Naval Petroleum Reserve: Opportunities Exist to Enhance Its Profitability
(Letter Report, 01/12/95, GAO/RCED-95-65).

The Naval Petroleum Reserve in Elk Hills, California, is jointly owned
by the United States government and Chevron U.S.A., Inc. It is now
operated by Bechtel Petroleum Operations, Inc., under a contract that
expires in July 1995.  Chevron believes that it can run the reserve more
profitably than the government can, and in May 1995 it proposed taking
over reserve operations.  Later, the Energy Department (DOE) suspended
negotiations with Chevron on this proposal and recently began to solicit
interest from other parties to operate the reserve.  Like Chevron, DOE
wants to lower the costs of operating the reserve.  This report explores
actions that DOE and Congress can now take to improve the reserve's
profitability.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-65
     TITLE:  Naval Petroleum Reserve: Opportunities Exist to Enhance Its 
             Profitability
      DATE:  01/12/95
   SUBJECT:  Oil resources
             Energy supplies
             Domestic crude oil
             Petroleum industry
             Fuel sales
             Petroleum refining facilities
             Microeconomic analysis
             Profits
             Cost sharing (finance)
             Contract modifications
IDENTIFIER:  Naval Petroleum Reserve No. 1 (Elk Hills, CA)
             
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Cover
================================================================ COVER


Report to the Committee on Armed Services, U.S.  Senate

January 1995

NAVAL PETROLEUM RESERVE -
OPPORTUNITIES EXIST TO ENHANCE ITS
PROFITABILITY

GAO/RCED-95-65

Profitability of the NPR-1


Abbreviations
=============================================================== ABBREV

  DOE - Department of Energy
  GAO - General Accounting Office
  MER - maximum efficient rate
  NAPA - National Academy of Public Administration
  NPR - Naval Petroleum Reserve
  UPC - unit plan contract

Letter
=============================================================== LETTER


B-259495

January 12, 1995

The Honorable Strom Thurmond
Chairman
The Honorable Sam Nunn
Ranking Minority Member
Committee on Armed Services
United States Senate

The Naval Petroleum Reserve in Elk Hills, California, (known as the
NPR-1), is jointly owned by the United States government and Chevron
U.S.A., Inc.  It is currently operated by Bechtel Petroleum
Operations, Inc., under a contract that expires in July 1995. 
Because Chevron believes that it can operate the NPR-1 more
profitably than a government contractor, in May 1993 it proposed
taking over operation of the reserve.  You asked us to evaluate the
economic feasibility of that proposal. 

Subsequently, the Department of Energy (DOE), representing the
federal government, suspended negotiations with Chevron on this
proposal.  Instead, DOE has recently solicited interest from other
parties to operate the NPR-1 and is planning to develop a proposal on
which the interested parties will be asked to compete.  Like Chevron,
DOE is interested in lowering the costs of operating the reserve.  In
light of these events, we agreed with your offices to refocus our
review on actions that the Secretary of Energy and the Congress can
now take to improve the profitability of the NPR-1.\1 Over the past
few years, several organizations, including the National Academy of
Public Administration (NAPA) and an independent industry panel, have
noted that the profitability of the NPR-1 and the resulting revenues
to the U.S.  Treasury could be increased by adopting management
practices more in line with those of commercial oil and gas
operations.  They believe that doing so could substantially reduce
the costs of operating the NPR-1 while at the same time generating
more revenues.  DOE is considering alternatives for managing the
reserve-- including establishing a government corporation to operate
it, selling it, or leasing it--as a means of improving its efficiency
and enhancing its value to the taxpayer.  We also believe that
management changes will be needed to enhance the profitability of the
NPR-1 and that the actions discussed in this report will complement
those changes. 


