; and
And the Senate agree to the same.
(5) any other revenues resulting from the operation of the
JOHN MELCHER,
naval petroleum reserves.
HAROLD T. JOHNSON,
(b) Funds available in the naval petroleum reserve special account
PHILLIP BURTON,
shall be available for expenditure in such sums as are specified in
HAROLD RUNNELS,
annual appropriations Acts for the expenses of-
GEORGE MILLER,
"(1) exploration, prospecting, conservation, development, use,
MELVIN PRICE,
operation, and production of the naval petroleum reserves as au-
CHARLES BENNETT,
thorized by this chapter;
JOE SKUBITZ,
"(2) production (including preparation for production) as au-
SAM STEIGER,
thorized by this chapter, or as may hereafter be authorized;
WILLIAM L. DICKINSON,
(3) the construction and operation of facilities both within and
F. EDWARD HÉBERT,
outside the naval petroleum reserves incident to the production
JOHN F. SEIBERLING,
and the delivery of petroleum, including pipelines and shipping
DON YOUNG,
terminals;
Managers on the Part of the House.
"(4) the procurement of petroleum for, and the construction
HOWARD W. CANNON,
and operation of facilities associated with, the Strategic Petroleum
JOHN C. STENNIS,
Reserve authorized by sections 151 through 166 of the Energy
STUART SYMINGTON,
Policy and Conservation Act; and
SAM NUNN,
(5) the exploration and study of the National Petroleum Re-
GARY HART,
serve in Alaska as authorized in title I of the Naval Petroleum
HENRY M. JACKSON,
Reserves Production Act of 1976.
LEE METCALF,
(c) The budget estimates for annual appropriations from the naval
FLOYD K. HASKELL,
petroleum reserves special account shall be prepared by the Secretary
STROM THURMOND,
and shall be presented to the Congress by the President independently
WILLIAM L. SCOTT,
of the budget of the Department of the Navy and the Department
ROBERT TAFT,
of Defense.
CLIFFORD P. HANSEN,
"(d) Contracts under this chapter providing for the obligation of
DEWEY F. BARTLETT,
funds may be entered into by the Secretary for a period of five years,
Managers on the Part of the Senate.
renewable, at the option of the Secretary, for an additional five-year
period; however, such contracts may obligate funds only to the extent
that such funds are made available in annual appropriations.".
(14) Section 7433(a) is amended by striking out "of the Navy".
(15) Section 7433 (b) is amended by striking out "and oil shale".
(16) Section 7434 is amended by striking out "and oil shale".
(17) Section 7435 (b) is amended by striking out "of the Navy".
(18) Section 7436 (a) is amended by deleting "of the Navy, subject
to approval of the President,".
(19) Section 7438 is amended by striking out "Secretary of the
Interior" wherever it occurs and inserting therefor "Administrator
of the Energy Research and Development Administration"; and by
striking out "of the Navy" wherever it occurs.
(20) The table of sections at the beginning of such chapter is
amended-
(A) by inserting immediately before
"7421. Jurisdiction and control."
the following.
15
bill, the House objective of increasing domestic petroleum production
would be realized.
In reaching a compromise the Committee of Conference agreed to
leave jurisdiction for Naval Petroleum Reserves 1, 2 and 3 with the
Secretary of Navy, and to require him to take steps to bring these
JOINT STATEMENT OF THE COMMITTEE
reserves into immediate production. Under the compromise, petroleum
OF CONFERENCE
at the three reserves is to be produced at the maximum efficient rate
for a period of six years, with provisions for an indefinite number of
INTRODUCTION
extensions for periods of three years each under specified
circumstances.
The Committee of Conference on the bill (H.R. 49) which involves
NAVAL PETROLEUM RESERVE NO. 4
the establishment of a National Petroleum Reserve in Alaska under
The House version of H.R. 49 would have established a national
the jurisdiction of the Secretary of the Interior and the production of
petroleum reserve encompassing Naval Petroleum Reserve No. 4;
petroleum from the naval petroleum reserves by the Secretary of
thus abolishing it as a naval reserve. It also required the Secretary
Navy, met seven times to resolve the differences between the House
of the Interior to continue exploration of the reserve and report
bill and the Senate amendment. In addition, many hours of informal
progress annually to Congress, but it required further Congressional
negotiations were involved in reaching agreement on the text of the
authorization before any development leading to production could
legislation explained below. This revised text is in the form of a
be undertaken. In addition, a study was to be made by the Secretary
complete substitute for the two different versions approved by the
House and Senate.
of the feasibility of developing delivery systems with respect to any
oil and gas which may be produced and a task force was to be estab-
COMPARISON OF MAJOR ISSUES AND FINAL RECOMMENDATION
lished to review all of the resource values of the lands and report its
recommendations to the Congress.
The differences between H.R. 49 as passed by the House and as
The Senate amendment would have retained jurisdiction over this
amended by the Senate are SO great as to make a side-by-side com-
area in the Secretary of Navy. It contemplated the continuation of the
parison impractical. The two versions of the bill sought to achieve
current exploration program by the Secretary of Navy and provided
somewhat different objectives through different agencies. However,
that the Federal Energy Administration would conduct a 180-day
both bills sought to solve a long-existing issue of great national
study regarding alternatives available for the exploration, develop-
importance, viz. how the petroleum resources owned by the United
ment, and production of NPR #4. The study by the Administrator of
States government in the public lands reserved for the four naval
the Federal Energy Administration was later incorporated into the
petroleum reserves can best serve the public interest.
Energy Policy and Conservation Act (Public Law 94-163).
The Committee of Conference agreed that all of the lands in
OBJECTIVE
NPR #4 should be transferred to the Secretary of the Interior, except
for the surface of lands necessary for the Naval Arctic Research Labo-
The House version of H.R. 49 authorized the Secretary of the
ratory near Point Barrow, Alaska. Unlike the immediate transfer im-
Interior to establish a system of national petroleum reserves on the
plicit in the House version however, the Committee recommends that
reserved and unreserved public lands of the United States (with cer-
the transfer take place on June 1, 1977, after the two affected agencies
tain stated exemptions). Under the House bill, lands in the naval pe-
have had a winter season to work together in the field to insure the
troleum reserves could be included in this new system after consulta-
smooth transfer of jurisdiction and to minimize the lost time in the
tion with the Secretary of Defense and thereby be excluded from the
ongoing exploration program. The Committee agreed to language to
naval petroleum reserves. In the forty-eight contiguous States devel-
establish a task force, under the direction of the Secretary of the In-
opment and production of petroleum in the new national petroleum
terior consisting of representatives of Alaska, the Alaska Natives, the
reserves was to be undertaken by the Secretary of the Interior either
Bureau of Land Management, the U.S. Fish and Wildlife Service, the
directly or through competitive bidding procedures.
U.S. Geological Survey, the Bureau of Mines, and such other agencies
The Senate amendment, on the other hand, authorized production
as the Secretary may deem appropriate, to review the overall resource
from these Naval Petroleum Reserves 1, 2, and 3 under the jurisdic-
values in the area. A second study provision agreed upon requires
tion of the Navy for a period of five years with the objectives of (1)
consideration in depth of alternatives for the development, production,
assuring the readiness of the reserves to produce in the future and-
transportation and distribution of petroleum in the reserve under the
(2) using the proceeds from the sale of the petroleum produced to
direction of the President, in consultation with the representatives of
permit complete development of the reserves and to partially offset
the State of Alaska. The 180-day FEA study, authorized by Public
the costs associated with a strategic energy reserve system designed
Law 94-163, which is now underway, is to be completed and will be
to store an immediately available quantity of petroleum for emer-
transmitted directly to the Committees on Interior and Insular Affairs
gency use. During the period of production authorized in the Senate
of the House and Senate.
(14)
16
17
COMPETITIVE SALES AND SMALL REFINERS
be desirable; consequently, the Committee has included antitrust pro-
visions in both titles of the legislation. With respect to production
In H.R. 49 as approved by the House, the Secretary of the Interior
from Naval Petroleum Reserves 12 and 13, before the Secretary of the
was directed to use competitive bidding procedures in the sale of
Navy may promulgate any rules and regulations, finalize any plans of
any petroleum from the reserves. In addition, he was to structure
development, or execute any contracts for the development, production,
such sales in a manner which would allow all companies-majors
or sale of petroleum from the reserves, he must consult with the At-
and independents alike-to offer viable bids. Particularly, with respect
torney General and give due consideration to his advice on matters
to petroleum produced at Elk Hills, the House version limited the
which may affect competition. The Secretary is also prohibited from
total amount which any person or company could directly or indi-
making any contract until thirty days after he has notified the Attor-
rectly control to not more than 20 percent of the production from
ney General of his intention. If the Attorney General advises that the
that field in any one year.
contract may create a situation inconsistent with the antitrust laws
The Senate amendment required the United States share of the
then the Secretary is precluded from executing it. Furthermore, the
petroleum to be sold by the Secretary of Navy to the highest quali-
Secretary is required to include in all plans submitted to the Con-
fied bidder at such time and in such amounts as the Secretary of
gress, a report by the Attorney General with respect to the anticipated
Navy considered proper and it also required such sales to be struc-
effects of such plans on competition.
tured SO as to allow all interested companies to have a full and equal
With respect to the National Petroleum Reserve in Alaska (for-
opportunity to acquire the petroleum and required it to be offered
merly Naval Petroleum Reserve No. 4), the Secretary of Interior
in blocks small enough to allow small refiners to bid on the oil ten-
is authorized to enter into contracts for the explortion of the reserve,
dered. It specifically provided that such sales might be made with-
but at least thirty days before executing such contracts, he must sub-
out regard to Federal, State or local regulations controlling sales or
mit them to the Attorney General for review to determine whether or
allocation of petroleum products.
not they are consistent with the antitrust laws. If within thirty days
The Committee of Conference recommends that all sales of petro-
the Attorney General determines that they are not consistent, then the
leum by the Secretary of Navy be made at such time and in such
Secretary is precluded from proceeding to finalize the contract. If
amounts as he deems proper to the highest qualified bidder for pe-
development leading to production is authorized at the reserve, then,
riods of not more than one year. It also requires that each sale be
unless Congress provides otherwise, the antitrust policies applicable
structured to give full and equal opportunity to all companies. Fur-
to production of the naval petroleum reserves are to be applied to
thermore, it prohibits the sale of more than 20 percent of the esti-
production from the National Petroleum Reserve in Alaska.
mated Federal share of petroleum produced from Elk Hills to any
buyer in a single year. To promote competition and to assist small
COMMON CARRIER PROVISIONS
refiners not having adequate sources of supply of petroleum, the Sec-
retary is authorized to set aside up to 25 percent of the estimated
Both the House bill and Senate amendment contained provisions
Federal share of production from the reserves for sale to such re-
dealing with the operation of pipelines from the naval petroleum
finers or, in his discretion, to prorate such petroleum to such refiners
reserves. As enacted by the House, any pipeline carrying petroleum
for sale at not less than the prevailing local market price.
from the national petroleum reserves was to be operated and main-
tained as a common carrier and the Secretary of the Interior was to
ANTITRUST PROVISIONS
have the authority to make necessary rules and regulations to carry
out this provision. Any violation of such rules and regulations could
With respect to provisions involving possible restraints on compe-
result in the Secretary voiding any contract, operating agreement,
tition, the House-approved bill required the Secretary of the Interior
right-of-way, permit or easement granted by him. In addition, the
to consult with the Attorney General at each stage in the formulation
Secretary was authorized to acquire or construct pipelines in the
of plans and rules or regulations, and at each stage in the entering
vicinity of any national petroleum reserve in order to assure the trans-
into of contracts or operating arrangements. In addition, all plans sub-
portation of petroleum from such reserves to refinery points or to
mitted to the Congress were to contain a report by the Attorney
points connecting with common carrier pipelines.
General on the anticipated effects of these upon competition. Further-
The Senate amendment was comparable, except that it dealt only
more, the Secretary was to be prohibited from entering into any con-
with the naval petroleum reserves in California and, in line with its
tract until the Attorney General was given an opportunity for re-
approach to the bill, instead of placing the authority in the Secretary
view to determine if the contract would create or maintain a situation
of the Interior, it placed the responsibility with the Secretary of the
inconsistent with the antitrust laws. If the Attorney General were to
Navy. To assure the transportation of the petroleum produced from
find it inconsistent with the antitrust laws or incompatible with the
Naval Petroleum Reserves 1, 2 and 3, it authorized the Secretary to
public interest, then the Secretary's recourse was to be through public
construct or procure pipelines and associated facilities, and such facili-
hearings and a separate finding.
ties at Elk Hills were to be capable of transporting not less than
While the Senate amendment contained no comparable provisions,
350,000 barrels of oil per day within three years after the enactment of
the Committee of Conference agreed that antitrust protections would
the legislation.
18
19
In reconciling these differences, the Committee of Conference took
The Senate amendment also contained the complete authority estab-
note of the fact that some, and perhaps most, of the present pipelines
lishing a strategic reserve system. Since approval of H.R. 49, by the
which would be involved under this legislation are already common
House and Senate, the Energy Policy and Conservation Act, provid-
carriers under the terms of the Mineral Leasing Act of 1920. But the
ing for the establishment of a strategic reserve, has been enacted into
recommended language attempts to deal with all of the foreseeable
law. In recognition of this fact, the Committee of Conference approved
possibilities:
a modified approach which authorizes the President to place all or any
First, any pipeline which accepts or transports any petroleum
part of the petroleum produced from the naval petroleum reserves in
from Naval Petroleum Reserves 1 or 3 must accept and transport
the authorized strategic storage facilities or exchange it for petroleum
petroleum. from these reserves as a common carrier;
of equal value to be SO stored.
Second, any purchaser of petroleum from such reserves must
It was agreed that there should be established a special account in
agree, by contract, to transport any petroleum from these reserves
the Treasury consisting of revenues derived from the disposition of
as a common carrier if he owns a controlling interest in a pipeline,
petroleum from the naval petroleum reserves, the proceeds from in-
or if he owns a controlling interest in a company which operates
ternal sales of petroleum within the Department of Defense, appropri-
a pipeline, or if he is the operator of any pipeline carrying petro-
ations made by Congress for such reserves and any royalties or other
leum produced from these reserves;
revenues derived from the operation of such reserves. This special ac-
Third, if adequate transportation facilities are not otherwise
count is not to be the exclusive source of funds for the conduct of ac-
available, the Secretary of Navy may construct or acquire them or
tivities authorized by this Act, but monies credited to it are to be
contract for the use of them;
available as offsetting receipts to reduce outlay requirements for (1)
Fourth, if a pipeline in the vicinity refuses to transport petro-
the Secretary of the Navy in connection with expenses incident to the
leum from these reserves as a common carrier, then the Secre-
operation of the naval petroleum reserves, (2) the Secretary of the
tary may acquire such pipeline (by condemnation, if necessary);
Interior in connection with exploration and study costs associated
and
with the National Petroleum Reserve in Alaska, and (3) the Admin-
Fifth, if new pipelines are constructed on rights-of-way
istrator of the Federal Energy Administration in connection with
acquired by the government, then these pipelines are to be com-
the procurement of petroleum for, and construction and operation of
mon carrier pipelines.
facilities associated with, the Strategic Petroleum Reserve. The con-
The Committee of Conference accepted the Senate approach with
ferees were aware that anticipated receipts would not offset the outlay
respect to pipeline facilities for production from Elk Hills which re-
requirements of all three of the agencies eligible to utilize the funds,
quires the Secretary to have available adequate capacity to accom-
and the President, in all likelihood, will find it necessary to apportion
modate not less than 350,000 barrels per day within three years after
the available monies between the three agencies. The conferees ex-
the date of enactment of this legislation. In addition the recommended
pect the Budget Committees to consider all of these funds under the
language authorizes the Secretary to promulgate such rules and regu-
"Natural resources, environment, and energy functional" category.
lations as may be necessary to carry out the provisions of section 7430,
title 10 United States Code, and to take appropriate action in the
CONGRESSIONAL OVERSIGHT
event of violation thereof.
Both versions of H.R. 49 provided for oversight responsibilities
STRATEGIC STORAGE AND NAVAL PETROLEUM RESERVES SPECIAL ACCOUNT
to be vested either in the Interior and Insular Affairs Committees (un-
der the House language) or in the Armed Services Committees (un-
The Senate amendment provided that the President could direct
der the Senate language). The Committee of Conference agreed that
that all or part of the Federal share of petroleum produced from
continued Congressional oversight over all aspects of the implementa-
the naval petroleum reserves could be placed in a strategic storage
tion of this legislation would be important. Since Naval Petroleum
facility. In addition, it authorized the establishment of a special ac-
Reserve No. 4 in Alaska is to be transferred to the Interior Depart-
count in the Treasury to which all revenues from the sale of petroleum
ment, the Committee is recommending that all contracts, plans, reports,
and proceeds from other activities associated with the naval petroleum
etc. involving this area be referred directly to the Committees on In-
reserves were to be credited. From this account, funds were to be ap-
terior and Insular Affairs. Similarly, since the other reserves are to
propriated for activities at the reserves, construction of necessary
remain under the administrative jurisdiction of the Secretary of the
pipelines or other facilities, and procurement of petroleum for the
Navy, all such contracts, plans, reports, etc. dealing with them will be
national strategic energy reserve system.
directed to the Committees on Armed Services.
In comparison the House language established a special fund in the
Treasury to receive the proceeds realized under the legislation from
SECTION BY SECTION ANALYSIS
the sale of oil and gas from the national petroleum reserves. Monies in
the fund were to be appropriated for the purchase of petroleum for
TITLE I-NATIONAL PETROLEUM RESERVE IN ALASKA
storage in the national strategic petroleum reserve, when authorized by
law, and for the development and production of Naval Petroleum Re-
SEC. 101 defines the term "petroleum" to include crude oil, gases of
serves 1, 2, and 3.
all kinds (natural gas, hydrogen, carbon dioxide, helium and any
20
21
others), natural gasoline, and related hydrocarbons (tar sands, asphalt,
tion of the reserve be transferred by the Secretary of the Navy, with-
propane, butane, etc.), oil shale and the products of such resources.
out reimbursement, to the Secretary of the Interior and provides that
SEC. 102 provides that, except for surface of the lands in Tract 1 as
any unexpended funds previously appropriated for use in connection
described in Public Land Order 2344 which are being used for the
with the reserve be transferred to the Secretary of the Interior for use
Naval Arctic Research Laboratory, all of the public lands whether pre-
in connection with the reserve as intended by the Congress when such
viously reserved or unreserved within the exterior boundaries of Naval
Petroleum Reserve No. 4 as established by Executive Order 3797A of
appropriations were made. In this connection the legislation also trans-
fers the civilian personnel ceilings assigned to the management and
February 27, 1923, will be transferred to the administrative jurisdic-
tion of the Secretary of the Interior from the Secretary of the Navy,
operation of the reserve to the Interior Department. It is not expected
that non-civilian Navy personnel will transfer to the Department of
but Federal agencies conducting authorized activities not inconsistent
with the Act may be permitted to continue such activities to the extent
the Interior, but it is intended that the number of positions allocated
they do not interfere with the administration of the land by the Secre-
to the management and operation of the reserve will continue at ap-
tary. All lands within this new "National Petroleum Reserve in
proximately the same level after the transfer takes place SO that ac-
tivities at the reserve will continue at least at their current level.
Alaska" are statutorily withdrawn from all forms of entry and dispo-
SEC. 104 makes it absolutely clear that only exploration is authorized
sition under the public land laws and mining and mineral leasing laws.
at the National Petroleum Reserve in Alaska. After the studies are
It is the specific intent of this provision that all lands be explicitly
excluded from the provisions of the Mineral Leasing Act of 1920.
completed and transmitted to the Congress, as required by the legisla-
The intent of this section is to insure that all of the lands within
tion, then the Congress will determine how future development and
the exterior boundaries of the reserve remain withdrawn from all uses
production will take place. Until authorized by the Congress, there
inconsistent with the purposes of this legislation. The statutory with-
will be no production of petroleum from this reserve, except for a
drawal includes all lands within the boundaries of the 1923 Executive
limited quantity from the South Barrow gas field which is essential
Order in order to override the unexpected interpretation of that order
to the Native village of Barrow and other communities and installa-
tions near Point Barrow.
by the United States Court of Appeals for the Ninth Circuit in Arnold
V. Morton. Express recognition is given to certain existing uses, e.g.,
The legislation makes it clear that the Secretary may designate
the continued operation of the South Barrow gas field. Inasmuch as
certain areas-including specifically the Utukok River area and the
the Alaska Native Claims Settlement Act authorized native village
Teshekpuk Lake area-where special precautions may be necessary
corporations to select certain Federally owned land in Alaska, includ-
to control activities which would disrupt the surface values or disturb
the associated fish and wildlife habitat values and related subsistence
ing the right to apply for surface rights within the Naval Petroleum
Reserve until December 18, 1975, this legislation authorizes the Sec-
requirements of the Alaska Natives.
retary to convey such surface interests if the selections were made
It is the intention of this provision to immediately authorize the
on or before that date, but in no event does the legislation authorize
Secretary to require that the exploration activities within these des-
the disposition of the subsurface mineral estate within the national
ignated areas be conducted in a manner designed to minimize adverse
impacts on the values which these areas contain. While "maximum
petroleum reserve to any person or group, except for mineral mate-
rials (e.g., sand, gravel, and crushed stone, which for the purpose of
protection of such surface values" is not a prohibition of exploration-
this legislation are considered to be a part of the subsurface mineral
related activities within such areas, it is intended that such explora-
estate) which the Secretary may permit to be used for maintenance or
tion operations will be conducted in a manner which will minimize
development of local services by native communities or for use in con-
the adverse impact on the environment.
nection with activities associated with administration of the reserve
To this end, the Secretary is expected to take into consideration
under this Act.
the needs of resident and migratory wildlife and to schedule explora-
tion activities in a manner which, and at such seasons as, will cause
SEC. 103 provides that jurisdiction over Naval Petroleum Reserve
the least adverse influence on fish and wildlife. In scheduling explora-
No. 4 shall be transferred to the Secretary of the Interior on June 1,
tion activities in such an area the Secretary should take steps to mini-
1977, at which time it shall be redesignated as the National Petroleum
mize any adverse effects on native subsistence requirements and
Reserve in Alaska. Responsibility for the protection of the natural,
associated fish and wildlife values. Specifically, he should conduct
fish and wildlife, scenic and historical values of the area is vested
exploration activities in these areas during times of the year when the
in the Secretary of the Interior immediately upon enactment of this
caribou calving season and the nesting and molting seasons of the
Act SO that any activities which are or might be detrimental to such
birds can be avoided.
values will be carefully controlled. When complete jurisdiction over
While this provision suggests that certain areas should receive
the reserve is transferred on June 1, 1977, the Secretary of the Interior
special consideration, the Members of the Committee of Conference
will assume all rights and obligations incurred under contracts exe-
do not mean to imply that the Secretary should ignore the environ-
cuted by the Secretary of the Navy with respect to activities in the
mental ramifications of exploration activities in other areas. On the
reserve.
