Sale of Naval Petroleum Reserve No. 1; Intent To Prepare a Supplemental Environmental Impact Statement and Conduct Public Scoping Meeting

DEPARTMENT OF ENERGY

Sale of Naval Petroleum Reserve No. 1; Intent To Prepare a

Supplemental Environmental Impact Statement and Conduct Public Scoping

Meeting

AGENCY: Office of Naval Petroleum and Oil Shale Reserves, Energy.

ACTION: Notice of intent to prepare a Supplemental Environmental Impact

Statement.

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SUMMARY: Title XXXIV, Subtitle B, of the National Defense Authorization

Act for Fiscal Year 1996 (Public Law 104-106) directs the Secretary of

Energy to sell the Federal government's interests in Naval Petroleum

Reserve Numbered 1 (NPR-1, also called ``Elk Hills''). In 1993, the

Department of Energy (DOE) published a supplement (DOE/EIS-0158) to a

1979 Environmental Impact Statement (EIS) which analyzed the impacts of

oil and gas production at NPR-1 under continued Federal ownership and

operation. Sale of Federal ownership was not analyzed in the 1993

Supplemental EIS. DOE has determined that the sale required by Public

Law 104-106 constitutes a major Federal action which may have

significant impact upon the environment within the meaning of the

National Environmental Policy Act (NEPA). For this reason, DOE intends

to prepare a supplement to the 1993 Supplemental EIS to cover

foreseeable impacts from the sale and reasonable alternatives.

DATES: DOE invites interested agencies, organizations, and members of

the public to submit comments or suggestions to assist in identifying

significant environmental issues and determining the appropriate scope

of the Supplemental EIS. Comments may be submitted by mail or presented

at a scoping meeting to be held at Bakersfield, California, on the date

and at the time indicated below.

Tuesday, April 16, 1996

1:00 P.M. to 3:00 P.M., and 7:00 P.M. to 9:00 P.M.

Red Lion Hotel, 3100 Camino del Rio Court, Bakersfield, California

Written comments postmarked by May 6, 1996, will be considered in

the preparation of the Draft Supplemental EIS. Comments postmarked

after that date will be considered to the maximum extent practicable.

Requests to speak at the meeting should be received by Anthony J. Como,

at the address indicated below, on or before April 9, 1996. In

addition, requests to speak may be submitted to Mr. Como via facsimile

at (202) 586-6050 or a message may be left on our toll-free number at

1-888-NPREIS1 (677-3471). Requests to speak may also be made at the

time of registration for the meeting. However, persons who submitted

advance requests to speak by April 9, 1996, will be given priority if

time should become limited during the meeting.

ADDRESSES: Written comments or suggestions on the scope of the

supplemental EIS, and requests to speak at the scoping meeting, may be

submitted to: Anthony J. Como, Document Manager (FE-52), U.S.

Department of Energy, 1000 Independence Avenue, S.W., Washington, DC

20585-0350, Phone: 202-586-5935, Telefax: 202-586-6050.

Envelopes should be labeled ``Scoping for Sale EIS''.

FOR FURTHER INFORMATION CONTACT: For general information on the DOE

NEPA review process, contact: Carol M. Borgstrom, Director, Office of

NEPA Policy, and Assistance (EH-42), U.S. Department of Energy, 1000

Independence Ave., S.W., Washington, D.C. 20585-0119, Phone: 202-586-

4600, Telefax: 202-586-7031, Toll Free: (800) 472-2756.

For information on the sale of NPR-1 required by Pub. L. 104-106,

contact: John Bartholomew, Divestment Administrator (FE-41), U.S.

Department of Energy, 1000 Independence Ave., S.W., Washington, D.C.

20585-0340, Phone: 202-586-4248, Telefax: 202-586-0835.

