Selling Elk Hills: The Political Economy of US Federal Divestment

Abstract

With a newly elected Congress in 1995, the United States government (USG) began to face a family of questions sun ounding the possible sale of its largest and most profitable asset the giant oil and gas field, Elk Hills, or Naval Petroleum Reserve No 1. Discovered nearly 90 years ago, it became a Federal Reserve by Executive Order of the President in 1912. The fourth largest of some 278 fields in California, and producing over 1.4 billion barrels of oil (energy equivalent for both oil and natural gas) per annum by 1998, it was originally set aside both to protect the resource and to establish a strategic reserve for the US Navy. Although highly productive in the recent past, it was seen by both the USG's industry partner and the Congress as likely to become less profitable as its production declined and costs increased. The industry partner was the private sector oil corporation, Chevron USA, which by 1976 owned an undivided 22 percent interest in the field. Several public institutions were involved in evaluating and creating a future for Elk Hills: