Largest Federal Divestiture Completed, Elk Hills Transferred To Private Owner

$3.65 Billion Sale to Help Further Shrink Nation's Deficit

	Patricia Godley, DOE's Assistant Secretary for Fossil Energy, who orchestrated the government's 2-year process to divest of Elk Hills, watches the culmination of her efforts with the historic signing of the final transfer documents by Secretary Peña (left) and Occidental's Hentschel.

Washington, DC - The Department of Energy and Occidental Petroleum Corporation today concluded the largest divestiture of federal property in the history of the U.S. government. In a Washington, D.C., ceremony, Secretary of Energy Federico Peña and Occidental Oil & Gas Chief Executive David Hentschel signed final papers for the sale of the United States' interest in the Elk Hills Naval Petroleum Reserve to Occidental.

Early today, Occidental executed a wire transfer of $3.65 billion to the U.S. Treasury. In return, the U.S. Government recorded a deed in the Kern County (CA) Courthouse, transferring title to the property which had been in government hands since President Taft created the reserve in 1912.

Today's signing completed a privatization process that began in 1995 when the Clinton Administration proposed selling Elk Hills. The divestment will get the federal government out of the business of producing oil and gas at Elk Hills and reflects President Clinton's vision for the proper roles of the federal government and private industry.

"This historic transaction is another example of the Clinton Administration's commitment to common sense government that works better and costs less," Secretary Peña said. "We're returning to the private sector those functions that can be more effectively performed in the private sector. That underscores this Administration's faith in the ability of market forces to create prosperity and new opportunities for all Americans."

Elk Hills is one of the nation's 11 largest oil and gas fields, encompassing 47,000 acres with more than 900 producing wells. It currently produces approximately 55,000 barrels of oil and almost 400 million cubic feet of natural gas per day.

For much of the 20th century, the field served as contingency source of fuel for the Navy's oil-burning ships. With refined petroleum products and nuclear energy now meeting the military's fuel needs, the Elk Hills Reserve no longer serves a strategic purpose. The country's civilian and defense emergency oil supplies are now held in the Strategic Petroleum Reserve. In 1995, the Administration proposed legislation to privatize Elk Hills, and Congress gave authority to proceed in the 1996 National Defense Authorization Act, setting into motion a two-year timetable which concluded today.

The Energy Department's 1999 budget request to Congress includes $36 million from the Elk Hills proceeds to be transferred to the California State Teachers Retirement System -- part of the Administration's agreement with the state to resolve a long-standing dispute over certain "school lands" within the Elk Hills Reserve. A provision in the legislation authorizing the sale of Elk Hills provided the state an avenue to address its claims by setting aside a percentage of the proceeds from the sale to benefit the retirement fund. Over the next seven years, upon appropriations by Congress, the government will ultimately pay into the system more than $320 million -- money to be used for cost-of-living increases for retired public school teachers in California.

Peña noted, "We're proud of the stewardship role the Government has played in overseeing this important domestic resource for most of this century. The Elk Hills property is the model of a modern-day oil field. Today's divestiture places the Elk Hills field on a new path toward realizing its true potential as a secure source of affordable domestic fuels. We are pleased to be placing its future into the very capable hands of a company respected worldwide for its responsible development of energy resources."

- End of TechLine -

For more information, contact:
Bill Wicker, DOE Office of Public Affairs, 202-586-5806
Robert Porter, DOE Office of Fossil Energy, 202-586-6503