--------------------
\1 Our May 1994 report Naval Petroleum Reserve:  Limited
Opportunities Exist to Increase Revenues From Oil Sales in California
(GAO/RCED-94-126) also addressed ways to enhance the NPR's
profitability through various marketing strategies. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Three actions could enhance the profitability of the NPR-1.  First,
DOE could be allowed to set the rate of production in a way that
maximizes profits, which is standard industry practice.  In contrast,
the production rate of oil and gas at the reserve is currently set by
statutory requirement at the rate that can be achieved "without
detriment to the ultimate recovery" of the resource--called the
maximum efficient rate (MER).  For example, DOE has traditionally
reinjected gas produced from the reserve to maximize the recovery of
oil from the NPR-1.  While this practice has increased oil recovery,
DOE, Chevron, and Bechtel have estimated that selling the gas could
be more profitable. 

Second, making a final decision on how ownership shares in the NPR-1
are distributed between DOE and Chevron could enhance the reserve's
profitability by allowing the owners to focus on investments that
enhance the venture as a whole.  Currently, an open-ended arrangement
between Chevron and DOE governs their equity or ownership shares of
production.  The Naval Petroleum Reserves Production Act of 1976, as
amended, and the contract between DOE and Chevron require that these
ownership shares, expressed as percentages, be revised from time to
time.  The new percentages apply not only to future production but
also to past production dating back to 1942.  This open-ended
situation has undermined trust and cooperation between the two
owners, and both spend a significant amount of resources examining
the likely impact of proposed investments on their equity shares
before committing to new projects.  These expenditures and the slowed
decision-making result in reduced profits.  By contrast, standard
industry practice calls for operating a mature commercial oil and gas
field like the NPR-1 with the equity shares finalized among the
partners so the unit can be developed and production managed in the
most profitable manner possible. 

Finally, adding a clause to the contract between DOE and Chevron to
promote risk sharing could help encourage investments that enhance
profits.  Under the current contract, DOE and Chevron may be drilling
fewer profitable wells than they could because they do not always
share in the risks or costs of drilling.  In standard industry
practice, sharing such risks is encouraged by a contract's
"nonconsent clause," which governs how a partner that does not share
the initial risks or costs of a project will be treated.  Without
such a clause, one partner may decide not to participate in drilling
a well but later decide that it wants a share of any resulting
profits.  Because the current contract has no such clause, DOE has
sometimes borne all of the initial risks or costs of drilling
potentially profitable wells, only to have Chevron later share in the
profits without penalty. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Naval Petroleum and Oil Shale Reserves were established in the
early 1900s as a strategic reserve of fuel supplies for the military. 
The NPR-1 produces both crude oil and natural gas.  The reserves were
largely inactive until the Congress passed the Naval Petroleum
Reserves Production Act of 1976 (P.L.  94-258) in response to the
1973-74 Arab oil embargo.  This statute changed the NPR from a
strategic reserve for the military to a source of oil for the U.S. 
economy.  Among other things, the act required that the NPR-1 be
fully developed and its resources produced at the maximum efficient
rate of production (MER) that permits "economic development and
depletion of the reservoir without detriment to the ultimate
recovery" of the resource.  In response to the Arab oil embargo, the
United States has also established a Strategic Petroleum Reserve
designed to soften any negative impacts of disruptions in the oil
supply.  Because oil production from the NPR-1 represents a small
fraction of the nation's daily oil consumption, the reserve's ability
to offset supply disruptions is limited. 

The U.S.  government currently owns about 78 percent of the NPR-1;
Chevron U.S.A., Inc., (Chevron) owns 22 percent.  The percentage that
each party owns of the four major commercially productive oil and gas
zones at the reserve varies depending on what was originally agreed
to in the unit plan contract (UPC), signed by the two owners in
1944.\2 The NPR Production Act of 1976, as amended, and the UPC
require the owners to redetermine from time to time how the equity
shares or ownership percentages of the producing zones are to be
divided.  This division is made on the basis of estimates of the
location and amounts of oil and natural gas in the NPR-1.  DOE and
Chevron recently completed such a redetermination for one zone and
are revising the equity shares in a second zone.  DOE, as the
administrator of the reserve for the U.S.  government, develops and
operates the reserve.  The total revenues generated at the reserve in
fiscal year 1993 were $382.1 million. 

Over the past several years, a number of experts have called for
increasing the capacity of the NPR-1 to generate profits and,
ultimately, revenues for the U.S.  Treasury.  In addition, the Senate
Committee on Armed Services has called for the NPR-1 to increase its
operating efficiency.  In response, an independent industry panel,
the National Academy of Public Administration (NAPA), and DOE have
evaluated operations at the NPR-1 and suggested ways to lower its
operating costs and enhance its profitability.\3 They have also
considered other alternatives for managing the reserve.  In addition,
in May 1993 Chevron proposed that it operate the NPR-1, estimating
that it could reduce operating costs by as much as $37 million per
year.  However, negotiations between Chevron and DOE on this proposal
were suspended in the spring of 1994 because of the Secretary of
Energy's concerns that this proposal might not be appropriate given
the need to ensure competitive selection of the next operator or
contractor. 


--------------------
\2 Changes to the UPC require DOE to consult with the Senate and
House Committees on Armed Services. 

\3 Evaluation of Operations at Naval Petroleum Reserve No.  1, an
Independent Industry Panel (Oct.  1993); Restructuring the Naval
Petroleum and Oil Shale Reserves, NAPA, Apr.  1994; Organizational
Alternatives for the Naval Petroleum and Oil Shale Reserves, DOE,
June 1994 (draft). 


   OPPORTUNITIES TO INCREASE THE
   PROFITABILITY OF THE NPR-1
------------------------------------------------------------ Letter :3

We identified three ways to enhance the profitability of the NPR-1
and complement future management changes.  First, to meet the
statutory requirement of MER, DOE is producing at a rate intended to
achieve the ultimate recovery of oil--sometimes to the exclusion of
gas; such an approach may not maximize profits.  Second, because the
equity or ownership shares currently are not finalized, individual
owners spend considerable sums of money on studies on ways to protect
their equity shares rather than investing in projects that would
enhance the profits of the operation as a whole.  Third, as a result
of the absence of a nonconsent clause in the current contract between
DOE and Chevron, DOE at times takes all the risk but Chevron shares
in the profits at no penalty.  Because the risk is not shared, there
is less incentive to undertake investments that could enhance
profits. 


      ELIMINATING THE MER CAN
      INCREASE THE NPR-1'S
      PROFITABILITY
---------------------------------------------------------- Letter :3.1

In operating the NPR-1 to maximize the recovery of oil, DOE has not
always maximized the profitability of the field's oil and gas
production.  The NPR Production Act of 1976 requires DOE to produce
oil or gas from the NPR-1 at the "maximum sustainable daily oil or
gas rate [known as the MER] from a reservoir which will permit
economic development and depletion of that reservoir without
detriment to the ultimate recovery" of the resource.  DOE has
operated the NPR-1 in a fashion intended to recover the maximum
amount of oil.  In a commercially operated field, the owners strive
to maximize profitability from oil and gas production rather than
simply to recover the maximum amount of oil. 

DOE's Office of General Counsel believes that the concept of the MER
is outdated and needs to be changed.\4 For example, to achieve the
MER, DOE requires Bechtel to inject recovered gas back into the
ground to enhance the ultimate recovery of oil in two reservoirs of
the reserve--even though it would be more profitable to sell the gas. 
A preliminary study by DOE, Bechtel, and Chevron estimated that in
the first of these two reservoirs, as much as $135 million in present
value of future profits could be gained if the gas is sold rather
than reinjected after 1996.\5 Apreliminary analysis by Bechtel
estimated that in the second reservoir, discontinuing gas reinjection
in 1994 and selling the gas instead could result in a gain of as much
as $66 million in present value of future profits.\6 In each of these
cases, DOE would receive about 80 percent of the resulting profits.\7
DOE has stated in the past that selling gas to increase profits is
not consistent with the act's MER requirement since doing so may
reduce the amount of oil that is ultimately recovered. 

We agree with DOE's Office of General Counsel that the concept of MER
is outdated and needs to be changed.  We believe that eliminating the
MER requirement would give DOE greater flexibility to adjust
operations in response to changes in oil and gas prices and
forecasted prices and thus to earn greater expected profits and
provide greater expected revenue to the U.S.  Treasury. 


--------------------
\4 In interpreting the MER requirement, DOE has focused primarily on
the recovery of oil. 