SUPPLEMENTARY INFORMATION: NPR-1 comprises 47,985 acres and is located

about 35 miles west of Bakersfield in Kern County, California. It was

created by an Executive Order issued by President Taft in 1912 to

provide an emergency source of liquid fuels for the military. Except

for brief periods of production in the 1920's and during World War II,

Elk Hills was maintained in an essentially undeveloped status until the

1973-74 oil embargo demonstrated the Nation's vulnerability to oil

supply interruptions. As a result of the embargo, the Congress passed

the Naval Petroleum Reserves Production

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Act of 1976 (Pub. L. 94-258), which authorized and directed that the

Reserve be explored and developed to its full economic and productive

potential. Public Law 94-258 required that Elk Hills be produced for

six years at the ``maximum efficient rate'' consistent with sound

engineering practices. The law also provided the President

discretionary authority to extend production subsequently, in

increments of up to three years each, if continued production is found

to be in the national interest. Such findings have been made and

production is presently authorized through April 5, 1997.

Elk Hills is currently producing approximately 61,000 barrels per

day of oil, 345 million cubic feet per day of natural gas, and 500

thousand gallons per day of natural gas liquids. All of the

government's share of production (approximately 47,000 barrels per day

of oil, 40 million cubic feet per day of natural gas, and 225 thousand

gallons per day of natural gas liquids) is sold on the open market via

competitive bids, and all revenues from these sales are deposited into

the Miscellaneous Receipts Account in the U.S. Treasury. Since the

opening of Elk Hills to full development in 1976, revenues through

Fiscal Year 1995 from the sale of hydrocarbon products produced from

the field have totaled almost $13.0 billion, against total costs of

$3.0 billion.

Elk Hills consists of about 67 sections of land, approximately 78

percent of which is owned by the Federal government and 22 percent by

Chevron U.S.A. These lands have been developed and operated as a unit

pursuant to a Unit Plan Contract (UPC) entered into in 1944. Under the

UPC, the Federal government has the exclusive control, subject to the

UPC, over the exploration, development, and operation of NPR-1.

To meet President Clinton's call to reinvent government, DOE

evaluated the Federal government's role at Elk Hills in context with

current national priorities and needs. The Department recognized that

this facility consistently earns substantial revenues for the Treasury.

However, the Department decided that continued involvement by the

Federal government in what is essentially a commercial enterprise was

inappropriate, and recommended to the Congress that Elk Hills be

privatized. Congress agreed that privatization was the appropriate

course of action and included language in the Defense Authorization Act

for Fiscal Year 1996 authorizing the sale.

Preliminary Identification of Alternatives

One of the major purposes of an EIS is to define and analyze the

reasonable alternatives to the proposed action, and the environmental

impacts to be expected from each alternative. As background for public

comments and suggestions concerning reasonable alternatives to be

considered, DOE has tentatively identified two alternatives, as well as

a reference case, to be analyzed in the Supplemental EIS:

1. Continued Federal Ownership and Operation Under Public Law 104-106

(``No Action'')

Public Law 104-106 establishes certain conditions that must be met

for the sale of the Federal government's ownership interests in Elk

Hills to be completed. For example, under section 3414(b), the

Secretary of Energy may suspend the sale if the Secretary and the

Director of the Office of Management and Budget jointly determine that

the sale is proceeding in a manner inconsistent with achievement of a

sale price that reflects the full value of Elk Hills, or that a course

of action other than immediate sale is in the best interests of the

United States. The ``No Action'' alternative, therefore, contemplates

that sale does not take place for some reason, and that Federal

ownership and operation of NPR-1 will continue.

The environmental and socioeconomic impacts of continued Federal

ownership and operation of Elk Hills were analyzed in the 1993

Supplemental EIS (DOE/EIS-0158). Those analyses assumed that the

petroleum engineering strategy that was being used in 1993 to guide the

overall development of Elk Hills (``maximum efficient rate''

production, as required by the Naval Petroleum Reserves Production Act

of 1976), would continue to be used in the future. However, section

3412(h) of the Defense Authorization Act for Fiscal Year 1996, which

authorized the sale of Elk Hills, also revised the basic operating

strategy for that oil field. Section 3412(h) requires that, until the

sale of Elk Hills is completed, DOE must produce the field not at the

``maximum efficient rate,'' but rather ``at a maximum daily oil or gas

rate * * * which will permit maximum economic development * * *

consistent with sound oil field engineering practices * * * '' It is

possible that development of Elk Hills under this new strategy may

proceed at a different pace, and may consist of a different mix of

facility development and operational projects, than was analyzed in the

1993 Supplemental EIS. DOE will have a more detailed, but still

preliminary, description of activities under the ``maximum economic

development'' strategy available at the scoping meeting. However, the

Department is seeking public input on this issue and encourages

suggestions and comments.