To make this transfer of jurisdiction orderly, the legislation requires
contrary, it is expected that the Secretary will take every precaution
to avoid unnecessary surface damage and to minimize ecological dis-
that all equipment, facilities, and property associated with explora-
turbances throughout the reserve.
22
23
Until the actual transfer of the reserve to the Department of the
necessary actions to continue such service, including the develop-
Interior, the legislation requires the Secretary of the Navy to con-
ment of additional fields, if necessary. The Secretary is not ex-
tinue the ongoing exploration program within the reserve. In other
pected to amortize the investment in this field, on the contrary he is
words, the Members of the Committee of Conference agreed that since
expected to set the rates for this service at a level which is reasonable
the Secretary of the Navy is to continue administration of this reserve
from the point of view of the Federal Government and equitable from
until June 1, 1977, he should move forward on the exploration pro-
the point of view of the users.
gram which for fiscal year 1977 envisions the drilling of five
The equitable rate should take into consideration the special condi-
exploratory wells and the completion of approximately 3,000 miles of
tions which exist in this area. The Committee recognizes that this is
seismic surveys.
an isolated area in an Arctic environment where the source and supply
There is every reason to believe that he will be able to cooperate with
of energy is critically important. Certainly, the village of Barrow
the Secretary of the Interior in carrying forward the exploration pro-
should never be charged a rate exceeding the rate charged other users.
gram and the Members of the Committee of Conference expect them to
On the contrary, the Secretary should take into consideration the av-
work together for the full season prior to the transfer SO that a con-
erage disposable income of the residents of the village and other fac-
tinuity of operations without lost time will be assured.
tors in determining what the "equitable rate" might be and could, in
Since the Secretary of the Interior is required to assume responsi-
fact, determine that a rate lower than the rate for other users should
bility for the conduct of operations under contracts negotiated by the
be charged on the basis of equity.
Secretary of the Navy, after June 1, 1977, it is expected that all new
SEC. 105 deals with the study of the reserve. First, it provides that
contracts or amendments to existing contracts after enactment of this
the study authorized by the Energy Policy and Conservation Act of
legislation will be closely coordinated between the two Secretaries.
December 22, 1975, will be completed and transmitted to the Commit-
The Committee of Conference did not give the Secretary of the In-
tees on Interior and Insular Affairs. This study should be useful in
terior a veto power over such contracts or changes, because it is
identifying promising alternatives for more detailed consideration in
generally understood that no new contracts are anticipated in the
the study called for by section 105(b). In addition, the President
foreseeable future and because it is recognized that in the interests of
through appropriate executive departments or agencies and in consul-
good management, the Secretaries would establish a responsible and
tation with the State of Alaska shall make a detailed study of the pe-
reasonable working relationship which will protect the public interest
troleum resources in the reserve to determine the best procedures for
in the activities within the reserve.
the development, production, transportation and distribution of such
Once the transfer is effected, the legislation authorizes the Secre-
petroleum resources. In developing this study the President is to con-
tary of the Interior to enter into contracts which he deems necessary
sider alternative procedures for the development and production of the
to carry out the exploration activities contemplated. Such contracts
reserve and the economic and environmental consequences of each.
are to be reviewed by the Attorney General for their legal suf-
Periodic reports on the implementation of this study provision and
ficiency and consistency with the antitrust laws. The Secretary
annual reports of his findings and conclusions will be transmitted to
is precluded from entering any contract which the Attorney
the Committees on Interior and Insular Affairs of the House of Repre-
General determines would unduly restrict competition or be inconsist-
sentatives and the Senate. The study is to be completed no later than
ent with the antitrust laws. For the purposes of adequate oversight
January 1, 1980.
over such proposed actions, the Secretary is required to transmit all
In addition the legislation provides for the creation of a task force
plans, or substantial amendments to plans, to the Committees on In-
to conduct a study to determine the values of, and best uses for, the
terior and Insular Affairs of the House of Representatives and Senate
lands within the reserve. This study differs from the President's study
and to report annually to such Committees on the progress of, and
discussed above in that it is a comprehensive review of all resource
future plans for, exploration of the reserve.
values, other than petroleum, which the lands within the reserve con-
Public Law 93-153, which modernized the law relating to rights-of-
tain. In addition to considering the importance of this area to the
way over Federal lands and authorized the Trans-Alaska oil pipe-
natives who depend upon this area for subsistence, this task force is
lines, included a specific requirement (section 403) that the Secretary
directed to consider the natural, scenic, wildlife, and wilderness values
of the Interior take affirmative action to assure that no person would,
which it contains as well as the potential for minerals, other than pe-
on the grounds of race, creed, color, national origin, or sex be excluded
troleum, and other values. The task force is to include representation
from activities carried out under authority of Title II of that Act.
of various interested Federal agencies, a representative of the State
The Committee of Conference expects both the Secretary of the In-
of Alaska and a representative of the Arctic Native Slope Community,
terior and the Secretary of Navy to follow the principles set out in
the latter to be selected jointly by the affected native corporation,
section 403 of P.L. 93-153 in implementing H.R. 49.
borough and villages. It will be the responsibility of the Secretary to
The legislation specifically authorizes the Secretary of the Navy
prepare and submit the report of the task force, together with his
to develop and continue the operation of the South Barrow gas field
recommendations, to the Committees on Interior and Insular Affairs
in order to supply gas at reasonable and equitable rates to the nearby
within three years after enactment of H.R. 49, but it shall contain
villages and facilities near Point Barrow. Once the transfer of the re-
the concurring or dissenting views of any non-Federal representative
serve is effected, the Secretary of the Interior is authorized to take all
who submits his views in writing to the Secretary within 30 days after
24
25
the Secretary announces his intention to forward the report as re-
the Small Business Administration in qualifying a refinery as a
quired by the legislation. It is not intended that either study author-
small business refiner.
ized by this Act should preclude any action by either Secretary which
Amendment 2 makes some technical changes in the chapter and
this legislation otherwise authorizes.
provides that the naval petroleum reserves are to be used for defense
SEC. 106 provides that if the Congress enacts legislation authorizing
purposes, except as otherwise provided by the terms of this legislation.
development leading to production, then the Secretary shall consult
Amendment 3 completely revises section 7422 and requires the
with the Attorney General in formulating regulations, developing
Secretary to produce the petroleum in Naval Petroleum Reserves 1, 2
plans, and on all contracts or operating agreements relating to de-
and 3. He is authorized either to produce such petroleum or to have
velopment, production or sale of petroleum from the reserve to be
it produced under a contractual arrangement. Petroleum leases are
sure that they are consistent with the antitrust laws. While this
a permissible arrangement only at Naval Petroleum Reserve No. 2
provision would become applicable if the Congress authorizes produc-
(Buena Vista), where such leases presently exist.
tion at the reserve, this section is not intended to delay or interfere
Generally, in the past the naval petroleum reserves have been used
in any way with the exploration program or to preclude any geologic,
and operated only to the extent that such production was found
geophysical, seismic or other activity necessary to carry out the
necessary by the Secretary, with the approval of the President, and
purposes of this Act.
then only when authorized by a joint resolution of the Congress. But
SEC. 107 authorizes the appropriation of such sums as may be
the change incorporated in this amendment directs the Secretary to
necessary to carry out the provisions of this title and provides that,
promptly commence the production of petroleum from these reserves
under certain circumstances, the Secretary may aid affected com-
at the maximum efficient rate and to continue such production for a
munities experiencing substantially increased needs for municipal
period of six years. During this period, the Secretary is to sell or
services and facilities as the direct result of the exploration and study
otherwise dispose of the United States share of production.
activities authorized by the legislation. Before implementing this
The Secretary is authorized and directed to construct, acquire or
provision, the Secretary is required to consult with the other Federal
contract for the use of storage or shipping facilities. The Secretary
departments or agencies to determine what financial aid is otherwise
is expected to exhaust every possibility of utilizing private facilities
available.
or of encouraging private enterprise to construct facilities before he
undertakes construction or condemnation of any facilities outside the
TITLE II-PRODUCTION OF NAVAL PETROLEUM RESERVES
reserves. If necessary, the Secretary may condemn any pipeline not
operated as a common carrier if the owner refuses to carry, without
SEC. 201 is a series of amendments to chapter 641 of title 10 of
the United States Code-i.e. the chapter dealing with the naval
discrimination and at a reasonable rate, any petroleum produced at
such reserve. In addition, if new pipelines are necessary, rights-of-
petroleum reserves.
Amendment 1 adds a new section to the chapter defining the follow-
way may be acquired by the use of condemnation under Federal
statutory authority, but such pipelines must be operated as common
ing terms:
"National defense" includes not only military emergencies, but also
carriers. At Naval Petroleum Reserve No. 1 (Elk Hills) pipelines
economic emergencies such as the one which occurred during the
and associated facilities capable of carrying 350,000 barrels of oil
per day are required to be available not later than three years after
Arab embargo of 1973.
"Naval Petroleum Reserves" are defined to include the four exist-
the date of enactment of this legislation. This provision was included
in the Act in order to assure the availability of adequate facilities to
ing petroleum reserves and the three oil shale reserves, but Naval
Petroleum Reserve No. 4 in Alaska is included in this definition only
promptly transport petroleum from Elk Hills and maintain produc-
tion at the maximum efficient rate of production for the field.
until it is transferred to the Secretary of the Interior on June 1, 1977,
when it is to be redesignated as the National Petroleum Reserve in
As already noted, production of petroleum at the naval petroleum
reserves is to commence 90 days after the enactment of this legisla-
Alaska in accordance with the provisions of title I of the Act.
The term "petroleum" is defined exactly the same way as in title I.
tion. After six years of production, the reserves will again be shut-in
unless the President takes steps to extend the operations. To accom-
"Maximum efficient rate" implies that production shall be con-
ducted in a manner which will assure the most efficient development
plish this, he must first assess the current and prospective need for
petroleum and determine the necessity for continued production, then
to maximize ultimate recovery of petroleum from the reservoir. The
he must submit to the Congress the report of this assessment together
Members of the Committee of Conference recognize that the Secre-
with a certification that he has determined that continued production
tary of Navy retains, under the unit plan contract at NPR #1, the
is in the national interest. Following receipt of the report, unless
full and absolute power to determine the rate of development, as
either the Senate or House of Representatives expressly disapproves
well as the volume and rate of production consistent with the objec-
further production, it will be extended for three years. Additional
tives of this Act and do not intend to alter or limit this power by the
extensions of three years each can be accomplished by following the
use of the term "economic development" in this definition.
same procedures.
