Record of Decision: Supplemental Environmental Impact Statement/ Program Environmental Impact Report for the Sale of Naval Petroleum Reserve No. 1 (Elk Hills), Kern County, California

DEPARTMENT OF ENERGY

Record of Decision: Supplemental Environmental Impact Statement/

Program Environmental Impact Report for the Sale of Naval Petroleum

Reserve No. 1 (Elk Hills), Kern County, California

AGENCY: U.S. Department of Energy.

ACTION: Record of Decision.

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SUMMARY: The Department of Energy (DOE) is issuing this Record of

Decision to proceed, subject to review by Congress, with the sale to

Occidental Petroleum Corporation (Occidental) of all right, title, and

interest of the United States in Naval Petroleum Reserve No. 1 (NPR-1)

located in Kern County, California, in accordance with Title XXXIV of

the National Defense Authorization Act for Fiscal Year 1996, Public Law

104-106 (hereinafter the ``Elk Hills Sales Statute'' or ``Act'').

The Act requires that DOE undertake a process to sell NPR-1 in a

manner consistent with commercial practices and in a manner that

maximizes the proceeds to the Federal government. Furthermore, the Act

requires DOE to complete the sale of NPR-1 by February 10, 1998, unless

DOE and the Office of Management and Budget (OMB) jointly determine

that (i) the sale is proceeding in a manner inconsistent with

achievement of a sale price that reflects full value, or (ii) another

course of action is in the best interests of the United States. The Act

also specifies a process for determining the minimum acceptable price

for the sale of NPR-1.

Based on the analyses in the Supplemental Environmental Impact

Statement/Program Environmental Impact Report (SEIS/PEIR) titled,

``Sale of Naval Petroleum Reserve No. 1 (Elk Hills) Kern County,

California,'' consideration of the Congressional direction contained in

the Elk Hills Sales Statute, and an offer submitted by Occidental that

exceeded the minimum acceptable sale price as determined pursuant to

section 3412(d) of the Act and exceeded all other offers received

following a competitive sales process, DOE has determined that

implementation of the Proposed Action and Preferred Alternative in the

SEIS/PEIR (i.e., the sale of all right, title and interest in NPR-1 in

accordance with the Act to Occidental) is in the best interests of the

United States. Accordingly, DOE is publishing this Record of Decision

(ROD) under the authority of the National Environmental Policy Act

(NEPA) of 1969 to proceed with the sale of NPR-1 to Occidental and to

document the basis for this decision.

ADDRESSES: For further information on the sale of NPR-1 (Elk Hills),

contact Anthony J. Como, NEPA Document Manager, Office of Fossil

Energy, U.S. Department of Energy, 1000 Independence Avenue SW,

Washington, D.C. 20585, (202) 586-5935 or 1-888-NPR-EIS1. For further

information on the NEPA process, contact Carol Borgstrom, Director,

Office of NEPA Policy and Assistance, U.S. Department of Energy, 1000

Independence Avenue SW, Washington, D.C. 20585, (202) 586-4600 or leave

a message at 1-800-472-2756.

SUPPLEMENTARY INFORMATION: DOE is issuing a ROD pursuant to the

regulations of the Council on Environmental Quality implementing the

procedural provisions of NEPA 1 and DOE's NEPA implementing

regulations.2

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\1\ 40 CFR Parts 1500-1508.

\2\ 10 CFR Part 1021.

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Background

The Elk Hills Sales Statute, signed by President Clinton on

February 10, 1996, authorized and directed the Secretary of Energy (the

``Secretary'') to enter into one or more contracts for the sale of NPR-

1 by February 10, 1998, unless the Secretary and the Director of OMB

jointly determine that (i) the sale is proceeding in a manner

inconsistent with achievement of a sale price that reflects full value,

or (ii) another course of action is in the best interests of the United

States. The Act further directed that the sales process be conducted

``in a manner consistent with commercial practices and in a manner that

maximizes sale proceeds to the Government.''

The Act directed the Secretary to take certain measures which were

designed to assure that the sale of NPR-1 would result in the maximum

return to the government and that the full value of the reserve would

be realized. These measures included:

(1) The retention of an investment banker to independently

administer the sale in a manner that maximizes sale proceeds to the

government;

(2) The hiring of an independent petroleum engineer to prepare a

reserve report in a manner consistent with commercial practices;

(3) The finalization of equity interests of known oil and gas

zones;

[[Page 66610]]

(4) Conducting a competitive sale that was fair and open to all

interested and qualified parties;

(5) The establishment of a process for setting the minimum

acceptable sales price; and

(6) The authority to transfer to the purchaser(s) of NPR-1 the

otherwise nontransferable incidental take permit 3 issued to

the Secretary by the U.S. Fish and Wildlife Service (FWS) under section

7 of the Endangered Species Act (ESA).

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\3\ The authority for Federal agencies to incidentally ``take''

(i.e., kill, harm, hunt, wound, trap, etc.) endangered species is

granted by the FWS through a consultation process. Such consultation

results in the issuance of a Biological Opinion, which includes an

incidental take statement. As used in this Record of Decision, the

term ``incidental take permit'' or ``permit'' refers collectively to

the Biological Opinion and the incidental take statement contained

therein.

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The Act also requires that DOE submit a written notification to

Congress of the conditions of the proposed sale at least 31 days before

DOE enters into any contract(s).

Minimum Acceptable Sales Price

Section 3412(d) of the Act prescribes a process for the Secretary

of Energy, in consultation with the Director of OMB, to set the minimum

acceptable price for the sale of NPR-1. As required by this section of

the Act, the Secretary retained the services of five independent

experts in the valuation of oil and gas fields to conduct separate

assessments, in a manner consistent with commercial practices, of the

value of NPR-1 to the United States under continued government

ownership and operation. Section 3412(d) specifies that in making their

assessments, the independent experts shall consider, among other

factors, the net present value of the anticipated revenue stream that

the Secretary and the Director of OMB jointly determine the Treasury

would receive from NPR-1 if it were not sold, adjusted for any

anticipated increases in tax revenues that would result if NPR-1 were

sold. This net present value determination was prepared jointly by DOE

and OMB and was provided to the five independent experts for

consideration in making their assessments.

Section 3412(d)(3) of the Act specifies that the Secretary may not

set the minimum acceptable sale price below the higher of: (a) The

average of the five independent assessments; and (b) the average of

three assessments after excluding the high and low assessments. The

five independent assessments were submitted to DOE on September 15,

1997. After reviewing these assessments, on September 26, 1997, the

Secretary and the Director of OMB jointly established the minimum

acceptable price for the sale of NPR-1 as the average of the five

assessments, which average was higher than the average of the middle

three assessments. The best and final offer submitted by Occidental on

October 3, 1997, exceeded the minimum acceptable sale price established

by the above process, as well as all other offers, and combinations of

other offers, submitted by qualified offerors.

Transfer of Incidental Take Permit

Section 3413(d) of the Elk Hills Sales Statute permits the

Secretary to transfer to the purchaser(s) of NPR-1 the incidental take

permit issued to the Secretary by the FWS and in effect on February 10,

1996, ``if the Secretary determines that transfer of the permit is

necessary to expedite the sale of the reserve in a manner that

maximizes the value of the sale to the United States.'' At the

beginning of the commercial sales process, DOE decided that

transferring to the purchaser(s) of NPR-1 the Biological Opinion (and

incidental take statement contained therein) issued to DOE by the FWS

on November 8, 1995, should help maximize the proceeds from the sale of

NPR-1. However, in the event that not all potential purchasers of NPR-1

would be willing to accept the transferred Biological Opinion and its

terms and conditions, DOE determined to make the transfer optional on

the part of the prospective operators in the draft Purchase and Sale

Agreement distributed to potential purchasers during the sales process.

In its offer to purchase NPR-1, Occidental agreed to accept DOE's

Biological Opinion and incidental take statement. Accordingly, under

the terms of the Purchase and Sale Agreement, Occidental will assume

and agree to be bound by and perform all of DOE's obligations (terms,

conditions, and mitigation measures) under the Biological Opinion,

including the on-going monitoring requirements and the obligation to

establish a 7,075-acre conservation area.

NEPA Process

The continued operation of NPR-1 by DOE has been analyzed in two

previously-issued environmental impact statements (EISs): the 1979 EIS

titled ``Petroleum Production at Maximum Efficient Rate, Naval

Petroleum Reserve No. 1 (Elk Hills), Kern County, California'' (DOE/

EIS-0012) and a 1993 supplement to the 1979 EIS titled ``Petroleum

Production at Maximum Efficient Rate, Naval Petroleum Reserve No. 1

(Elk Hills), Kern County, California'' (DOE/EIS-0158). However, neither

of those documents addressed the possible divestiture of NPR-1.

Therefore, subsequent to the enactment of the Elk Hills Sales Statute,

DOE determined that the sale of NPR-1 would constitute a major Federal

action that may have a significant impact upon the environment within

the meaning of NEPA. Accordingly, on March 21, 1996, DOE published a

notice in the Federal Register (61 FR 11617) announcing its intention

to prepare a supplement to the 1993 Supplemental EIS to address

foreseeable impacts from the sale of NPR-1 and reasonable alternatives.

On April 16, 1996, DOE conducted two public scoping meetings in

Bakersfield, California, to identify major issues and concerns that

should be addressed in the SEIS.

After consultation with the Kern County (California) Planning

Department, Kern County determined that the proposed sale was a project

within the meaning of the California Environmental Quality Act of 1970

(CEQA) requiring the preparation of a environmental impact report

(EIR). Kern County also determined that, because of the unknown future

development decisions of the potential new owners, the EIR should be a

program EIR (PEIR) with future additional analyses to be conducted

under CEQA as required. Then the determination was made by DOE and Kern

County to prepare a joint SEIS/PEIR as allowed by the NEPA and CEQA

regulations.

In July 1997, the DOE and Kern County published a Draft SEIS/PEIR

on the proposed divestiture of NPR-1 titled ``Draft Supplemental

Environmental Impact Statement/Program Environmental Impact Report for

the Sale of NPR-1, Kern County, California (DOE/SEIS/PEIR-0158-S2).

This document addressed the environmental impacts associated with the

Proposed Action (sale of all right, title, and interest of the United

States in NPR-1 as required by the Elk Hills Sales Statute) and two

possible alternatives. DOE and Kern County distributed approximately

300 copies of the Draft SEIS/PEIR to members of Congress, Federal,

state and local agencies, Native American organizations, environmental

groups, businesses, and interested individuals. On July 25, 1997, the

U.S. Environmental Protection Agency published a notice in the Federal

Register (62 FR 40074) announcing the availability of the Draft SEIS/

PEIR and the start of a 45-day public comment period, which ended on

September 8, 1997. As part of the public comment process, DOE and Kern

County held two

[[Page 66611]]

public hearings on August 26, 1997, in Bakersfield, California.

In preparing the Final SEIS/PEIR, DOE and Kern County considered

all public comments received, including comments received after the

September 8, 1997, comment closing date as well as the oral comments

made during the public hearings. Over 300 comments were received from

29 written comment letters and 7 oral statements made at the public

hearings. The Final SEIS/PEIR was distributed on October 17, 1997. This

Final SEIS/PEIR consisted of the Draft SEIS/PEIR and a comment-response

document that included public comments received on the Draft SEIS/PEIR,

responses to those comments, and changes in the Draft SEIS/PEIR in

response to public comments. The Final SEIS/PEIR identified the

Proposed Action as DOE's Preferred Alternative. DOE and Kern County

distributed approximately 300 copies of the Final SEIS/PEIR to members

of Congress, Federal, state and local agencies, Native American

organizations, environmental groups, businesses, and interested

individuals. On October 24, 1997, the U.S. Environmental Protection

Agency published a notice in the Federal Register (62 FR 55399)

announcing the availability of the Final SEIS/PEIR.

Sales Process

In order to meet the February 10, 1998, statutory deadline

contained in the Elk Hills Sales Statute for the completion of the

sale, DOE conducted its sales process concurrently with the NEPA and

CEQA processes. On May 21, 1997, DOE announced the start of the sales

process, which culminated on October 1, 1997, with the submission of

bids for the purchase of NPR-1.

To comply with the provisions of the Act, DOE implemented a sales

strategy designed to maximize the proceeds to the Federal government.

To comply with DOE's further obligations under NEPA to identify all

practicable means of mitigating adverse impacts, DOE structured the

sales process to incorporate mitigation in a manner that would not

impair the ability of DOE to maximize the proceeds from the sale of

NPR-1. To meet DOE's obligations under the Elk Hills Sales Statute and

NEPA, the Purchase and Sale Agreement provided to prospective offerors

during the sales process (May 21, 1997, through October 1, 1997)

contained three optional provisions designed to incorporate mitigation

into the sale of NPR-1 in a manner that did not impair DOE's ability to

maximize proceeds from the sale. These optional provisions were:

(1) Acceptance of the Biological Opinion (including incidental take

statement) issued to DOE by the FWS;

(2) Identification of mitigation measures (contained in the SEIS/

PEIR) that would be committed to, without reducing the offering price;

and

(3) A guarantee that small and independent refiners in the region

would have access to 25% of the new operator's NPR-1 oil production for

three years following the sale.

During the sales process, prospective purchasers were notified

that, even after offers were submitted and the ``highest offer(s)''

identified, DOE could not enter into a sales contract until:

(1) The NEPA process is completed and DOE publishes a Record of

Decision;

(2) The Justice Department completes an antitrust review of the

sale; and

(3) A 31-day Congressional review period expires with no adverse

Congressional action.

On October 1, 1997, DOE received twenty-two (22) offers from

fifteen (15) entities. After a preliminary evaluation of these offers,

DOE requested submission of ``best and final'' offers from all offerors

whose initial offer exceeded the minimum acceptable price. After review

of the ``best and final'' offers, DOE identified Occidental as the firm

submitting the highest offer for the purchase of NPR-1. In the final

Purchase and Sale Agreement to purchase NPR-1, Occidental proposed to

accept the transfer of DOE's Biological Opinion and to submit to DOE,

within ten (10) business days following the publication of the Final

SEIS/PEIR, a list of mitigation measures Occidental would implement

after the closing date of the sale, which is scheduled to occur no

later than February 10, 1998. This list of mitigation measures

4 is described in this Record of Decision.

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\4\ The final Purchase and Sale Agreement negotiated with

Occidental contained a provision in which Occidental agreed ``to

deliver a list of mitigation measures to be implemented by Buyer

[Occidental] after Closing.'' In compliance with this provision, on

November 7, 1997, Occidental submitted a list of thirty-three (33)

mitigation measures that it intends to implement. In this letter,

Occidental also identified the appropriate State, local, or Federal

agency which is expected to monitor compliance with each of the

measures.

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Description of Alternatives

Three alternative actions were analyzed in the SEIS/PEIR: (1) Sale

of all right, title, and interest of the Federal government in NPR-1 in

accordance with the Act (the Proposed Action); (2) continued DOE

ownership and operation of NPR-1 (the No-Action Alternative); and (3)

withdrawal of DOE from direct petroleum production activities at NPR-1

but continued Federal ownership (Alternative to the Proposed Action).

Comments received during the scoping process suggested that,

depending upon how NPR-1 was offered for sale and the type of

entity(ies) to whom NPR-1 was sold, different types and levels of

environmental impacts could result. Based on these scoping comments,

DOE and Kern County developed and analyzed three different divestiture

scenarios under the Proposed Action and two different divestiture

scenarios under the Alternative to the Proposed Action. In each case,

the analyses in the SEIS/PEIR were based upon either a government

approach to field development or a commercial approach, depending upon

the type of entity(ies) assumed to be the eventual owner(s) of NPR-1.

The three alternatives, five divestiture scenarios, and the two field

development approaches combine to produce varying types and levels of

environmental impacts that are identified in the SEIS/PEIR. These

differences in types and levels of impacts result from differences in

the rate and level of intensity of oil field development among the

three alternatives.

The No Action Alternative assumes continued government ownership

and operation of NPR-1 and is based upon the lowest rate and level of

intensity of field development activities among the three alternatives.

Because the Proposed Action and the Alternative to the Proposed Action

both assume operation of NPR-1 by a private entity, these two

alternatives are based upon the same rate and level of intensity of

field development activities, which is above that assumed in the No

Action Alternative.

In order to provide a development baseline against which to analyze

the environmental impacts resulting from each alternative, the SEIS/

PEIR also included a Reference Case. The Reference Case is based on

continued production of NPR-1 at maximum efficient rate (MER) in

compliance with the Naval Petroleum Reserves Production Act of 1976, 10

U.S.C. 7420 et seq. The 1976 Production Act defines MER as ``the

maximum sustainable daily oil and gas rate from a reservoir which will

permit economic development and depletion of that reservoir without

detriment to the ultimate recovery'' (10 U.S.C. 7420). Such a case

formed the basis of the Proposed Action in the 1993 SEIS. The Reference

Case in the SEIS/PEIR is

[[Page 66612]]

based upon NPR-1's 1995 Long Range Plan.

Proposed Action

The Proposed Action and DOE's Preferred Alternative is the sale of

all the Federal government's right, title, and interest in NPR-1 as

directed by the Elk Hills Sales Statute. Under the Proposed Action, one

or more private entities would purchase NPR-1 and continue to develop

and operate it as a commercial oil and gas field for at least the next

40 years. This alternative would result in a higher rate and level of

intensity of development for NPR-1 than would be the case under

continued government ownership and operation (the No Action

Alternative). This higher rate and level of intensity of development

would result in the construction and operation of more oil field

infrastructure (wells, pipelines, gas processing facilities) than under

government operation with a resulting increase in the level of

environmental impacts.

No Action Alternative

The No Action Alternative assumes continued Federal ownership of

NPR-1 with ongoing responsibility for the field continuing to be

assumed by DOE. This could occur if the Secretary exercises his

authority under section 3414(b) of the Act to suspend the sale. If such

a recommendation were made, new and separate Congressional action would

be required before further action with respect to the disposition of

NPR-1 could take place.

However, section 3412(h) of the Act specifies that, until sale,

production at NPR-1 is to continue at ``the maximum daily oil or gas

rate from a reservoir, which will permit maximum economic development

of the reservoir consistent with sound oil field engineering

practices.'' Therefore, under the No Action Alternative, continued

ownership and operation by DOE would result in a higher rate and level

of intensity of development and associated environmental impacts than

those that formed the basis of the Proposed Action in the 1993 SEIS and

that are above those characterized by the Reference Case in the SEIS/

PEIR.

Alternative to the Proposed Action

Under this alternative, the Federal government would take some

action other than that required by the Act to sell part, but not all,

of its interest in NPR-1, with the same objective of maximizing the

value of the reserve to the government. Under this alternative, some

level of Federal ownership and control over NPR-1 would be retained.

Future oil and gas development of NPR-1 would be at the same rate and

level of intensity as the Proposed Action but at a higher rate and

level of intensity than under the No Action Alternative. However, the

continued Federal role in the overall management of the property would

result in a lower level of environmental impacts than under the

Proposed Action. Implementation of this alternative would require

additional legislation.

Environmentally Preferable Alternative

The Environmentally Preferable Alternative is the No Action

Alternative: continued ownership and operation of NPR-1 by DOE. This

alternative would result in a continuation of the present level of

Federal protection for the threatened and endangered species that are

found on NPR-1. Also, under this alternative, the Federal government

would develop NPR-1 at a lower rate and level of intensity than would a

private entity under the Proposed Action or the Alternative to the

Proposed Action. This lower rate and level of intensity of development

would produce proportionately lower levels of impacts across the full

spectrum of environmental resources. Finally, under the No Action

Alternative, NPR-1 likely would revert to some form of conservation

area after the completion of oil and gas operations. The

environmentally preferable alternative was not selected as DOE's

preferred alternative because it would not permit DOE to comply with

the Congressional direction contained in the Act of divesting the

Federal government of all right, title, and interest in NPR-1.

Major Environmental Impacts and Mitigation Measures

NPR-1 is expected to remain exclusively an oil field for about the

next half century. The differences in environmental impacts among

alternatives are driven by the rate and level of intensity of

development. Development by a private entity under the Proposed Action

or the Alternative to the Proposed Action would occur at a higher rate

and level of intensity than development by the Federal government under

the No Action Alternative.

The two most import resource areas expected to be impacted by the

Proposed Action (as well as the No Action Alternative and the

Alternative to the Proposed Action) are biological and cultural

resources. The SEIS/PEIR also identified two other potentially

significant resource areas for the three alternatives. These include

air resources and water resources. Other potential resource areas and

impacts analyzed in the SEIS/PEIR include geology and soils, hazardous

waste, land use, noise, socioeconomic, energy conservation, and

environmental justice. However, none of the impacts occurring in these

areas were considered likely to be significant. The SEIS/PEIR concludes

that all of the impacts resulting from the three alternatives could be

mitigated to levels that are less than significant.

Proposed Action

Because the proposed sale of NPR-1 to Occidental would involve the

sale of all of the Federal government's right, title, and interest,

implementation of mitigation measures under the Proposed Action would

be accomplished, for the most part (except for the completion of

certain mitigation measures related to cultural resources), by the

proposed purchaser of NPR-1, Occidental, with enforcement by the

Federal, state and local agencies that have regulatory responsibility

for the activities occurring at NPR-1.

Biological Resources

Impacts: The most significant impacts from the Proposed Action and

the attendant future development of NPR-1 would be on biological

resources. NPR-1 serves as an important habitat for a number of

threatened and endangered species, including the San Joaquin kit fox,

the blunt nose leopard lizard, the giant kangaroo rat, the Tipton

kangaroo rat, the antelope squirrel, and Hoover's woolly-star (a

flowering plant).

Oil and gas development on NPR-1 would continue to alter habitat

and destroy or injure individuals of threatened and endangered species

under the Proposed Action. Development under private ownership of NPR-1

would be at a higher rate and level of intensity and, consequently,

have a greater impact on plant and animal communities in general and on

threatened and endangered species in particular. Under the Proposed

Action, potentially significant impacts include: (1) loss of the

affirmative Federal obligation under section 7(a)(1) of the ESA to

protect, conserve and help recover threatened and endangered species

and their habitats, because the degree of mitigation required of

private entities by the ESA is lower than that required of the Federal

government; (2) the potential lack of funds for protection and

management of the habitat conservation area required to be created by

the 1995 Biological Opinion; (3) reduced potential for recovery of

listed species and increased potential for listing additional species;

and (4) increase in habitat loss and mortality, injury or displacement

of plant and

[[Page 66613]]

animal communities, including threatened and endangered species.

The impacts under private ownership from future development

following the depletion of the reserves and the end of oil and gas

production are too speculative to be predicted with any specificity.

However, it is possible that additional stress to biological resources

could occur, depending on how the owners use the land.

Mitigation: The principal mitigation for the potentially

significant impacts on biological resources is Occidental's decision to

accept transfer of and agreement to be bound by all the terms and

conditions of the Biological Opinion and incidental take statement

issued to DOE by the FWS on November 8, 1995. Those terms and

conditions, including the mitigation commitments made by DOE, will be

in effect until Occidental applies for and receives a new incidental

take permit from the FWS under section 10 of the ESA.5 A new

section 10 permit would contain appropriate terms and conditions agreed

to by the FWS and Occidental. The principal mitigation measures

contained in the 1995 Biological Opinion include:

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\5\ This is the section of the ESA which contains requirements

applicable to private landowners.

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(1) Creation of a 7,075-acre conservation area and habitat

management program;

(2) Conducting research, monitoring, and biological survey

programs;

(3) Incorporation of a variety of measures to limit disturbance or

destruction of individuals of threatened and endangered species during

operation and construction activities;

(4) Prohibitions of public access, hunting, and livestock grazing

within NPR-1; and

(5) Restrictions on the use of pesticides, herbicides, and

rodenticides.

In addition to accepting the terms and conditions of the 1995

Biological Opinion, Occidental will enter into and implement an Interim

Memorandum of Understanding with the California Department of Fish and

Game pursuant to Section 2081 of California's Endangered Species Act.

The terms, conditions, and mitigation measures that would be contained

in this Memorandum of Understanding will mitigate potentially

significant impacts on those plant and animal species listed as

threatened or endangered by the State of California.

Cultural Resources

Impacts: The second major resource area impacted by the Proposed

Action is cultural resources. Approximately 60 percent of the area of

NPR-1 has been subject to archaeological survey and inventory. There

are two historic archaeological sites at NPR-1 that the California

State Historic Preservation Officer (SHPO) has determined are eligible

for inclusion on the National Register of Historic Places (discussed

below). There are also four prehistoric sites that are eligible for the

National Register. Additional inventory efforts are underway and more

prehistoric sites are likely to be found (discussed below). The

documented prehistoric sites are represented by accumulations of flaked

and ground stone, shell and bone artifacts, features, faunal dietary

remains and human remains (at two known sites), all of which may be

relevant to the prehistory of the area.

Although many potentially significant individual historic

archaeological sites or buildings at NPR-1 have been so disturbed that

their archaeological values have been destroyed, DOE recommended to the

SHPO that NPR-1 be eligible for inclusion on the National Register as

an historic landscape. The SHPO concluded, however, that NPR-1 was not

an historic landscape but found that three early production wells (the

Hay No. 1 Discovery Well, the Hay No. 5 well, and the Hay No. 7 natural

gas well) appear to be eligible for the National Register.

Discussions with the SHPO on prehistoric sites indicate that NPR-1

development may disturb the four individual prehistoric sites eligible

for the National Register. In September 1997, DOE completed a survey of

3,000 acres previously unsurveyed but predicted to be sensitive for

prehistoric archeological resources, and by the end of November 1997,

archeological testing at the most promising sites within the 3,000-acre

survey area had been completed. Data recovery on significant

prehistoric archeological resources will be completed prior to the

conclusion of the sales process which is presently scheduled for early

February 1998.

Mitigation: Pursuant to sections 106 and 110 of the National

Historic Preservation Act, DOE is in the process of finalizing a

Programmatic Agreement with the California SHPO and the Advisory

Council on Historic Preservation concerning surveys, research, data

recordation, documentation and other preservation activities, as

appropriate, to mitigate the impacts of the Proposed Action. A set of

prehistoric resources representative of the types found on NPR-1 would

be treated by a combination of surface mapping, collection, subsurface

excavations and analysis to recover data and to address important

scientific research questions. A Cultural Resources Management Plan

(CRMP) will address the appropriate mitigation required to recover

important data from these resources and preserve them through

appropriate documentation and publication. The CRMP will be made a part

of the Programmatic Agreement.

The Programmatic Agreement will also include mitigation measures

specifically designed to address the impacts on resources of particular

concern to Native Americans. The mitigation measures will be performed

under appropriate archeological protection permits with notice to

Native Americans in accordance with Native American Graves Protection

and Repatriation Act (NAGPRA) and the Archeological Resources

Protection Act. As one of the mitigation measures, DOE will inform

Occidental and the California Department of Conservation, Division of

Oil, Gas, and Geothermal Resources that sites of this type are known to

exist in particular areas of the Reserve, although without providing

specific locations so as to protect Native American values.

The SHPO has indicated to DOE that the Programmatic Agreement must

also address the concerns related to NAGPRA. As DOE develops the

Programmatic Agreement with the SHPO, DOE will provide for involvement

and comment by Native Americans, both from tribes on the NAGPRA list

and from others with traditional ties to Elk Hills. In addition, DOE

will work closely with the FWS and with Occidental in determining the

location of the land to be included in the conservation set aside area

required under the terms of the 1995 Biological Opinion, in order to

maximize the inclusion of areas that archaeologists and Native

Americans have identified as known or likely to contain human remains.

With respect to the two historic oil and gas wells that the SHPO

has determined are eligible for the National Register, the Programmatic

Agreement will provide for a treatment plan to describe the historic

context of these wells, as well as to publish the descriptions and

distribute the descriptions to public libraries.

In addition to DOE's mitigation, the mitigation measures Occidental

intends to implement include:

(1) Evaluate inclusion of the two locations of suspected human

remains identified by DOE within the conservation area to be

established pursuant to the 1995 Biological Opinion;

(2) Implement a cultural resources training plan supervised by an

archaeologist; and

[[Page 66614]]

(3) Implement a plan to address the discovery of suspected human

remains, other than human remains addressed by the Programmatic

Agreement between DOE and the SHPO, which may be unexpectedly

encountered during construction activities. The plan may include

consulting with the County Coroner, an archaeologist and/or a local

Native American Representative to avoid disturbing suspected human

remains.

Other Potentially Significant Impacts

Impacts: The two other potentially significant resource areas

impacted by the Proposed Action are air quality and water resources.

Future development of NPR-1 under the proposed action would likely

result in higher levels of air emissions. Modeling of projected

emissions for the year 2001, the highest expected emission year, shows

the potential that the state ambient air quality standards for

PM10 (particulate matter 10 microns or larger) could be

exceeded off-site. In addition, on-site Federal ambient air quality

standards for NO2 (Nitrous Oxide) and state ambient air

quality standards for PM10 and SO2 (Sulfur

Dioxide) might be exceeded. However, these results are conservatively

based on maximum permitted emission rates rather than likely lower

actual emission rates, so the actual future emissions are expected to

be within the National and state standards.

The last potential significant impact area from the Proposed Action

is the potential impact on water resources. The higher rate and level

of intensity of development under the Proposed Action would increase

water use in the enhanced oil recovery technique knows as ``water

flooding'' and increase in treatment and disposal requirements for

``produced waters.''

Mitigation: The impacts to these resources would be roughly

proportional to oil production levels and can be mitigated through

compliance with applicable National and state air emission standards

and a continuation of the ongoing NPR-1 program to use treated produced

waters in ``water flood'' projects. Occidental intends to implement two

mitigation measures with respect to air quality and fifteen (15) water

resource mitigation measures. These mitigation measures by Occidental

would continue existing DOE practices.

Other Resources

Impacts: Additional areas of potential concern are geology and

soils, hazardous waste management and disposal, land use, noise,

socioeconomic, energy conservation, and environmental justice. Impacts

in these areas are not likely to be significant.

Comments received during scoping and comments received on the Draft

SEIS/PEIR expressed concern that the possible loss of access to NPR-1

oil for use in local refineries and as a diluent for pipeline

transmission could lead to a premature loss of local refinery

production and/or the inability of local crude oil producers to deliver

their products to market. Some local small and independent refiners

and/or producers of heavy crude oil are dependent on continued access

to the lighter NPR-1 oil, and concern was expressed that the proposed

sale could limit their access to the oil. Although the proposed

purchaser of NPR-1, Occidental, did not accept the optional sales

provision to guarantee access to small and independent refiners,

Occidental does not refine oil in California and is expected to put its

share of the production from NPR-1 on the market. Therefore, small and

independent refiners in the region should have access to NPR-1 crude

oil under the Proposed Action (sale of NPR-1 to Occidental).

Mitigation: Occidental intends to implement 10 additional

mitigation measures (see Footnote 4) with respect to these other impact

areas. In addition, all known hazardous waste sites at NPR-1 have been

or will be remediated by DOE using appropriate remediation technology.

However, remediated sites have, as yet, not received determinations

that no further actions are needed from the relevant regulatory

agencies. DOE will continue to work with these agencies to achieve

final closure on the sites, including any additional mitigation work if

required. In the unlikely event that any previously undiscovered

reportable hazardous waste sites are encountered prior to the sale, DOE

will characterize the contamination and disclose it to Occidental.

No Action Alternative

Government development of NPR-1 under the No Action Alternative

would likely be at a lower rate and level of intensity than under the

Proposed Action or the Alternative to the Proposed Action. Further, DOE

would retain the affirmative Federal obligation to mitigate the

environmental consequences of its actions. However, the affected

environment and the types of impacts to the affected environment would

be the same under both the Proposed Action and the No Action

Alternative. In addition, the SEIS/PEIR recognizes the possibility

(although an unlikely one) of a higher rate and level of intensity of

development under government operation than might occur under

commercial operation.

For biological resources, there would be less destruction,

disturbance and fragmentation of endangered species habitat under the

No Action Alternative compared to the Proposed Action because it is

expected that fewer wells would be drilled under the No Action

Alternative. In addition, the level of mitigation required of Federal

agencies under the ESA is greater than that for private industry.

Furthermore, although future development cannot be predicted, at the

end of NPR-1's useful life as an oil and gas field, it is more likely

to be converted to wildlife habitat under government ownership than

under private ownership.

For cultural resources, again there would be less disturbance of

surface areas under the No Action Alternative than under the Proposed

Action. Further, the requirements placed on Federal agencies by the

National Historic Preservation Act to protect historic properties would

continue under this alternative.

For air resources and water resources, the lower rate and level of

intensity of development under the No Action Alternative would mean

fewer impacts to these affected environments than under the Proposed

Action or the Alternative to the Proposed Action. However, the

difference in impacts between the No Action Alternative and the

Proposed Action is not expected to be significant. The additional areas

of potential concern of geology and soils, hazardous waste management

and disposal, land use, noise, socioeconomic, energy conservation, and

environmental justice would not involve significant differences in

level of impacts between the No Action Alternative and the Proposed

Action. However, the implementation of mitigation measures in each of

the resource areas would reduce potential impacts to levels that are

less than significant.

Alternative to the Proposed Action

Development of NPR-1 by a private entity under the Alternative to

the Proposed Action would likely occur at the same rate and level of

intensity as the Proposed Action. However, the continuing government

interest in NPR-1, although not direct operation, would mean that

development would continue to be subject to the affirmative Federal

obligation to mitigate the environmental consequences of its actions,

especially for biological and cultural resources.

[[Page 66615]]

Again, the affected environment and the types of impacts to the

affected environment would be the same under both the Proposed Action

and the Alternative to the Proposed Action.

For biological resources, there would be the same destruction,

disturbance and fragmentation of endangered species habitat under the

Alternative to the Proposed Action as for the Proposed Action because

it is expected that the same number of wells would be drilled. However,

the higher levels of mitigation required of government agencies would

continue to apply and although future development cannot be predicted,

at the end of the field's life, it is more likely to be converted to

wildlife habitat under this limited amount of government ownership than

under complete private ownership.

For cultural resources, again there would be the same disturbance

of surface under the Alternative to the Proposed Action as the Proposed

Action. Further, the requirements placed on Federal agencies by the

National Historic Preservation Act to protect historic properties would

continue under this alternative.

For air resources and water resources, the similarity of the rate

and level of intensity of development likely for this alternative

compared to the Proposed Action would mean similar impacts to these

affected environments as in the Proposed Action. The impacts to

additional areas of potential concern of geology and soils, hazardous

waste management and disposal, land use, noise, socioeconomic, energy

conservation, and environmental justice would not be significantly

different from the impacts in these areas under the Proposed Action.

However, the implementation of mitigation measures in each of the

resource areas would reduce potential impacts to levels that are less

than significant.

Cumulative Impacts

Section 3416 of the Elk Hills Sales Statute directed the Secretary

to study four options for the disposition of the other Naval Petroleum

Reserves (other than NPR-1) 6 and to recommend to Congress

which option or combination of options would maximize the value of the

reserves to the United States. These options included:

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\6\ The other Naval Petroleum Reserves include NPR-2 located

adjacent to NPR-1 in Kern County, California; NPR-3 located in

Natrona County, Wyoming; Naval Oil Shale Reserve Nos. 1 and 3

located in Garfield County, Colorado; and Naval Oil Shale Reserve

No. 2 located in Uintah and Carbon Counties, Utah.

---------------------------------------------------------------------------

(1) Retention and continued operation by DOE;

(2) Transfer to the Department of the Interior (DOI) for leasing;

(3) Transfer of all or part of the other reserves to another

Federal agency; and

(4) Sale of the interest of the United States in the other

reserves.

