Winter 1997
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California Update: Sale of Elk Hills Naval Petroleum Reserve No. 1As part of the Fiscal Year 1996 budget, the Administration (Department of Energy) proposed to privatize California's Elk Hills Naval Petroleum Reserve No. 1. That proposal was part of the National Defense Authorization Act which was signed by the President on February 10, 1996. The Act provided a mechanism for compensating California for its state school land interest within the Naval Petroleum Reserve No. 1 (NPR-1). In order to provide greater certainty that California's retired teachers would receive compensation under the Act, negotiations were pursued with the Department of Energy beginning in April. It wasn't until October 10, however, after two months of intense negotiations between the California State Lands Commission, the California State Teachers' Retirement System, and the Office of the California Attorney General, that the Secretary of Energy came to terms on a "settlement agreement." The agreement provides for the compensation to California for the two Elk Hills school land sections. At the same time, it would maximize sale revenues to the federal government and to California by removing the state's cloud on title, by removing purchasers' exposure to treble damages for conversion under California statutory law, and by prohibiting the state from enjoying the sale of Elk Hills. The key provisions of the settlement agreement are: The Department of Energy would pay nine percent of the net proceeds from the sale of Elk Hills in five equal installments, without interest, beginning in Fiscal Year 1999 and ending in Fiscal Year 2003. If the amount exceeds $180 million, the balance over $180 million would be paid in two equal installments in years six and seven (Fiscal Years 2004 and 2005); and The obligation to pay is contingent on the sale, and the obligation to pay each installment is subject to an appropriation for the purpose of making the payment. Now that the agreement has been signed, the next step is for the 105th Congress to appropriate the funds. |