To eliminate any possible confusion over the term "small refiner",
There is no intention to negate the provisions of the existing unit
the legislation incorporates, by reference, the standards applied by
plan contract at Elk Hills and the language specifically provides for
26
27
the continuation of operations under that contract if the owner of the
dent may arrange, either directly or through exchange, to store all or
private interest agrees. It is intended that there will be a formalized
any part of the petroleum produced at the reserves in the strategic
agreement to this effect within 90 days after the enactment of the
storage facilities authorized by Public Law 94-163.
legislation. Failure to reach such an agreement could result in the
acquisition of the outstanding private holdings if the Secretary deems
2. Sale of Petroleum
such action necessary in order to protect the public interest.
All sales of petroleum by the Secretary are to be made at public
Amendment 4 merely makes some technical changes to make section
sale to the highest qualified bidder after appropriate public notice.
7423 conform to changes being made in Chapter 641.
Such sales contracts shall be for periods of one year or less and are
Amendment 5 also makes some technical changes in the Chapter,
required to be structured in such a manner as to give all companies-
but it contains one significant substantive revision. Under existing law,
majors and independents alike-a "full and equal opportunity for the
the Secretary of the Navy is required to consolidate and protect Federal
acquisition of petroleum" from the reserves. In no event, may more
oil lands by contracting with private owners and lessees of lands
than 20 percent of the Federal share of production of petroleum from
within or adjacent to naval petroleum reserves to conserve oil and gas
Elk Hills be acquired by a single purchaser (i.e. any person as defined
"in the ground." As recommended by the Committee of Conference, the
in Title I of the United States Code). By providing that sales may be
Secretary may continue to contract with such private parties for the
made by the Secretary "without regard to Federal, State or local
wisest conservation and development of the petroleum in the reserves,
regulations controlling sales or allocation of petroleum products", it
but he is not required to keep it in the ground. In fact, the intention
is intended that the sales of petroleum from the reserves will continue
of the provisions of the legislation is to assure the development of
to be at the highest bid price regardless of the current or previous
petroleum in the reserves at the maximum efficient rate for the six-year
distinction between "old" and "new" oil and would not be subject to
period of production authorized or any extension.
Federal laws establishing ceiling or composite prices for first sales of
Amendment 6 makes a technical change in section 7425 to conform
domestic crude oil.
to the definitions contained in the legislation.
The Committee recognized that in effecting sales to ensure the
Amendment 7 makes it clear that the Secretary may make con-
limitations of no more than 20 percent to one person and in con-
tracts for joint, unit or cooperative plans for exploration, prospecting,
sidering a small business set aside the Secretary will have to estimate
conservation, development, use or operation within the Elk Hills
his production for the following year and package his contracts ac-
reserve, but in making such contracts he is required to pursue the
cordingly. The Secretary is not expected or required to terminate con-
objective of this legislation, viz. to develop Elk Hills SO that produc-
tracts if he finds that actual production varies substantially from his
tion will achieve the maximum efficient rate at the earliest possible
estimates, but he will have to account for such variation in his reports
time.
to Congress and adjust appropriately for future sales.
Amendment 8 conforms existing law to the changes made in the
3. Small Refineries
definitions section of this legislation.
As mentioned above, the Secretary is required to structure bids in
Amendment 9 makes it clear that in the future petroleum leasing
such amounts as to allow all potential qualified purchasers to bid on
procedures shall be appropriate only within Naval Petroleum Reserve
the Federal petroleum to be sold. In addition the Secretary, after con-
No. 2 (Buena Vista).
sulting with the Secretary of the Interior, may find it in the public
Amendment 10 makes a technical change to conform to the defini-
interest to set aside up to 25 per cent of the estimated Federal produc-
tions section of this legislation.
tion from the reserves for small refiners not having an adequate source
Amendment 11 deals with some of the most critical issues of the pro-
of supply of petroleum of their own. In making such a set-aside, the
posed legislation. Specifically it deals with the following matters re-
Secretary may prorate such petroleum among small refiners, without
lated to the production of petroleum from the naval petroleum
competitive bids, but such petroleum must then be sold at the pre-
reserves:
vailing local market price for comparable petroleum. The legislation
1. Storage of Petroleum
specifies that the Secretary, in making any sales under the set-aside
The Secretary is directed to "use, store, or sell" the petroleum
provision, must require the processing or use of the petroleum in such
produced at the reserves. In agreeing to this provision, the conferees
small refineries and must prohibit the small refiners from re-selling
recognized that some use of some of the products of the reserves might
the petroleum prior to processing it.
be required in connection with operation and production activities. For
4. Antitrust Provisions
example, gas produced from the reserves could be used for power gen-
Before finalizing any rules and regulations, plans of development,
eration or reinjection, but this authority does not extend beyond the
contracts or operating agreements relating to the development,
authority to use these products in connection with activities directly
production, or sale of petroleum, the Secretary is required to consult
related to production of the naval petroleum reserves. Except as au-
with, and consider the views of, the Attorney General. In agreeing to
thorized for strategic storage in subsection (k), it is intended that the
this provision, the Committee of Conference recognized that such con-
storage authorized is limited to storage incident to the sale of petro-
sultation will be effective only if the Secretary, in good faith, seeks the
leum and should not exceed more than is necessary to handle normal
advice and counsel of the Attorney General when he is in the early
fluctuations in marketing volumes. Under subsection (k), the Presi-
stages of such proceedings SO that he may have the benefit of his views
28
29
on matters which might affect competition before finalizing the
is temporarily exported for convenience or increased transportation
policies and provisions of such regulations or contracts. In any event,
efficiency across international boundaries, petroleum from the naval
the legislation requires all contracts and operating agreements to be
petroleum reserves may be exported from the United States only in
forwarded at least thirty days before their execution, together with
compliance with the Export Administration Act of 1969 and then
such additional information as he may require, to the Attorney
only if the President makes and publishes an express finding that
General. If, within the thirty days period, the Attorney General ad-
such exports will not adversely affect the supply of petroleum for the
vises the Secretary that such contract or agreement may create or
United States, that such exports are in the national interest, and they
maintain a situation inconsistent with the antitrust laws, then the
are in compliance with the Export Administration Act of 1969.
Secretary is precluded from executing the contract or operating agree-
ment. In the absence of such an adverse finding by the Attorney
7. Consultation Requirements
General within thirty days, the Secretary may proceed to finalize the
For the duration of the production period-i.e. the initial 6 years
agreements.
and any additional 3 year extensions-the requirement that the Presi-
dent must approve and the Committees on Armed Services must be
5. Common Carrier Provision
consulted on contracts for the sale of products is waived.
In order to assure the transportation of the petroleum produced
Amendment 12 involves the consultation requirements mentioned
from Naval Petroleum Reserves Numbered 1 and 3 (i.e. Elk Hills and
immediately above. As long as production continues at any or all of
Teapot Dome), the Committee of Conference agreed to a revised com-
the reserves under section 7422(c) of title 10 of the United States
mon carrier provision which provides:
Code, the legislation provides for special reporting procedures for
(1) that if pipelines are used to carry any petroleum from these
new plans or substantial amendments to existing plans relating to
reserves, they must accept such petroleum produced from them
exploration, development, production, disposal and transportation. If,
without discrimination and at reasonable rates;
on the other hand, it is determined, either by the President or by Con-
(2) that every contract for the sale of any Federal petroleum
gressional action, that continued production of these reserves is not
must require the purchaser, if he is the owner of a controlling in-
necessary, then after the fields have been shut in, production and sale
terest in any pipeline, the owner of a controlling interest in any
of petroleum may be reinstated only after compliance with the ap-
company operating a pipeline, or the operator of a pipeline which
proval and consultation requirements of section 7422. The other trans-
carries petroleum from such reserves, to transport petroleum
actions specified would be subject to these same requirements after
from such reserves without discrimination and at reasonable
production is once discontinued.
rates as a common carrier.
While production is underway, the Committees on Armed Services
These provisions are not intended to make such pipelines "tradi-
of the House and Senate will maintain careful scrutiny over plans for
tional" common carriers as provided under other laws nor should they
the exploration, development and production program. These plans
be construed to require the transportation of any petroleum regardless
are required to contain a report by the Attorney General as to their
of the source. Instead, the intent of the provision is to require only the
anticipated effects upon competition and are not to be implemented
transportation of petroleum from the specified reserves whenever the
until 60 days after being submitted to the Committees. The provision
pipeline involved is not otherwise operated as a common carrier, and
requires the same of "substantial amendments" which are left to the
then only when the pipeline carries some production from the reserves
discretion of the Secretary to determine; however, as a guideline, any
or is controlled by some person (person, association, corporation, joint
plan that is amended to change the execution time by a year or more
venture, or other business organization) who has contracted with
or any plan which experiences a 25 percent or more change in funding
the Secretary of Navy for the purchase of petroleum produced from
is considered, by the conferees, as involving a substantial amendment.
such reserves.
In addition while the reserves are being produced, annual reports
To aid in the enforcement of this provision, the Secretary of the
are to be submitted to the Committees detailing the status of the pro-
Navy is authorized to make rules and regulations to carry out the
gram, the production level and its disposition, and future plans for
provisions of the section. Whenever any person violates any such rule or
the reserves.
regulation, the Secretary may take appropriate action to cancel any
Amendment 13 establishes a special account in the Treasury into
contract, operating agreement, right-of-way, etc. which he may have
which all proceeds from the disposition of petroleum from the naval
issued. Furthermore, he may request that the Secretary of the In-
petroleum reserves will be deposited. From this "naval petroleum
terior, acting on behalf of the United States, to void any contract,
reserves special account" funds will be appropriated, as needed, by
right-of-way, permit, or easement which he may have issued to such
the Congress for continued activities at the naval petroleum reserves,
person in accordance with authority granted to him insofar as it ap-
for construction and operation of facilities incident to production and
plies to these reserves. The purpose of this enforcement procedure is
the delivery of such petroleum to shipping terminals, for the procure-
to assure compliance with the rules and regulations which the Secre-
ment of petroleum and facilities needed for the National Strategic
tary of the Navy is expected to issue.
Petroleum Reserve, and for the exploration and study of the National
6. Exportation of Petroleum
Petroleum Reserve in Alaska authorized by this Act. Budget esti-
mates involving this account are to be submitted as an independent
Except for petroleum which may be exchanged in similar quantities
entry in the President's Budget.
with persons or the government of an adjacent foreign state or which
30
Amendments 14, 15, 16, 17, 18 and 20 make technical changes in the
chapter to conform with other provisions in this legislation.
Amendment 19 updates section 7438 by substituting the Administra-
tor of the Energy Research and Development Administration for the
Secretary of the Interior as the chief administrator of the Rifle,
Colorado, oil shale research facility-an administrative change that
has already taken place.
JOHN MELCHER,
HAROLD T. JOHNSON,
PHILLIP BURTON,
HAROLD RUNNELS,
GEORGE MILLER,
MELVIN PRICE,
CHARLES BENNETT,
JOE SKUBITZ,
SAM STEIGER,
WILLIAM L. DICKINSON,
F. EDWARD HÉBERT,
JOHN F. SEIBERLING,
DON YOUNG,
Managers on the Part of the House.