\5 This estimate covers a 30-year period and accounts for any profits
forgone as a result of leaving an estimated 5.2 million barrels of
oil in the ground.  Changes in gas prices, among other things, would
affect the outcome of this estimate. 

\6 This estimate covers a 20-year period and accounts for any profits
lost as a result of not recovering an estimated 2.4 million barrels
of oil.  Changes in gas prices, among other things, would affect the
outcome of this estimate. 

\7 Both parties would incur some cost to improve the reserve's
infrastructure--including the cost of building pipelines. 


      FINALIZING THE EQUITY SHARES
      CAN INCREASE THE
      PROFITABILITY OF THE NPR-1
---------------------------------------------------------- Letter :3.2

Because DOE and Chevron have not finalized the ownership shares,
opportunities to increase the profitability of the NPR-1 have been
lost.  Equity or ownership shares determine how each partner shares
in the expenses and profits of an oil and gas operation.  In a
typical commercial operation, the equity shares of the owners are
finalized as specific percentages once the operation becomes
mature--that is, after a number of years of operation, when good
information is available about the size of the field.  As long as the
equity shares are not finalized, money will be spent on costly
redeterminations, and revenues will be deferred and forgone as
projects are delayed while each owner determines if individual
projects threaten its ownership shares.\8 Finalizing the equity
shares ensures that the partners know exactly what their share of
potential profits will be; they will thus focus more on increasing
profits for the venture as a whole. 

The NPR Production Act of 1976, as amended, and the 1944 UPC preclude
finalizing the equity shares.  In fact, the shares can be
redetermined whenever both parties agree to do so.  Moreover, changes
to the equity shares are retroactively applied to all production and
its related costs since 1942.  Because of the partners' concerns
about protecting their equity shares at the NPR-1, opportunities for
profitability have been lost. 

For example, in August of 1992, Chevron proposed injecting water into
the ground to enhance oil production in a section of the reserve (a
technique known as a waterflood).  Chevron estimated that the
resulting production would provide DOE with a gain of about $41
million in present value of future profits.  DOE ultimately responded
to the proposal by deciding to begin a pilot project in January 1995. 
Chevron believes that DOE's 2-year delay--which resulted in deferred
and forgone revenues--resulted from considerations of the impact of
the project on DOE's equity share because the area to be flooded is
mostly on Chevron land.  According to a Chevron official, the choice
of that area was based on the availability of idle wells that could
be used for a new waterflood without incurring high capital costs. 
Chevron believes that DOE saw this project as an attempt by Chevron
to increase oil recovery from its land, thereby increasing Chevron's
overall equity share at a future redetermination. 

According to a DOE headquarters official, the NPR-1 is a mature
field, and its production history is long enough to provide
sufficient knowledge to support a project of this type.  He also
stated that the project is a good example of the difficulty of
enhancing profits at the NPR-1 when the equity shares have not been
finalized.  He added that while using idle wells on Chevron's section
of the NPR-1 would reduce the costs of the project, it could also
potentially boost Chevron's equity position during a future
redetermination of that zone.  However, lower costs, rather than
equity considerations, would have been the issue if the equity shares
had been finalized. 

Currently, how the equity shares are apportioned can be reexamined at
the request of either owner.  According to DOE and Chevron officials,
this process consumes and will continue to consume a considerable
amount of time, labor, and money at the NPR-1 if the equity shares
are not finalized.  Redetermining equity shares is a complex and
costly process, requiring sophisticated engineering and geologic
studies.  For the NPR-1, there is an overall committee and several
subcommittees whose primary responsibility is to make decisions about
the development and operation of the reserve.  Instead, members of
these committees spend much of their time arguing over the equity
positions of the respective owners.  Members of the committees from
both DOE and Chevron acknowledged that the process of redetermining
the equity shares at the NPR-1 has consumed much of their time in
several meetings. 

