[Congressional Record Volume 142, Number 11 (Friday, January 26, 1996)]
[Senate]
[Pages S496-S498]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BUMPERS:
  S. 1530. A bill to create a government corporation to own and operate 
the naval petroleum reserves and naval oil shale reserves, and for 
other purposes; to the Committee on Armed Services.


       the naval petroleum reserves and naval oil shale reserves 
                      corporatization act of 1996

 Mr. BUMPERS. Mr. President, I introduce the Naval Petroleum 
Reserves and Naval Oil Shale Reserves Corporatization Act of 1996. This 
bill would: First, create a government corporation to own and operate 
the naval petroleum reserves and naval oil shale reserves; and second, 
authorize the privatization of the corporation within 5 years if the 
taxpayers receive a fair return.
  The naval petroleum reserves consist of three fields: Elk Hills in 
California; Buena Vista Hills in California and Teapot Dome in Wyoming. 
The Federal Government owns 100 percent of both Buena Vista Hills and 
Teapot Dome. However, the Government owns only 78 percent of Elk Hills. 
The remaining 22 percent is owned by Chevron. Elk Hills is by far the 
most significant area, making it one of the largest fields in the 
United States. In fact, Elk Hills produces approximately $400 million 
per year in revenues for the Federal Treasury.
  Similarly, there are three naval oil shale reserves. Naval oil shale 
reserves 1 and 3 are located in northwest Colorado. Naval oil shale 
reserve 2 is located in eastern Utah. Unlike the Naval Petroleum 
reserves, there is no production from the oil shale reserves because 
development of oil shale is not currently economical. However, there is 
also recoverable natural gas.
  Both the administration and the majority party in Congress have, at 
various times, proposed that the naval petroleum reserves be sold and 
the administration has also proposed that two of the three oil shale 
reserves be privatized as well. While I am not necessarily opposed to 
the notion of removing the Government from the oil production business, 
I am troubled that the various proposals do not put the taxpayers' 
interests first. The Congressional Budget Office [CBO] has estimated 
that the sale of the naval petroleum reserves as originally proposed 
would produce $1.55 billion in receipts. CBO also determined that the 
sale would actually cost the Government $992 million over 7 years 
because the reserves would produce approximately $2.5 billion in 
revenues in the Government retains the assets during that same time 
period. While the CBO estimate does not take into account the 
appropriated expenditures made annually for operation and maintenance 
of the petroleum reserves, the sale of the assets would eliminate 
possibly billions of dollars worth of additional revenue that would be 
derived from the continued operation of the naval petroleum reserves 
over the life of the assets.
  From 1987 until this year, Congress prohibited revenue derived from 
the sale of Government assets from being scored for budget purposes. I 
strongly opposed the change made to the asset sale scoring rule in this 
year's budget resolution for exactly the reasons exemplified by the 
proposed sale of the naval petroleum reserves. It makes no sense to 
sell an asset for some quick cash when, in the long run, the loss of 
revenues from the sold Government asset outweighs the funds derived 
from the sale. However, that is exactly what the budget rules now 
permit and, in fact, promote.

  Mr. President, as I mentioned earlier, I am not necessarily opposed 
to the privatization of the naval petroleum reserves and the naval oil 
shale reserves. However, I am opposed to selling these assets for far 
less than they are worth to their current owners--the Americans 
taxpayers.
  The bill I am introducing today is designed to ensure that the value 
of these assets are maximized. First, by creating a Government 
corporation, the naval petroleum reserves can be operated in a more 
efficient manner in the absence of burdensome restrictions placed on 
Government agencies. Second, the corporation will have the time to 
adequately evaluate the worth of the naval petroleum reserves and naval 
oil shale reserves to make sure that if they are sold, the taxpayers 
receive an adequate return. Finally, my bill authorizes the corporation 
to privatize, but only if the price paid by private investors is at 
least equal to the net present value if the corporation remained in 
Government hands.
  Government corporatization is not a new idea. In fact, the Department 
of Energy [DOE] proposed creating a Government corporation to own and 
operate the naval petroleum reserves in 1993. An internal DOE analysis 
determined that a Government corporation is the option that would 
produce the greatest net present value associated with the naval 
petroleum reserves through 2040. In addition, in 1994 the National 
Academy of Public Administration [NAPA] recommended that the naval 
petroleum and oil shale reserves be owned and operated by a Government 
corporation. In fact, the Academy estimated that the net present value 
of the naval petroleum reserves, if they were owned by a Government 
corporation, would be $4.1 billion. This is far greater than the $1.55 
billion which CBO estimates the sale of the petroleum reserves would 
produce.
  Mr. President, our constituents have sent us to Washington, in part, 
to act as their guardians by ensuring that their interests, as 
taxpayers, are protected. Our obligations are not limited to making 
sure that the funds provided by their taxes are spent wisely. It is 
also the duty of everyone in this body to require that when taxpayer-
owned assets are disposed of, that the taxpayers receive a fair return. 
It is beyond belief that anyone could argue that selling the naval 
petroleum reserves for $1.55 billion is a better choice than creating a 
Government corporation to own and operate the reserves which will 
provide more than $4 billion adjusted for net present value.
  Mr. President, I urge my colleagues to join me by cosponsoring the 
Naval Petroleum Reserves and Naval Oil Shale Reserves Corporatization 
Act of 1996. I ask unanimous consent that the full text of the bill 
appear in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1530

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be referred to as the ``Naval Petroleum 
     Reserves and Naval Oil Shale Reserves Corporatization Act of 
     1995''.

  TITLE I--ESTABLISHMENT OF THE NAVAL PETROLEUM RESERVES CORPORATION.

     SEC. 101. ESTABLISHMENT OF THE CORPORATION.

       (a) There is established a body corporate to be known as 
     the ``Naval Petroleum Reserves and Naval Oil Shale Reserves 
     Corporation'' (referred to in this Act as ``the 
     Corporation'').
       (b) The Corporation is a for-profit, wholly owned 
     Government Corporation subject to chapter 91 of title 31, 
     United States Code (the Government Corporation Control Act). 
     The Corporation is an agency of the United States, subject to 
     annual apportionment under section 1512 of title 31, United 
     States Code.
       (c) Jurisdiction and Control.--The Corporation has 
     exclusive jurisdiction and control over all of the Naval 
     Petroleum Reserves and Naval Oil Shale Reserves.

     SEC. 102. CORPORATE OFFICES.

       The Corporation shall maintain an office for the service of 
     process and papers in the District of Columbia, and is 
     considered, for purposes of venue in civil actions, to be a 
     resident of the District of Columbia. The Corporation may 
     establish offices in any other place it determines necessary 
     or appropriate in the conduct of its business.

     SEC. 103. GENERAL POWERS AND FUNCTIONS OF THE CORPORATION.

       The Corporation--
       (a) may adopt, alter, and use a corporate seal, which shall 
     be judicially noticed;
       (b) may settle and adjust claims, sue and be sued in its 
     corporate name, and be represented by its own attorneys in 
     all administrative and, with prior approval of the Attorney 
     General, judicial proceedings, including appeals from 
     decisions of Federal courts;
       (c) shall adopt and may amend and repeal bylaws, and may 
     adopt, amend and repeal corporate orders and directives, 
     governing the manner in which its business may be conducted 
     and the powers granted to it by law may be exercised and 
     enjoyed;
       (d) may acquire, purchase, lease, and hold the real and 
     personal property it considers necessary to conduct its 
     business;
     
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       (e) may sell, lease, grant, and dispose of property as it 
     considers necessary to conduct its business;
       (f) with the consent of the agency concerned, may utilize 
     or employ the services, records, facilities, or personnel, of 
     any Federal, State, or local government agency;
       (g) may enter into contracts and incur liabilities;
       (h) may retain or use up to $250 million annually of its 
     revenues, without further appropriation, for reasonable 
     capital and operating expenses of the Corporation;
       (I) shall have the priority of the United States with 
     respect to the payment of debts out of bankrupt, insolvent, 
     and decedents' estates;
       (j) may request from the Administrator of General Services 
     the services the Administrator is authorized to provide 
     agencies of the United States, and Administrator shall 
     furnish the requested services to the Corporation on the 
     same basis those services are provided agencies of the 
     United States;
       (k) may accept gifts or donations of services or of real, 
     personal, mixed, tangible, or intangible property to conduct 
     its business; the Corporation shall establish written rules 
     setting forth the criteria to be used in determining whether 
     the acceptance of gifts or donations of real, personal, 
     mixed, tangible, or intangible property to conduct its 
     business under this subsection would reflect unfavorably upon 
     the ability of the Corporation or any employee to carry out 
     its responsibilities or official duties in a fair and 
     objective manner, or would compromise the integrity or 
     appearance of integrity of its programs or any official 
     involved in those programs;
       (1) may execute all instruments necessary or appropriate in 
     the exercise of its powers;
       (m) may acquire liability insurance or act as self-insurer;
       (n) shall pay any settlement or judgment entered against it 
     from the Corporation's own funds and not from the judgment 
     fund established under section 1304 of title 31, United 
     States Code; section 1346(b) and chapter 171 of title 28, 
     United States Code do not apply to claims against the 
     Corporation; and
       (o) may request the Secretary of the Treasury to invest 
     monies of the Corporation in public debt securities having 
     maturities suitable to the needs of the Corporation, and 
     bearing interest at rates determined by the Secretary of the 
     Treasury, taking into consideration current market yields on 
     outstanding obligations of the United States of comparable 
     maturity.

     SEC. 104. SPECIFIC POWERS AND FUNCTIONS OF THE CORPORATION.

       The Corporation--
       (a) shall explore, prospect, develop, use, produce, and 
     operate the Reserves to maximize the economic value of these 
     properties to the Nation;
       (b) may enter into joint, unit, or other cooperative plans, 
     leases, or other agreements and transactions as may be 
     necessary in the conduct of its business;
       (c) subject to section 109(c) shall administer and may 
     amend existing contracts, including the Unit Plan Contract, 
     and other agreements transferred to the Corporation under 
     section 109(a) of this subtitle;
       (d) may construct, acquire, or contract for the use of 
     storage and shipping facilities, and pipelines and associated 
     facilities, on and off the Reserves, for transporting 
     petroleum from the Reserves to the points where the 
     production from the Reserves will be refined and shipped;
       (e) may store, for appropriate reimbursement reasonably 
     reflecting fair market value, petroleum owned or managed by 
     other Federal agencies and instrumentalities and may store 
     petroleum owned or managed by non-Federal entities at rates 
     consistent with subsection (j) of this section;
       (f) may acquire privately owned lands and leases inside the 
     Reserves, or outside those Reserves on the same geologic 
     structure, by exchange or contract, and in order to protect 
     the Reserves from drainage, and if unable to arrange an 
     exchange or contract, by purchase or condemnation;
       (g) may acquire any pipeline in the vicinity of the Reserve 
     not otherwise operated as a common carrier by condemnation, 
     if necessary, if the owner refuses to accept, convey, and 
     transport without discrimination and at reasonable rates any 
     petroleum produced at the Reserve;
       (h) may acquire a right-of-way for new pipelines and 
     associated facilities by eminent domain under the Act of 
     February 26, 1931 (40 U.S.C. 258a-258e), and the prospective 
     holder of the right-of-way is ``the authority empowered by 
     law to acquire the lands'' within the meaning of that Act; 
     new pipelines shall accept, convey, and transport any 
     petroleum produced at the Reserves at reasonable rates;
       (i) may use, store, or sell its share of the petroleum 
     produced from the Reserves and lands covered by joint, unit, 
     or other cooperative plans;
       (j) shall establish prices for products, materials, and 
     services on a basis that will allow it to maximize the 
     financial return to the Government;
       (k) shall give priority to assisting in national security 
     matters when requested by the Secretary of Defense; and
       (l) shall transfer annually to the Treasury all revenues in 
     excess of that needed for reasonable capital and operating 
     expenses of the Corporation, but in no event may the revenues 
     retained or used for those purposes in any fiscal year exceed 
     $250 million.

     SEC. 105. CHIEF EXECUTIVE OFFICER.

       The powers and functions of the Corporation are vested in a 
     Chief Executive Officer to be appointed by the Secretary. The 
     Chief Executive Officer serves at the pleasure and under the 
     supervision of, and may be removed at the discretion of, the 
     Secretary. The Secretary shall set the compensation of the 
     Chief Executive Officer, not to exceed Executive Level III.

     SEC. 106. EMPLOYEES.

       (a) Appointments.--
       (1) The Chief Executive Officer may appoint officers and 
     employees of the Corporation without regard to the provisions 
     in title 5, United States Code, governing appointments in the 
     competitive service, and may fix compensation without regard 
     to chapter 51 and subchapter III of chapter 53 of title 5, 
     United States Code, governing general schedule 
     classifications and pay. In appointing officers of the 
     Corporation and setting their compensation, which may not 
     exceed Executive Level IV, the Chief Executive Officer 
     shall consult with the Secretary. Any officer or employee 
     of the Corporation may be removed at the discretion of the 
     Chief Executive Officer except as specified in subsection 
     (b) of this section.
       (2) Section 3132(a)(1) of title 5, United States Code, is 
     amended by adding at the end the following:
       ``(E)'' the United States Navel Petroleum Reserves and 
     Naval Oil Shale Reserves Corporation;''.
       (b) Transfer of Functions.--An officer or employee of the 
     Department who the Secretary determines is performing 
     functions vested in the Corporation by this subtitle is 
     transferred to the Corporation under section 3503 of title 5, 
     United States Code. Such an officer or employee retains the 
     compensation in effect immediately prior to the transfer to 
     the Corporation until changed by the Chief Executive Officer, 
     and may not be separated involuntarily by reason of the 
     transfer (but may be separated for cause) for a period of one 
     year from the date of the transfer to the Corporation.
       (c) Payments for Employee Benefits.--
       (1) The Corporation shall make those payments to the 
     Employees' Compensation Fund which are required by section 
     3147 of title 5, United States Code.
       (2) The Corporation shall pay to the Civil Service 
     Retirement and Disability Fund--
       (A) those employee deductions and agency contributions 
     which are required by sections 3334, 3422, and 3423 of title 
     5, United States Code.
       (B) those additional agency contributions which are 
     determined necessary by the Office of Personnel Management to 
     pay, in combination with sums under paragraph (2)(A) of this 
     subsection, the normal cost (determined using dynamic 
     assumptions) of retirement benefits for the employees of the 
     Corporation who are subject to subchapter III of chapter 83 
     of title 5, United States Code; and
       (C) those additional amounts, not to exceed two percent of 
     the amounts under paragraphs (2)(A) and (2)(B) of this 
     subsection, which are determined necessary by the Office of 
     Personnel Management to pay the costs of administering 
     retirement benefits for the Corporation's employees and 
     retirees and their survivors (which months shall be available 
     to the Office as provided in section 3343(a)(1)(B) of title 
     5, United States Code).
       (3) The Corporation shall pay to the Employees' Life 
     Insurance Fund--
       (A) those employees deductions and agency contributions 
     which are required by sections 8707 and 8708(a) of title 5, 
     United States Code; and
       (B) those amounts which are determined necessary by 
     the Office of Personnel Management under paragraph (5) of 
     this subsection to reimburse the Office for contributions 
     under sections 8708(d) of title 5, United Stated Code.
       (4) The Corporation shall pay to the Employees Health 
     Benefits fund--
       (A) those employees payments and agency contributions which 
     are required by section 8906 (a)-(f) of title 5, United 
     States Code; and
       (B) those amounts which are determined necessary by the 
     Office of Personnel Management under paragraph (5) of this 
     subsection to reimburse the Office for contributions under 
     section 8708(d) of title 5, United States Code.
       (4) The Corporation shall pay to the Employees Health 
     Benefits fund--
       (A) those employee payments and agency contributions which 
     are required by section 8906 (a)-(f) of title 5, United 
     States Code; and
       (B) those amounts which are determined necessary by the 
     Office of Personnel Management under paragraph (5) of this 
     subsection to reimburse the Office for contributions under 
     section 8906(g)(1) of title 5, United States Code.
       (5) The amounts required under paragraphs (3)(B) and (4)(B) 
     of this subsection are the Government contributions for 
     retired employees who retire from the Corporation after the 
     date of transfer, the survivors of those retired employees, 
     and survivors of the employees of the Corporation who die 
     after the date of the transfer, prorated to reflect the 
     portion of the total civilian service of such employee and 
     retired employees that was performed for the Corporation 
     after the date of transfer.
       (6) The Corporation shall pay to the Thrift Savings Fund 
     those employee and agency contributions that are required by 
     section 8432 of title 5, United States Code.
       (d) Separation Incentive Payments.--The Corporation shall 
     pay any voluntary separation incentive payments authorized, 
     but not yet paid, by the Department prior to the 

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     transfer of functions under subsection (b) of this section.

     SEC. 107. EXEMPTION FROM TAXATION.

       The Corporation, including the Reserves and all other 
     corporate property, all corporate activities, and all 
     corporate income are exempt from taxation in any manner or 
     form by any State or local government entity.

     SEC. 108. APPLICABILITY OF OTHER LAWS.

       (a) Federal Laws Governing Acquisition and Disposal.--The 
     Corporation shall not be considered to be a department, 
     agency, establishment, or instrumentality of the United 
     States for purposes of Federal laws, regulations, or other 
     requirements concerning acquisition of services and supplies, 
     and the acquisition, use, and disposal of real and personal 
     property, including the Federal Property and Administrative 
     Services Act (40 U.S.C. 471, et seq.), except that the 
     Corporation shall be considered to be a department, agency, 
     establishment, or instrumentality of the United States for 
     the purposes of the Davis-Bacon Act (40 U.S.C. 276a-276-7), 
     the McNamara-O'Hara Service Contract Act (41 U.S.C. 351, 
     et seq.), the Contract Work Hours and Safety Standards Act 
     (40 U.S.C. 327, et seq.), and civil rights laws and 
     regulations applicable to Federal contractors and 
     subcontractors.
       (b) Exemption From Administrative Procedural Provisions.--
     Chapter 5 of title 5, United States Code, does not apply to 
     the Corporation.

     SEC. 109. TRANSFERS TO THE CORPORATION.

       (a) Transfer of Assets.--Subject to subsection (c) of this 
     section, the Secretary shall transfer to the Corporation the 
     contracts, records, unexpended balance of appropriations and 
     other monies available to the Department (including funds set 
     aside for accounts payable and all advance payments), 
     accounts receivable, and all other assets that are related to 
     the powers and functions vested in the Corporation by this 
     subtitle.
       (b) Transfer of Liabilities and Judgments.--
       (1) All liabilities attributable to the operation of the 
     Reserves by the Department are transferred to the 
     Corporation.
       (2) Any judgment entered against the Department imposing 
     liability arising out of the operation of the Reserves by the 
     Department is considered a judgment against and is payable 
     solely by the Corporation.
       (c) Unit Plan Contract Dispute Resolution.--The Secretary 
     shall retain, and shall not transfer, dispute resolution 
     authority under section 9 of the Unit Plan Contract.
       (d) Payment of Interest to the Treasury.--From time to 
     time, and at least at the close of each fiscal year, the 
     Corporation shall pay into the Treasury as miscellaneous 
     receipts interest on any Federal financial capital utilized 
     by the Corporation, as determined by the Director of the 
     Office of Management and Budget. The rate of such interest 
     shall be determined by the Secretary of the Treasury, taking 
     into consideration prevailing market yields, during the month 
     preceding each fiscal year, on outstanding obligations of the 
     United States with remaining periods to maturity of 
     approximately one year.

               TITLE II--PRIVATIZATION OF THE CORPORATION

     SEC. 201. STRATEGIC PLAN FOR PRIVATIZATION.

       (a) Within 5 years after the establishment of the 
     Corporation, the Corporation shall prepare a strategic plan 
     for transferring ownership of the Corporation to private 
     investors. The Corporation shall revise the plan as needed.
       (b) The plan shall include consideration of alternative 
     means for transferring ownership of the Corporation to 
     private investors, including public stock offering, private 
     placement, or merger or acquisition. The plan may call for 
     the phased transfer of ownership or for complete transfer at 
     a single point of time. If the plan calls for phased transfer 
     of ownership, then--
       (1) privatization shall be deemed to occur when 100 percent 
     of ownership has been transferred to private investors;
       (2) prior to privatization, such stock shall be nonvoting 
     stock; and
       (3) at the time of privatization, such stock shall convert 
     to voting stock.
       (c) The plan shall evaluate the relative merits of the 
     alternatives considered and the estimated return to the 
     Government's investment in the Corporation achievable through 
     each alternative. The plan shall include the Corporation's 
     recommendations on its preferred means of privatization.
       (d) The Corporation shall transmit copies of the strategic 
     plan for privatization to the President and Congress upon 
     completion.

     SEC. 202. PRIVATIZATION.

       (a) Subsequent to transmitting a plan for privatization 
     pursuant to section 101, and subject to subsections (b) and 
     (c), the Corporation may implement the privatization plan if 
     the Corporation determines, in consultation with appropriate 
     agencies of the United States, that privatization will result 
     in a return to the United States at least equal to the net 
     present value of the Corporation.
       (b) The Corporation may not implement the privatization 
     plan without the approval of the President.
       (c) The Corporation shall notify the Congress of its intent 
     to implement the privatization plan. Within 30 days of 
     notification, the Comptroller General shall submit a report 
     to Congress evaluating the extent to which--
       (1) the privatization plan would result in any ongoing 
     obligation or undue cost to the Federal Government; and
       (2) the revenues gained by the Federal Government under the 
     privatization plan would represent at least the net present 
     value of the Corporation.
       (d) The Corporation may not implement the privatization 
     plan less than 60 days after notification of the Congress.
       (e) Proceeds from the sale of capital stock of the 
     Corporation under this section shall be deposited in the 
     general fund of the Treasury.
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