HOWARD W. CANNON,
JOHN C. STENNIS,
STUART SYMINGTON,
SAM NUNN,
GARY HART,
HENRY M. JACKSON,
LEE METCALF,
FLOYD K. HASKELL,,
STROM THURMOND,
WILLIAM L. ScoTT,
ROBERT TAFT,
CLIFFORD P. HANSEN,
DEWEY F. BARTLETT,
Managers on the Part of the Senate.
H. R. 49
LIBRARY
6FRALD
Rinety-fourth Congress of the United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday, the nineteenth day of January,
one thousand nine hundred and seventy-six
An Act
To authorize the Secretary of the Interior to establish on certain public lands
of the United States national petroleum reserves the development of which
needs to be regulated in a manner consistent with the total energy needs of
the Nation, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may
be cited as the "Naval Petroleum Reserves Production Act of 1976".
TITLE I-NATIONAL PETROLEUM RESERVE IN ALASKA
DEFINITION
SEC. 101. As used in this title, the term "petroleum" includes crude
oil, gases (including natural gas), natural gasoline, and other related
hydrocarbons, oil shale, and the products of any of such resources.
DESIGNATION OF THE NATIONAL PETROLEUM RESERVE IN ALASKA
SEC. 102. The area known as Naval Petroleum Reserve Numbered 4,
Alaska, established by Executive order of the President, dated Febru-
ary 27, 1923, except for tract Numbered 1 as described in Public Land
Order 2344, dated April 24, 1961, shall be transferred to and admin-
istered by the Secretary of the Interior in accordance with the provi-
sions of this Act. Effective on the date of transfer all lands within
such area shall be redesignated as the "National Petroleum Reserve in
Alaska" (hereinafter in this title referred to as the "reserve"). Sub-
ject to valid existing rights, all lands within the exterior boundaries
of such reserve are hereby reserved and withdrawn from all forms of
entry and disposition under the public land laws, including the min-
ing and mineral leasing laws, and all other Acts; but the Secretary is
authorized to (1) make dispositions of mineral materials pursuant to
the Act of July 31, 1947 (61 Stat. 681), as amended (30 U.S.C. 601),
for appropriate use by Alaska Natives, (2) make such dispositions of
mineral materials and grant such rights-of-way, licenses, and permits
as may be necessary to carry out his responsibilities under this Act,
and (3) convey the surface of lands properly selected on or before
December 18, 1975, by Native village corporations pursuant to the
Alaska Native Claims Settlement Act. All other provisions of law
heretofore enacted and actions heretofore taken reserving such lands
as a Naval Petroleum Reserve shall remain in full force and effect to
the extent not inconsistent with this Act.
TRANSFER OF JURISDICTION
SEC. 103. (a) Jurisdiction over the reserve shall be transferred by
the Secretary of the Navy to the Secretary of the Interior on June 1,
1977.
(b) With respect to any activities related to the protection of
environmental, fish and wildlife, and historical or scenic values, the
Secretary of the Interior shall assume all responsibilities as of the date
H. R. 49-2
of the enactment of this title. As soon as possible, but not later than
the effective date of transfer, the Secretary of the Interior may pro-
mulgate such rules and regulations as he deems necessary and appro-
priate for the protection of such values within the reserve.
(c) The Secretary of the Interior shall, upon the effective date of
the transfer of the reserve, assume the responsibilities and functions of
the Secretary of the Navy under any contracts which may be in effect
with respect to activities within the reserve.
(d) On the date of transfer of jurisdiction of the reserve, all equip-
ment, facilities, and other property of the Department of the Navy
used in connection with the operation of the reserve, including all
records, maps, exhibits, and other informational data held by the
Secretary of the Navy in connection with the reserve, shall be trans-
ferred without reimbursement from the Secretary of the Navy to the
Secretary of the Interior who shall thereafter be authorized to use
them to carry out the provisions of this title.
(e) On the date of transfer of jurisdiction of the reserve, the Secre-
tary of the Navy shall transfer to the Secretary of the Interior all
unexpended funds previously appropriated for use in connection with
the reserve and all civilian personnel ceilings assigned by the Secretary
of the Navy to the management and operation of the reserve as of
January 1, 1976.
ADMINISTRATION OF THE RESERVE
SEC. 104. (a) Except as provided in subsection (e) of this section,
production of petroleum from the reserve is prohibited and no develop-
ment leading to production of petroleum from the reserve shall be
undertaken until authorized by an Act of Congress.
(b) Any exploration within the Utukok River, the Teshekpuk
Lake areas, and other areas designated by the Secretary of the Interior
containing any significant subsistence, recreational, fish and wildlife,
or historical or scenic value, shall be conducted in a manner which will
assure the maximum protection of such surface values to the extent
consistent with the requirements of this Act for the exploration of the
reserve.
(c) The Secretary of the Navy shall continue the ongoing petroleum
exploration program within the reserve until the date of the transfer
of jurisdiction specified in section 103(a). Prior to the date of such
transfer of jurisdiction the Secretary of the Navy shall-
(1) cooperate fully with the Secretary of the Interior providing
him access to such facilities and such information as he may
request to facilitate the transfer of jurisdiction;
(2) provide to the Committees on Interior and Insular Affairs
of the Senate and the House of Representatives copies of any
reports, plans, or contracts pertaining to the reserve that are
required to be submitted to the Committees on Armed Services of
the Senate and the House of Representatives; and
(3) cooperate and consult with the Secretary of the Interior
before executing any new contract or amendment to any existing
contract pertaining to the reserve and allow him a reasonable
opportunity to comment on such contract or amendment, as the
case may be.
(d) The Secretary of the Interior shall commence further petroleum
exploration of the reserve as of the date of transfer of jurisdiction
specified in section 103(a). In conducting this exploration effort, the
Secretary of the Interior-
(1) is authorized to enter into contracts for the exploration of
the reserve, except that no such contract may be entered into until
H.R.49-3
at least thirty days after the Secretary of the Interior has pro-
vided the Attorney General with a copy of the proposed contract
and such other information as may be appropriate to determine
legal sufficiency and possible violations under, or inconsistencies
with, the antitrust laws. If, within such thirty day period, the
Attorney General advises the Secretary of the Interior that any
such contract would unduly restrict competition or be inconsistent
with the antitrust laws, then the Secretary of the Interior may
not execute that contract;
(2) shall submit to the Committees on Interior and Insular
Affairs of the Senate and the House of Representatives any new
plans or substantial amendments to ongoing plans for the explora-
tion of the reserve. All such plans or amendments submitted to
such committees pursuant to this section shall contain a report by
the Attorney General of the United States with respect to the
anticipated effects of such plans or amendments on competition.
Such plans or amendments shall not be implemented until sixty
days after they have been submitted to such committees; and
(3) shall report annually to the Committees on Interior and
Insular Affairs of the Senate and the House of Representatives on
the progress of, and future plans for. exploration of the reserve.
(e) Until the reserve is transferred to the jurisdiction of the Secre-
tary of the Interior, the Secretary of the Navy is authorized to develop
and continue operation of the South Barrow gas field, or such other
fields as may be necessary, to supply gas at reasonable and equitable
rates to the native village of Barrow, and other communities and
installations at or near Point Barrow, Alaska, and to installations of
the Department of Defense and other agencies of the United States
located at or near Point Barrow, Alaska. After such transfer, the Sec-
retary of the Interior shall take such actions as may be necessary to
continue such service to such village, communities, installations, and
agencies at reasonable and equitable rates.
STUDY OF THE RESERVE
SEC. 105. (a) Section 164 of the Energy Policy and Conservation
Act (89 Stat. 871, 889), is hereby amended by deleting in the first
sentence "to the Congress" and by inserting in lieu thereof "to the
Committees on Interior and Insular Affairs of the Senate and House
of Representatives".
(b) (1) The President shall direct such Executive departments and/
or agencies as he may deem appropriate to conduct a study, in con-
sultation with representatives of the State of Alaska, to determine
the best overall procedures to be used in the development, production,
transportation, and distribution of petroleum resources in the reserve.
Such study shall include, but shall not be limited to, a considera-
tion of-
(A) the alternative procedures for accomplishing the devel-
opment, production, transportation, and distribution of the petro-
leum resources from the reserve, and
(B) the economic and environmental consequences of such
alternative procedures.
(2) The President shall make semiannual progress reports on the
implementation of this subsection to the Committees on Interior and
Insular Affairs of the Senate and the House of Representatives begin-
ning not later than six months after the date of the enactment of this
Act and shall, not later than one year after the transfer of jurisdic-
tion of the reserve, and annually thereafter, report any findings or
H. R. 49-4
conclusions developed as a result of such study together with appro-
priate supporting data and such recommendations as he deems desir-
able. The study shall be completed and submitted to such committees,
together with recommended procedures and any proposed legislation
necessary to implement such procedures not later than January 1,
1980.
(c) (1) The Secretary of the Interior shall establish a task force
to conduct a study to determine the values of, and best uses for, the
lands contained in the reserve, taking into consideration (A) the
natives who live or depend upon such lands, (B) the scenic, histori-
cal, recreational, fish and wildlife, and wilderness values, (C) min-
eral potential, and (D) other values of such lands.
(2) Such task force shall be composed of representatives from the
government of Alaska, the Arctic slope native community, and such
offices and bureaus of the Department of the Interior as the Secre-
tary of the Interior deems appropriate, including, but not limited to,
the Bureau of Land Management, the United States Fish and Wild-
life Service, the United States Geological Survey, and the Bureau
of Mines.
(3) The Secretary of the Interior shall submit a report, together
with the concurring or dissenting views, if any, of any non-Federal
representatives of the task force, of the results of such study to the
Committees on Interior and Insular Affairs of the Senate and the
House of Representatives within three years after the date of enact-
ment of this title and shall include in such report his recommenda-
tions with respect to the value, best use, and appropriate designation
of the lands referred to in paragraph (1).
ANTITRUST PROVISIONS
SEC. 106. Unless otherwise provided by Act of Congress, whenever
development leading to production of petroleum is authorized, the
provisions of subsections (g), (h), and (i) of section 7430 of title 10,
United States Code, shall be deemed applicable to the Secretary of the
Interior with respect to rules and regulations, plans of development
and amendments thereto, and contracts and operating agreements. All
plans and proposals submitted to the Congress under this title or
pursuant to legislation authorizing development leading to produc-
tion shall contain a report by the Attorney General of the United
States on the anticipated effects upon competition of such plans and
proposals.
AUTHORIZATION FOR APPROPRIATIONS
SEC. 107. (a) There are authorized to be appropriated to the Depart-
ment of the Interior such sums as may be necessary to carry out the
provisions of this title.
(b) If the Secretary of the Interior determines that there is an
immediate and substantial increase in the need for municipal services
and facilities in communities located on or near the reserve as a direct
result of the exploration and study activities authorized by this title
and that an unfair and excessive financial burden will be incurred by
such communities as a result of the increased need for such services and
facilities, then he is authorized to assist such communities in meeting
the costs of providing increased municipal services and facilities. The
Secretary of the Interior shall carry out the provisions of this section
through existing Federal programs and he shall consult with the heads
of the departments or agencies of the Federal Government concerned
with the type of services and facilities for which financial assistance is
being made available.
H. R. 49-5
TITLE II-NAVAL PETROLEUM RESERVES
SEC. 201. Chapter 641 of title 10, United States Code, is amended as
follows:
(1) Immediately before section 7421 insert the following new
section:
"§ 7420. Definitions
"(a) In this chapter—
"(1) 'national defense' includes the needs of, and the planning
and preparedness to meet, essential defense, industrial, and mili-
tary emergency energy requirements relative to the national
safety, welfare, and economy, particularly resulting from foreign
military or economic actions;
"(2) 'naval petroleum reserves' means the naval petroleum and
oil shale reserves established by this chapter, including Naval
Petroleum Reserve Numbered 1 (Elk Hills), located in Kern
County, California, established by Executive order of the Presi-
dent, dated September 2, 1912; Naval Petroleum Reserve Num-
bered 2 (Buena Vista), located in Kern County, California,
established by Executive order of the President, dated Decem-
ber 13, 1912; Naval Petroleum Reserve Numbered 3 (Teapot
Dome), located in Wyoming, established by Executive order of the
President, dated April 30, 1915; Naval Petroleum Reserve Num-
bered 4, Alaska, established by Executive order of the President,
dated February 27, 1923 (until redesignated as the National Petro-
leum Reserve in Alaska under the jurisdiction of the Secretary of
the Interior as provided in the Naval Petroleum Reserves Pro-
duction Act of 1976) ; Oil Shale Reserve Numbered 1, located in
Colorado, established by Executive order of the President, dated
December 6, 1916, as amended by Executive order dated June 12,
1919; Oil Shale Reserve Numbered 2, located in Utah, established
by Executive order of the President, dated December 6, 1916; and
Oil Shale Reserve Numbered 3, located in Colorado, established by
Executive order of the President, dated September 27, 1924;
" (3) 'petroleum' includes crude oil, gases (including natural
gas), natural gasoline, and other related hydrocarbons, oil shale,
and the products of any of such resources;
(4) 'Secretary' means the Secretary of the Navy;
(5) 'small refiner' means an owner of a refinery or refineries
(including refineries not in operation) who qualifies as a small
business refiner under the rules and regulations of the Small
Business Administration; and
(6) 'maximum efficient rate' means the maximum sustainable
daily oil or gas rate from a reservoir which will permit economic
development and depletion of that reservoir without detriment to
the ultimate recovery.".
(2) Section 7421 (a) is amended-
(A) by striking out "of the Navy";
(B) by striking out "and oil shale";
(C) by striking out "for naval purposes" and inserting in lieu
thereof "for national defense purposes"; and
(D) by striking out "section 7438 hereof" and inserting in lieu
thereof "this chapter".
(3) The text of section 7422 is amended to read as follows:
" (a) The Secretary, directly or by contract, lease, or otherwise, shall
explore, prospect, conserve, develop, use, and operate the naval petro-
leum reserves in his discretion, subject to the provisions of subsection
H. R. 49-6
(c) and the other provisions of this chapter; except that no petroleum
leases shall be granted at Naval Petroleum Reserves Numbered 1 and 3.
"(b) Except as otherwise provided in this chapter, particularly
subsection (c) of this section, the naval petroleum reserves shall be
used and operated for-
"(1) the protection, conservation, maintenance, and testing of
those reserves; or
"(2) the production of petroleum whenever and to the extent
that the Secretary, with the approval of the President, finds that
such production is needed for national defense purposes and the
production is authorized by a joint resolution of Congress.
"(c) (1) In administering Naval Petroleum Reserves Numbered 1,
2, and 3, the Secretary is authorized and directed—
"(A) to further explore, develop, and operate such reserves;
(B) commencing within ninety days after the date of enact-
ment of the Naval Petroleum Reserves Production Act of 1976,
to produce such reserves at the maximum efficient rate consistent
with sound engineering practices for a period not to exceed six
years after the date of enactment of such Act;
"(C) during such production period or any extension thereof
to sell or otherwise dispose of the United States share of such
petroleum produced from such reserves as hereinafter provided;
and
"(D) to construct, acquire, or contract for the use of storage
and shipping facilities on and off the reserves and pipelines and
associated facilities on and off the reserves for transporting petro-
leum from such reserves to the points where the production from
such reserves will be refined or shipped.
Any pipeline in the vicinity of a naval petroleum reserve not other-
wise operated as a common carrier may be acquired by the Secretary
by condemnation, if necessary, if the owner thereof refuses to accept,
convey, and transport without discrimiation and at reasonable rates
any petroleum produced at such reserve. With the approval of the
Secretary, rights-of-way for new pipelines and associated facilities
may be acquired by the exercise of the right of eminent domain in
the appropriate United States district court. Such rights-of-way may
be acquired in the manner set forth in the Act of February 26, 1931,
chapter 307 (46 Stat. 1421; 40 U.S.C. 258(a)), and the prospective
holder of the right-of-way is 'the authority empowered by law to
acquire the lands' within the meaning of that Act. Such new pipelines
shall accept, convey, and transport without discrimination and at rea-
sonable rates any petroleum produced at such reserves as a common
carrier. Pipelines and associated facilities constructed at or procured
for Naval Petroleum Reserve Numbered 1 pursuant to this subsection
shall have adequate capacity to accommodate not less than three hun-
dred fifty thousand barrels of oil per day and shall be fully oper-
able as soon as possible, but not later than three years after the date of
enactment of the Naval Petroleum Reserves Production Act of 1976.
"(2) At the conclusion of the six-year production period authorized
by paragraph (1) (B) of this subsection the President may extend the
period of production in the case of any naval petroleum reserve for
additional periods of not to exceed three years each-
"(A) after the President requires an investigation to be made,
in the case of each extension, to determine the necessity for con-
tinued production from such naval petroleum reserve;
(B) after the President submits to the Congress, at least one
hundred eighty days prior to the expiration of the current pro-
duction period prescribed by this section, or any extension thereof,
H. R. 49-7
a copy of the report made to him on such investigation together
with a certification by him that continued production from such
naval petroleum reserve is in the national interest; and
"(C) if neither House of Congress within ninety days after
receipt of such report and certification adopts a resolution dis-
approving further production from such naval petroleum reserve.
(3) The production authorization set forth in paragraph (1) (B)
of this subsection, in the case of Naval Petroleum Reserve Numbered
1, is conditioned upon the private owner of any lands or interests
therein within such reserve agreeing with the Secretary to continue
operations of such reserve under a unitized plan contract which ade-
quately protects the public interest; however, if such agreement is not
reached within ninety days after the date of enactment of the Naval
Petroleum Reserves Production Act of 1976 the Secretary is author-
ized to exercise the authority for condemnation conferred by section
7425 of this chapter.".
(4) The first sentence of section 7423 is amended by deleting "of the
Navy" and "or products".
(5) Section 7424 is amended—
(A) by deleting "of the Navy" in the text of subsection (a)
preceding clause (1);
(B) by deleting "and oil shale" in subsection (a) (1) in the text
preceding subclause (A) and
(C) by deleting "in the ground" in clause (1) (A) of subsec-
tion (a).
(6) Section 7425 is amended by deleting "of the Navy".
(7) Section 7426(a) is amended by striking out "the Secretary of
the Navy" and inserting in lieu thereof "Subject to the provisions of
section 7422 (c), the Secretary".
(8) The first and second sentences of section 7427 are amended by
striking out "of the Navy".
(9) Section 7428 is amended by striking out "within the naval
petroleum and oil shale reserves shall contain a provision authorizing
the Secretary of the Navy" and inserting in lieu thereof "within Naval
Petroleum Reserve Numbered 2 and the oil shale reserves shall contain
a provision authorizing the Secretary".
(10) The first sentence of section 7429 is amended by deleting "of
the Navy".
(11) The text of section 7430 is amended to read as follows:
(a) In administering the naval petroleum reserves under this chap-
ter, the Secretary shall use, store, or sell the petroleum produced from
the naval petroleum reserves and lands covered by joint, unit, or other
cooperative plans.
(b) Notwithstanding any other provision of law, each sale of the
United States share of petroleum shall be made by the Secretary at
public sale to the highest qualified bidder, for periods of not more than
one year, at such time, in such amounts, and after such advertising as
the Secretary considers proper and without regard to Federal, State,
or local regulations controlling sales or allocation of petroleum
products.
"(c) In no event shall the Secretary permit the award of any con-
tract which would result in any person obtaining control, directly or
indirectly, over more than 20 per centum of the estimated annual
United States share of petroleum produced from Naval Petroleum
Reserve Numbered 1.
"(d) Each proposal for sale under this title shall provide that the
terms of every sale of the United States share of petroleum from the
naval petroleum reserves shall be SO structured as to give full and
H. R. 49-8
equal opportunity for the acquisition of petroleum by all interested
persons, including major and independent oil producers and refiners
alike. When the Secretary, in consultation with the Secretary of the
Interior, determines that the public interests will be served by the sale
of petroleum to small refiners not having their own adequate sources
of supply of petroleum, the Secretary is authorized and directed to set
aside a portion of the United States share of petroleum produced for
sale to such refiners under the provisions of this section for processing
or use in such refineries, except that-
"(1) none of the production sold to small refiners may be resold
in kind;
"(2) production must be sold at a cost of not less than the pre-
vailing local market price of comparable petroleum;
"(3) the set-aside portion may not exceed 25 per centum of the
estimated annual United States share of the total production from
all producing naval petroleum reserves; and
"(4) notwithstanding the provisions of subsection (b) of this
section, the Secretary may, at his discretion if he deems it to be
in the public interest, prorate such petroleum among such refiners
for sale, without competition, at not less than the prevailing local
market price of comparable petroleum.
"(e) Any petroleum produced from the naval petroleum reserves,
except such petroleum which is either exchanged in similar quantities
for convenience or increased efficiency of transportation with persons
or the government of an adjacent foreign state, or which is temporarily
exported for convenience or increased efficiency of transportation
across parts of an adjacent foreign state and reenters the United States,
shall be subject to all of the limitations and licensing requirements of
the Export Administration Act of 1969 (83 Stat. 841) and, in addition,
before any petroleum subject to this section may be exported under
the limitations and licensing requirement and penalty and enforce-
ment provisions of the Export Administration Act of 1969, the Presi-
dent must make and publish an express finding that such exports will
not diminish the total quality or quantity of petroleum available to the
United States and that such exports are in the national interest and
are in accord with the Export Administration Act of 1969.
"(f) During the period of production or any extension thereof
authorized by section 7422 (c), the consultation and approval require-
ments of section 7431 (a) (3) are waived.
"(g) (1) Prior to the promulgation of any rules and regulations,
plans of development and amendments thereto, and in the entering and
making of contracts and operating agreements relating to the develop-
ment, production, or sale of petroleum in or from the reserves, the
Secretary shall consult with and give due consideration to the views
of the Attorney General of the United States with respect to matters
which may affect competition.
"(2) No contract or operating agreement may be made, issued, or
executed under this chapter until at least thirty days after the Sec-
retary notifies the Attorney General of the proposed contract or
operating agreement. Such notification shall contain such information
as the Attorney General may require in order to advise the Secretary
as to whether such contract or operating agreement may create or
maintain a situation inconsistent with the antitrust laws. If, within
such thirty day period, the Attorney General advises the Secretary
that a contract or operating agreement may create or maintain a situ-
ation inconsistent with the antitrust laws, then the Secretary may not
make, issue, or execute that contract or operating agreement.