Included in these other reserves is NPR-2, which consists of

approximately 30,181 acres located immediately adjacent to NPR-1. The

Federal government owns approximately 35 percent of the acreage of NPR-

2, with the mineral rights associated with 9,224 of these acres leased

to seven oil companies under 15 active leases. DOE administers these

leases but has no active role in the day-to-day operation of NPR-2.

The SEIS/PEIR examined the cumulative impacts of the Proposed

Action for NPR-1 in conjunction with three possible actions for NPR-2:

transfer to DOI; a No Action Alternative; and a sales alternative. The

analysis in the SEIS/PEIR indicated that the sales alternative for NPR-

2 coupled with the Proposed Action for NPR-1 could result in

significant adverse impacts to biological and cultural resources

because of the loss of the affirmative Federal obligation to protect

sensitive environmental resources on the additional land comprising

NPR-2. However, the SEIS/PEIR concluded that there would be no

significant adverse impact resulting from either transfer to DOI or the

No Action Alternative for NPR-2 because both actions would continue

Federal ownership of the land and the attendant protections for

critical environmental resources.

Based on the results of the study of options for the other Naval

Petroleum Reserves directed by the Act, in March 1997 DOE recommended

to Congress that NPR-2 be transferred to the Department of the

Interior's Bureau of Land Management (BLM) for management of the

surface rights under the Federal Land Policy and Management Act and for

possible leasing of currently unleased acreage under the Mineral

Leasing Act. As discussed in the SEIS/PEIR, the combination of the

Proposed Action for NPR-1 and the recommended action for NPR-2 would

produce no increased stresses on the critical biological and cultural

resources in the region and result in no significant adverse cumulative

impacts.

Congress has not yet authorized DOE to take any action with respect

to the future disposition of NPR-2.

Response to Comments Received After the Final SEIS/PEIR

Following publication of the Final SEIS/PEIR, DOE received a letter

dated November 26, 1997, from the Pacific Environmental Advocacy Center

(PEAC) notifying DOE that the Southwest Center for Biological Diversity

intends to file suit against DOE for failure to reinitiate consultation

with the FWS under section 7(a)(2) of the ESA before selling NPR-1.

PEAC asserted that DOE is required to reinitiate consultation with the

FWS independent of the authority contained in the Elk Hills Sales

Statute, to transfer DOE's incidental take permit to the purchaser of

NPR-1.

The issue of reconsultation was discussed extensively in the Final

SEIS/PEIR in response to several comments received (Final SEIS/PEIR,

pages 1-5 and 1-6). DOE explained in that discussion the basis for

concluding that a new consultation was not required. DOE's conclusion

is supported by an interpretation of the pertinent provisions of the

Elk Hills Sales Statute provided by the DOI Regional Solicitor. DOE

believes that PEAC has not provided any new information that would

change the conclusions contained in the Final SEIS/PEIR or in this

Record of Decision.

Decision

DOE has decided to proceed with the sale of all right, title, and

interest of the United States in the NPR-1 to Occidental, subject to

other requirements of law, including completion of a 31-day

Congressional review period with no adverse legislative action by

Congress. This action will allow compliance with the Congressional

direction contained in the Elk Hills Sales Statute of removing the

Federal government from the inherently non-Federal role of operating a

commercial oil and gas field and also maximizing the value of NPR-1 to

the United States. This decision also is based in part on the offer

submitted by Occidental being the highest offer received by DOE at the

conclusion of the bidding process in 1997, and the fact that the

Occidental offer exceeds the minimum acceptable sale price set by DOE

in consultation with OMB consistent with the provisions of section

3412(d) of the Act.

DOE has considered the information contained within the SEIS/PEIR

and comments received in response to the Draft SEIS/PEIR. In making

this decision, DOE has considered in particular: any potential adverse

impacts to threatened and endangered plant and animal species which are

found within NPR-1, as analyzed in the SEIS/PEIR; the decision by

Occidental to accept the transfer of and to be bound by the terms and

conditions of the

[[Page 66616]]

Biological Opinion issued to DOE by the FWS on November 8, 1995; the

intention of Occidental to implement thirty-three (33) mitigation

measures identified in a letter submitted to DOE on November 7, 1997,

and which are generally described above; and the mitigation of

potential adverse impacts to cultural resources through the

implementation of mitigation measures by DOE pursuant to a Programmatic

Agreement to be executed among DOE, the California SHPO, and the

Advisory Council on Historic Preservation.

Mitigation Action Plan

Section 1201.331(a) of the DOE regulations implementing NEPA (10

CFR Part 1021) states that DOE shall prepare a Mitigation Action Plan

that addresses mitigation commitments expressed in the ROD. A

Mitigation Action Plan regarding DOE's commitments for the divestiture

of NPR-1 is being developed to ensure implementation of all mitigation

commitments. Copies of the Plan may be obtained from Mr. Anthony Como

at the above address.

Issued in Washington, D.C. this 12th day of December 1997.

Patricia Fry Godley,

Assistant Secretary for Fossil Energy.

[FR Doc. 97-33208 Filed 12-18-97; 8:45 am]

BILLING CODE 6450-01-P