2. Sale of the Federal Government's Ownership Interests (``Proposed

Action'')

In this scenario, all Federal ownership interests in Elk Hills

would be sold; DOE would no longer have authority or responsibility for

the management of Elk Hills, and all development and production

decisions would be vested solely with the private sector owner(s). This

is the outcome sought by the legislation and is therefore the proposed

action for the Supplemental EIS. Private owners of Elk Hills will not

be bound by any Federal statutory requirements regarding development

philosophies, as was DOE with the ``maximum efficient rate''

requirement in Public Law 94-258. This may result in the Elk Hills

field taking a different course in the future, with different levels of

development activity and different types of projects than under

continued government ownership. DOE will have a preliminary description

of a number of possible development scenarios for NPR-1 under private

ownership available for presentation at the scoping meeting. However,

the Department is seeking public input on this issue and encourages

suggestions and comments.

3. Reference Case

In order to understand the changes in environmental impacts which

Public Law 104-106 could cause at NPR-1, the Supplemental EIS will

describe a ``reference case'' scenario comprised of the present

conditions at the reserve. This scenario will be based on the 1993

Supplemental EIS and actual operational data obtained since that

document was published. The reference case will provide a basis of

comparison for evaluating the required change from the ``maximum

efficient rate'' operation strategy to ``maximum economic

development.'' DOE believes at this time that the reference case will

be similar to the No Action alternative in many respects.

Preliminary Identification of Environmental Issues

The purpose of this notice is to solicit comments and suggestions

for consideration in preparation of the EIS Supplement. As background

for public comment, it is useful to list in this

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document those environmental issues which have been tentatively

identified for analysis. This list is not intended to be all-inclusive

or to imply any predetermination of impacts. Following is a preliminary

list of issues that may require analysis in the NPR-1 Supplemental EIS.

In addition to seeking comments from the public on this preliminary

list of potential impacts, DOE is also soliciting comments on how

environmental compliance activities conducted by a private owner of Elk

Hills may differ from compliance activities conducted at the site by

the Federal government, as described in the 1993 Supplemental EIS and

other documents related to environmental compliance, such as the 1995

Biological Opinion issued by the U.S. Fish and Wildlife Service under

Section 7 of the Endangered Species Act.

1. Air Quality: Release of air pollutants from the Reserve would

probably occur at about the same levels as projected in the 1993

Supplemental EIS under Alternative 1, although it is possible that some

increases could also occur. Implementation of Alternative 2 could

result in the continued release of gaseous and particulate residuals

from the Reserve, and possibly increase the level of releases.

2. Impacts to Wildlife: Operation under either of the alternatives

would continue to produce some potentially adverse impacts to some

wildlife inhabiting the Reserve. Of particular concern would be the

continued or expanded disturbance of habitat, and other related

interactions, involving the six Federal- and state-listed endangered

species known to exist on the NPR-1 site (the San Joaquin kit fox,

giant kangaroo rat, blunt-nosed leopard lizard, Tipton kangaroo rat,

Hoover's wooly-star, and San Joaquin antelope squirrel).

3. Socioeconomic Effects: Sale of NPR-1 to a private owner could

result in a combination of positive and negative impacts in the local

area, depending on possible changes in state and local taxation of the

new privately-owned Reserve lands and related revenues, and in the

alteration of existing Federal purchasing and contracting practices by

a private sector owner. It is possible that overall staffing levels at

Elk Hills will be lower under a private owner than they are with

Federal ownership and operation. Hence, adoption of Alternative 2 by

DOE could potentially have adverse impacts in a number of Kern County

communities, due to direct loss of jobs by NPR-1 workers, indirect

economic impacts on businesses supported in whole or in part by Federal

operation of the Reserve, and by community loss of other revenues.