H.R.49-9
"(h) Nothing in this chapter shall be deemed to confer on any per-
son immunity from civil or criminal liability, or to create defenses to
actions, under the antitrust laws.
(i) As used in this section, the term 'antitrust laws' means—
"(1) the Act entitled 'An Act to protect trade and commerce
against unlawful restraints and monopolies', approved July 2,
1890 (15 U.S.C. 1 et seq.), as amended;
"(2) the Act entitled 'An Act to supplement existing laws
against unlaw ful restraints and monopolies, and for other pur-
poses', approved October 15, 1914 (15 U.S.C. 12 et seq.), as
amended:
"(3) the Federal Trade Commission Act (15 U.S.C. 41 et seq.),
as amended;
(4) sections 73 and 74 of the Act entitled 'An Act to reduce
taxation, to provide revenue for the Government, and for other
purposes', approved August 27, 1894 (15 U.S.C. 8 and 9), as
amended; or
(5) sections 2, 3, and 4 of the Act of June 19, 1936, chapter
592 (15 U.S.C. 13a, 13b, and 21a).
"(j) Any pipeline which accepts, conveys, or transports any petro-
leum produced from Naval Petroleum Reserves Numbered 1 or Num-
bered 3 shall accept, convey, and transport without discrimination and
at reasonable rates any such petroleum as a common carrier insofar as
petroleum from such reserves is concerned. Every contract entered into
by the Secretary for the sale of any petroleum owned by the United
States which is produced from such reserves shall contain provisions
implementing the requirements of the preceding sentence if the con-
tractor owns a controlling interest in any pipeline or any company
operating any pipeline, or is the operator of any pipeline, which carries
any petroleum produced from such naval petroleum reserves. The Sec-
retary may promulgate rules and regulations for the purpose of carry-
ing out the provisions of this section and he, or the Secretary of the
Interior where the authority extends to him, may declare forfeit any
contract, operating agreement, right-of-way, permit, or easement held
by any person violating any such rule or regulation. This section shall
not apply to any natural gas common carrier pipeline operated by any
person subject to regulation under the Natural Gas Act or any public
ntility subject to regulation by a State or municipal regulatory agency
having jurisdiction to regulate the rates and charges for the sale of
natural gas to consumers within the State or municipality.
"(k) The President may, at his discretion, direct that all or any
part of the United States share of petroleum produced from the naval
petroleum reserves be placed in strategic storage facilities as authorized
by sections 151 through 166 of the Energy Policy and Conservation
Act or that all or any part of such share be exchanged for petroleum
of equal value for the purpose of placing such petroleum in such
strategic storage facilities.".
(12) Section 7431 is amended-
(A) by inserting "(a)" immediately before "The Committees";
(B) by striking out "or oil shale" in clauses (1) and (2);
(C) by striking out "and oil shale" in clauses (2) and (3) ;
(D) by striking out "oil and gas (other than royalty oil and
gas), oil shale, and products therefrom" in clause (3) and insert-
ing in lieu thereof "petroleum (other than royalty oil and gas)";
and
(E) by adding at the end thereof the following new subsections:
'(b) (1) During the period of production authorized by section
H. R. 49-10
7422(c), the Secretary shall submit to the Committees on Armed
Services of the Senate and the House of Representatives any new plans
or substantial amendments to ongoing plans for the exploration,
development, and production of the naval petroleum reserves.
"(2) All plans or substantial amendments submitted to the Congress
pursuant to this section shall contain a report by the Attorney General
of the United States with respect to the anticipated effects of such
plans or amendments on competition. Such plans or amendments shall
not be implemented until sixty days after such plans or amendments
have been submitted to such committees.
(c) During the period of production authorized by section 7422
the Secretary shall submit annual reports as of the first day of the
fiscal year to the Committees on Armed Services of the Senate and
the House of Representatives, and such committees shall cause such
reports to be printed as a Senate or House document, as appropriate.
The Secretary shall include in such reports, with respect to each naval
petroleum reserve, an explanation in detail of the following:
(1) the status of the exploration, development, and production
programs;
(2) the production that has been achieved, including the dis-
position of such production and the proceeds realized therefrom;
"(3) the status of pipeline construction and procurement and
problems related to the availability of transportation facilities;
"(4) a summary of future plans for exploration, development,
production, disposal, and transportation of the production from
the naval petroleum reserves; and
"(5) such other information regarding the reserve as the Secre-
tary deems appropriate.".
(13) Section 7432 is amended to read as follows:
"§ 7432. Naval petroleum reserves special account
(a) There is hereby established on the books of the Treasury
Department a special account designated as the 'naval petroleum
reserves special account'. There shall be credited to such account-
"(1) all proceeds realized under this chapter from the disposi-
tion of the United States share of petroleum;
"(2) the net proceeds, if any, realized from sales or exchanges
within the Department of Defense of refined petroleum products
accruing to the benefit of any component of that department as
the result of any such sales or exchanges;
"(3) such additional sums as may be appropriated for the
maintenance, operation, exploration, development, and produc-
tion of the naval petroleum reserves;
"(4) such royalties as may accrue under the provisions of sec-
tion 7433; and
"(5) any other revenues resulting from the operation of the
naval petroleum reserves.
"(b) Funds available in the naval petroleum reserve special account
shall be available for expenditure in such sums as are specified in
annual appropriations Acts for the expenses of-
(1) exploration, prospecting, conservation, development, use,
operation, and production of the naval petroleum reserves as
authorized by this chapter;
(2) production (including preparation for production) as
authorized by this chapter, or as may hereafter be authorized;
(3) the construction and operation of facilities both within and
outside the naval petroleum reserves incident to the production
and the delivery of petroleum, including pipelines and shipping
terminals;
H. R. 49-11
"(4) the procurement of petroleum for, and the construction
and operation of facilities associated with, the Strategic Petroleum
Reserve authorized by sections 151 through 166 of the Energy
Policy and Conservation Act; and
"(5) the exploration and study of the National Petroleum
Reserve in Alaska as authorized in title I of the Naval Petroleum
Reserves Production Act of 1976.
(c) The budget estimates for annual appropriations from the
naval petroleum reserves special account shall be prepared by the
Secretary and shall be presented to the Congress by the President
independently of the budget of the Department of the Navy and the
Department of Defense.
"(d) Contracts under this chapter providing for the obligation of
funds may be entered into by the Secretary for a period of five years,
renewable, at the option of the Secretary, for an additional five-year
period; however, such contracts may obligate funds only to the extent
that such funds are made available in annual appropriations.".
(14) Section 7433 (a) is amended by striking out "of the Navy".
(15) Section 7433 (b) is amended by striking out "and oil shale".
(16) Section 7434 is amended by striking out "and oil shale".
(17) Section 7435 (b) is amended by striking out "of the Navy".
(18) Section 7436 (a) is amended by deleting "of the Navy, subject
to approval of the President,".
(19) Section 7438 is amended by striking out "Secretary of the
Interior" wherever it occurs and inserting therefor "Administrator of
the Energy Research and Development Administration"; and by strik-
ing out "of the Navy" wherever it occurs.
(20) The table of sections at the beginning of such chapter is
amended-
(A) by inserting immediately before
"7421. Jurisdiction and control."
the following:
"7420. Definitions."
(B) by striking out:
"7432. Expenditures; appropriations chargeable."
and inserting in lieu thereof the following
"7432. Naval petroleum reserve special account."
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
STATEMENT BY THE PRESIDENT
In my first State of the Union Message more than a year
ago, I set forth goals for regaining energy independence for
the United States. I also outlined a comprehensive and
ambitious national program needed to achieve our energy
goals. The first goal is to reduce our growing reliance on
imported oil.
We have launched energy programs that are possible
within existing authorities and I have asked the Congress
for the additional legislative authority that we must have.
My proposed Energy Independence Act of 1975 contained
thirteen specific programs to encourage energy conservation
and increase domestic energy production. More recently, I
sent to the Congress proposals dealing with nuclear energy,
investment in energy facilities, and other measures needed
to achieve our goals.
One of the original thirteen proposals was especially
important because it permitted immediate action to produce
more oil here in the United States. There are only a very
few steps like this that are possible. Generally, it takes
three years or more to bring new oil production on line.
Actions to increase domestic oil productions are
critical because oil imports have grown to the point where
they now account for almost 40% of the petroleum we are
using. We are even more dependent now than we were a
little over two years ago when we experienced the disrup-
tion of an oil embargo.
I am, therefore, pleased to sign into law today the
Naval Petroleum Reserves Production Act of 1976 which puts
in place one more element of our program to reduce
dependence on foreign oil.
FORD LIBRARY
2
The Naval Petroleum Reserves had special importance
when they were established over 50 years ago to guarantee
an adequate supply of oil for the U.S. Navy. Today, the
Reserves have even greater importance to the whole Nation
because they can help reduce our dependence on imported oil
and help stem the outflow of American dollars and jobs.
This new Act directs the Secretary of the Navy to
commence a vigorous production program from the three Naval
Petroleum Reserves located in California and Wyoming. The
Act also redesignates the fourth Naval Petroleum Reserve in
Alaska as a National Petroleum Reserve and transfers the
jurisdiction to the Department of the Interior in June 1977.
Production from the Alaskan Reserve is not authorized at
this time, but the Act specifically calls upon the President
to submit a development plan and appropriate legislation to
the Congress. Work has already begun on those measures.
The new Act also makes it possible for production from
the Naval Reserves to contribute directly to the creation
of the Strategic Petroleum Reserve authorized in the Energy
Policy and Conservation Act which I signed on December 22, 1975.
Once established, the Strategic Reserve will provide both a
deterrent to future embargoes and a significant means to
offset the effects of any future supply interruption.
The Strategic Reserve will permit us to have needed
petroleum much more readily available in the case of an
emergency for our Armed Services and other critical national
needs.
When in full production, the three Naval Petroleum
Reserves in California and Wyoming will provide more than
300,000 barrels of oil per day. The development and pro-
duction of Naval Petroleum Reserve Number One in Elk Hills,
California, will make the biggest contribution.
FORD + LIBRART
3
The U.S. share of this production, about 80 percent,
may be sold at auction and up to 25 percent of that amount
could be set aside for sale to small refiners. At the
President's discretion, all or part of the U.S. share may
be used to build up the Strategic Petroleum Reserves. The
Act authorizes use of revenues from the sale of petroleum
for work on the Naval Petroleum Reserves, for the National
Reserve in Alaska, and for the Strategic Petroleum Reserve.
This Act is an important step toward reversing our
declining domestic oil production and it is another sign
that we are making progress. Four of my original 13 proposals
were included in the Energy Policy and Conservation Act which
I signed into law on December 22, 1975.
The Congress still has before it 18 major energy
proposals, including those remaining from the original 13
I submitted in January 1975 and others I have submitted
since then. We need those measures to conserve energy and
to increase domestic production. Congress must act on those
measures so that we can achieve our national goals for
energy independence.
GE3ALA FORD
EMBARGOED FOR RELEASE
APRIL 5, 1976
UNTIL 2:15 P.M., EST.
Office of the White House Press Secretary
THE WHITE HOUSE
FACT SHEET
SIGNING OF THE NAVAL PETROLEUM RESERVES
PRODUCTION ACT OF 1976 (H.R. 49)
The President today signed the Naval Petroleum Reserves
Production Act of 1976 which:
Authorizes production of petroleum from Reserves 1, 2 and
3, located in Elk Hills, California; Buena Vista, California;
and Teapot Dome, Wyoming.
Transfers Jurisdiction of Reserve Number 4 in Alaska from
the Secretary of the Navy to the Secretary of the Interior
effective June 1, 1977 and redesignates it as a National
Petroleum Reserve.
Calls upon the President to submit to Congress a proposed
development plan and appropriate legislation to authorize
development and production from the Alaskan Reserve.
The President also urged the Congress to pass the 17 major
energy proposals which are still awaiting action.
BACKGROUND
Legislation authorizing production from the Naval Petroleum
Reserves was one of thirteen proposals submitted to the
Congress by the President in January 1975 as a part of his
Energy Independence Act.
During the past year, the President has proposed additional
energy legislation, including bills concerned with uranium
enrichment, financing energy facilities, energy resource
development impact assistance and Alaskan natural gas.
(Eighteen proposals awaiting action were identified in
the President's February 26, 1976, Energy Message.)
Four of the original thirteen proposals were included in
the Energy Policy and Conservation Act which the President
signed on December 22, 1975. The Naval Petroleum Reserve
legislation is the fifth proposal now in law.
PRINCIPAL PROVISIONS OF THE NEW ACT
The principal provisions of the Naval Petroleum Reserves
Production Act are outlined below. Under the previous law,
all of the NPR's were under the jurisdiction of the Secretary
of the Navy and were held in reserve for use only in times of
national emergency.
National Petroleum Reserve in Alaska
- NPR-4 is redesignated as a "national" petroleum reserve
and is transferred effective June 1, 1977, to the Secretary
of the Interior who shall assume all administrative
responsibilities formerly held by the Secretary of the
Navy.
more
GERALD FORD LIBRARY
2
- Interior shall continue Navy's exploration activities
and report annually to the Congress on further exploration
plans.
- The President is called upon to submit to the Congress
no later than January 1, 1980, a plan for the development
of the Alaskan Reserve, appropriate legislation, and
economic and environmental impact assessments. Develop-
ment plans are to be prepared in consultation with the
State of Alaska and appropriate Federal agencies.
Naval Petroleum Reserves 1, 2 and 3.
- The Secretary of the Navy is directed to begin producing
within 90 days NPR's 1, 2 and 3 at their maximum efficient
rate consistent with sound engineering practices for a
period of 6 years.
- Production can be continued for additional increments of
3 years 1f the President certifies that such production
is in the national interest and neither House of Congress
disapproves the action within 90 days.
- The Secretary of the Navy is directed to provide storage
and transportation facilities for NPR-1, within three years
of enactment, to accommodate production of not less than
350,000 barrels of oil per day.
- Sales of the U.S. share of oil (about 80%) shall be made
at public auction to the highest bidder for periods not
to exceed one year. Up to 25% is set aside for sale to
small refiners at prevailing market prices.
- The Secretary of the Navy must consult with the Attorney
General on matters which may affect competition and may
not sign a contract inconsistent with anti-trust laws.
- The President may direct all or part of the U.S. share
to be placed in the Strategic Petroleum Reserve directly
or through exchange agreements. The Strategic Reserve
was authorized by the Energy Policy and Conservation
Act (December 22, 1975).
- Proceeds from the sale of NPR production shall be credited
to a Naval Petroleum Reserve Special Account which, subject
to the appropriations process, shall be made available
for:
Exploration, development and production of NPR's 1, 2
and 3, and for exploration and study in regard to the
National Petroleum Reserve in Alaska.
Facilities incident to production and delivery of
petroleum.
Petroleum and facilities for the Stragetic Petroleum
Reserve.
IMPACT OF THE BILL
NPR-1 at Elk Hills has proven resources of approximately
1.25 billion barrels of oil -- one of the largest petroleum
fields in the U.S. Fully developed, it could produce oil at
the rate of 200,000 to 300,000 barrels per day. Current
more
FORD
GERWED
LIBRARY
3
production is about 2,000 to 3,000 barrels a day,
principally from production to offset private production
in adjoining fields and for testing and maintenance
purposes.
NPR-2 at Buena Vista is currently in full production,
allowing a U.S. share of about 600 barrels per day.
NPR-3 at Teapot Dome has reserves of 42.5 million barrels
and could produce at the rate of 21,000 barrels per day.
NPR-4 in Alaska has only 100 million barrels of proven
reserves, but estimates of potential reserves run as
high as 30 billion barrels.
# # #
GERALD FORD LIBRARY
EMBARGOED FOR RELEASE
APRIL 5, 1976
UNTIL 2:15, E.S.T.
Office of the White House Press Secretary
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
In my first State of the Union Message more than a year
ago, I set forth goals for regaining energy independence for
the United States. I also outlined a comprehensive and
ambitious national program needed to achieve our energy
goals. The first goal is to reduce our growing reliance on
imported oil.
We have launched energy programs that are possible
within existing authorities and I have asked the Congress
for the additional legislative authority that we must have.
My proposed Energy Independence Act of 1975 contained
thirteen specific programs to encourage energy conservation
and increase domestic energy production. More recently, I
sent to the Congress proposals dealing with nuclear energy,
investment in energy facilities, and other measures needed
to achieve our goals.
One of the original thirteen proposals was especially
important because it permitted immediate action to produce
more oil here in the United States. There are only a very
few steps like this that are possible. Generally, it takes
three years or more to bring new oil production on line.
Actions to increase domestic oil productions are
critical because oil imports have grown to the point where
they now account for almost 40% of the petroleum we are
using. We are even more dependent now than we were a
little over two years ago when we experienced the disrup-
tion of an oil embargo.
I am, therefore, pleased to sign into law today the
Naval Petroleum Reserves Production Act of 1976 which puts
in place one more element of our program to reduce
dependence on foreign oil.
The Naval Petroleum Reserves had special importance
when they were established over 50 years ago to guarantee
an adequate supply of oil for the U.S. Navy. Today, the
Reserves have even greater importance to the whole Nation
because they can help reduce our dependence on imported oil
and help stem the outflow of American dollars and jobs.
This new Act directs the Secretary of the Navy to
commence a vigorous production program from the three Naval
Petroleum Reserves located in California and Wyoming. The
Act also redesignates the fourth Naval Petroleum Reserve in
Alaska as a National Petroleum Reserve and transfers the
jurisdiction to the Department of the Interior in June 1977.
Production from the Alaskan Reserve is not authorized at
this time, but the Act specifically calls upon the President
to submit a development plan and appropriate legislation to
the Congress. Work has already begun on those measures.
more
FCRD
GERALD
LIBRARY
2
The new Act also makes it possible for production from
the Naval Reserves to contribute directly to the creation
of the Strategic Petroleum Reserve authorized in the Energy
Policy and Conservation Act which I signed on December 22, 1975.
Once established, the Strategic Reserve will provide both a
deterrent to future embargoes and a significant means to
offset the effects of any future supply interruption.
The Strategic Reserve will permit us to have needed
petroleum much more readily available in the case of an
emergency for our Armed Services and other critical national
needs.
When in full production, the three Naval Petroleum
Reserves in California and Wyoming will provide more than
300,000 barrels of oil per day. The development and pro-
duction of Naval Petroleum Reserve Number One in Elk Hills,
California, will make the biggest contribution.
The U.S. share of this production, about 80 percent,
may be sold at auction and up to 25 percent of that amount
could be set aside for sale to small refiners. At the
President's discretion, all or part of the U.S. share may
be used to build up the Strategic Petroleum Reserves. The
Act authorizes use of revenues from the sale of petroleum
for work on the Naval Petroleum Reserves, for the National
Reserve in Alaska, and for the Strategic Petroleum Reserve.
This Act is an important step toward reversing our
declining domestic oil production and it is another sign
that we are making progress. Four of my original 13 proposals
were included in the Energy Policy and Conservation Act which
I signed into law on December 22, 1975.
The Congress still has before it 17 major energy
proposals, including those remaining from the original 13
I submitted in January 1975 and others I have submitted
since then. We need those measures to conserve energy and
to increase domestic production. Congress must act on those
measures so that we can achieve our national goals for
energy independence.
#####
BERALD FORD LIBRART
FOR IMMEDIATE RELEASE
APRIL 5, 1976
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
REMARKS OF THE PRESIDENT
UPON SIGNING THE
NAVAL PETROLEUM RESERVES
PRODUCTION ACT
THE ROSE GARDEN
2:23 P.M. EST
Secretary Rumsfeld, Secretary Kleppe, Secretary
Middendorf, Administrator Zarb, distinguished Members of the
House and Senate:
Just over two years ago the Arab oil embargo
taught the United States a lesson, that we should not be too
dependent on other nations for our oil supplies. We learned
all too well the high price of energy dependence, both in the
terms of inflation and lost jobs.
Over a year ago, in my First State of the Union
Message, I set forth goals for regaining our energy indepen-
dence and a comprehensive program for achieving those goals.
Shortly thereafter I submitted to the Congress my comprehensive
energy independence plan, which contained specific programs
to encourage conservation and increase domestic production.
One of my proposals called for development and
production of our Naval Petroleum Reserve. This step is
especially important because it is one action we can take to
get an immediate increase in domestic oil production, thereby
lessening our dependence on foreign oil.
Accordingly, today I sign into law the Naval
Petroleum Reserves Production Act of 1976. This act directs
the Secretary of the Navy to begin full-scale production from
the two petroleum reserves in California, including Elk Hills,
and one from Wyoming.
When in full production, these three reserves will
provide more than 300,000 barrels of oil per day, which
represents about 4 percent of what we now import daily from
foreign suppliers.
The new act also makes it possible for production
from the Naval reserves to contribute directly to the creation
of strategic petroleum reserve authorized in the Energy
Policy and Conservation Act, which I signed into law
December 22, 1975.
MORE
FORD
GERALD
LIBRARY
Page 2
Once established, the strategic reserve will
provide both a deterrent to future embargoes and a significant
means to offset the effects of any future supply interruption.
The strategic reserve will permit us to have needed petroleum
much more readily available in case of emergency for our Armed
Forces and other critical national needs.
The act also redesignates the Naval Reserve in
Alaska as a Naval Petroleum Reserve to be managed by the
Department of the Interior.
This act is a very important step toward reversing
our declining domestic oil production, but other steps
obviously must be taken.
Eighteen major energy proposals still await
Congressional approval on Capitol Hill. I strongly urge the
Congress to move ahead on these additional initiatives so
that as we celebrate our 200th year of independence, we take
an affirmative action toward achieving energy independence
as well.
END
(AT 2:26 P.M. EST)
FORD & LIBRARY GERALD
2
April 1, 1976
Dear Mr. Director:
The following bills were received at the White
House on April 1st:
S. 3060
H.R. 49
H.R. 200
H.R. 8617
Please let the President have reports and
recommendations as to the approval of these
bills as soon as possible.
Sincerely,
Robert D. Linder
Chief Executive Clerk
The Honorable James T. Lynn
Director
Office of Management and Budget
Washington, D.C.
FORD & LIBRARY GERALD