Continued Federal ownership under Alternative 1 could maintain

socioeconomic benefits for the area through the interaction of the

substantial employment, subcontracting, and supply requirements of the

Reserve with the local economy and residents.

4. Water Resources: Some concern exists regarding the potential for

additional impacts to groundwater resources near the Reserve as a

result of continued and possibly expanded reinjection of wastewater and

disposal of other production wastes onsite. This concern is associated

with Alternatives 1 and 2.

5. Cumulative Impacts: NEPA requires that the EIS evaluate the

potential cumulative effects of the various alternatives in relation to

the impacts of past, present, and reasonably foreseeable future

development (of any kind), both on- and offsite. Cumulative impacts

will be evaluated within the Supplemental EIS for all important issues,

e.g., air quality, wildlife species, and socioeconomic conditions in

nearby areas.

Scoping

The above preliminary lists of major environmental issues and

reasonable alternatives are not meant to be exhaustive or final. For

instance, even though some potential environmental impact areas, such

as cultural resources, land use, and recreation, are not specified

above as major issues, they will be evaluated as part of the NEPA

analysis and will be discussed in the Supplemental EIS. DOE identified

the reasonable alternatives and environmental issues listed above based

on its experience with the major issues that have been raised in

previous NEPA compliance activities for Elk Hills. DOE considers the

scoping process to be open and dynamic in the sense that alternatives

other than those given above may warrant examination, and new issues

may be identified and evaluated. Interested parties are invited to

participate in the scoping process both to refine the preliminary

alternatives and environmental issues to be analyzed in depth, and to

eliminate from detailed study those alternatives and environmental

issues that are not significant or pertinent.

The scoping process will involve all interested agencies (Federal,

state, county, and local), groups, and members of the public. Comments

are invited on both the alternatives and the issues to be considered in

the Supplemental EIS. A public scoping meeting will be held at the

location, date, and time indicated above. This scoping meeting will be

informal and conducted as a discussion between attendees and DOE. The

DOE presiding officer will establish only those procedures needed to

ensure that everyone who wishes to speak has a chance to do so and that

all issues and comments raised are clearly understood by DOE. Depending

upon the number of persons wishing to speak, DOE may allow longer times

for representatives of organizations. Consequently, persons wishing to

speak on behalf of an organization should identify that organization in

their request to speak. Persons who have not submitted a request to

speak in advance may register to speak at the scoping meeting. However,

advance requests to speak are encouraged. Both oral and written

comments will be considered and will be given equal weight by DOE.

A complete transcript of the public scoping meeting will be

retained by DOE and made available for inspection during business

hours, Monday through Friday, at the Department of Energy Freedom of

Information Reading Room, Forrestal Building, 1000 Independence Avenue,

S.W., Washington, DC 20585, and at the Department of Energy Oakland

Operations Office, 1301 Clay Street, Oakland, CA 94612-5208. Additional

copies of the public scoping meeting transcripts will also be made

available during normal business hours at the following locations:

Beale Memorial Library-- Main Branch, 1315 Truxtun Avenue, Bakersfield,

California

Taft Branch--Kern County Library, 27 Emmons Park Drive, Taft,

California

A notice of locations where documents will be available will be

published in the Federal Register at the time of announcement of the

availability of the Draft Supplemental EIS. In addition, copies of the

public scoping meeting transcripts will be made available for purchase.

Those interested parties who do not wish to submit comments or

suggestions at this time, but who would like to receive a copy of the

Draft Supplemental EIS, should notify Anthony J. Como at the address

given in the address section of this notice.

Dated at Washington, DC, this 13th day of March, 1996, for the

United States Department of Energy.

Peter N. Brush,

Principal Deputy Assistant Secretary Environment, Safety and Health.

[FR Doc. 96-6837 Filed 3-20-96; 8:45 am]

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