By focusing attention on who owns what, DOE and Chevron are diverting
management attention away from enhancing the overall profitability of
the field.  For example, in the fall of 1993 and early 1994,
respectively, DOE and Chevron conducted separate redetermination
studies for one hydrocarbon zone.  While they initially disputed each
other's results, in November 1994 they reached an agreement on what
the new equity percentages should be.  DOE officials told us that
they have spent over $10 million to date in expert studies for this
zone and for a second zone where a reexamination is under way. 
Chevron officials estimated that they have spent about $4 million to
date for studies of these two zones.  While the potential benefits to
an individual owner of a gain in equity shares can be significant,
these benefits can result in a commensurate loss to the other owner. 
Thus, the owners may, at times, be engaging in a zero-sum game, in
which the end result may lead to a redistribution of ownership shares
but no overall gain in the field's profitability.  Moreover, because
potential losses from a change in the equity shares could be
significant, each owner has an incentive under the present
arrangement to spend considerable resources to make sure such changes
do not occur. 

Further compounding the problem of redetermining the equity shares is
the requirement that production and related costs be reallocated back
to 1942.  Specifically, the NPR Production Act of 1976 and the UPC
require that changes in the equity shares be applied retroactively. 
When possible, future allocations of oil and gas are adjusted to make
up for previous surpluses and deficits experienced by the partners. 
However, as overall production declines, the prospect increases that
a redetermination will occur that requires a reallocation that cannot
be met from future production.  In that case, a cash settlement would
be required.  Finalizing the equity shares and eliminating the
requirement that adjustments be made retroactively would mitigate
this situation. 

In November 1993, Chevron formally requested that the two owners
finalize the equity shares.  While DOE never officially responded to
Chevron's request, DOE officials told us they are in favor of
finalizing the shares.  However, they expressed some reservations. 
Because of uncertainty about how much oil and gas is in the ground,
the DOE officials said that they can never be sure that the equity
shares agreed to are the right ones.  However, uncertainty is a fact
of life in the oil and gas business, and an effective strategy must
be developed to deal with this uncertainty.  The standard industry
practice for a mature oil and gas field like the NPR-1 is to finalize
equity on the basis of the knowledge gathered over the years. 
Experts in the oil and gas industry that we spoke with and an
independent industry panel are also in favor of finalizing the equity
shares and eliminating the requirement for retroactive adjustments. 
Because the NPR-1 is now a mature oil and gas field, much of the
information needed to finalize the equity shares is already
available, and these experts believe the shares should be finalized. 
In addition, Chevron officials told us that if the equity shares are
not finalized and the U.S.  government decides to sell the reserve,
the price it receives will be discounted to reflect the uncertainty. 


--------------------
\8 Revenues are forgone because their present value is less. 


      ADOPTING A NONCONSENT CLAUSE
      WOULD ENHANCE PROFITABILITY
      BY ENCOURAGING A MORE
      COOPERATIVE APPROACH
---------------------------------------------------------- Letter :3.3

Because of the absence of a nonconsent clause concerning the NPR-1,
DOE has, at times, borne all of the initial risks or costs of
drilling potentially profitable wells, only to have Chevron share in
the profits without penalty.\9 The purpose of a nonconsent clause is
to share the risks or costs incurred in drilling wells.  If these
risks or costs are shared, drilling ventures expected to be
profitable will likely be more readily agreed to and embarked on. 

Exploration and/or drilling for hydrocarbons is inherently risky.  A
nonconsent clause is typically included in petroleum partnership
agreements as an incentive for partners to share in the risks of
drilling potentially profitable wells.  With such a clause, if a
drilling project proves profitable, the partner that did not consent
to the project in the beginning may share in the profit but is
penalized (generally about 300 percent) of the costs incurred by the
partner that bore all the risk.  On the other hand, if the drilling
project is not profitable, the partner that did the drilling absorbs
all the cost. 

Currently, the UPC between DOE and Chevron does not contain a
nonconsent clause.  Both DOE and Chevron agree that the lack of such
a clause has affected their relationship in drilling projects at the
NPR-1 and has proved a disincentive to drilling.  DOE and Chevron
officials cited examples of drilling that DOE carried out without
Chevron's participation.  In one case, Chevron later shared from the
profits, but since there is no nonconsent clause, Chevron was not
penalized.  For example, DOE drilled four wells in 1993 to prevent
oil from being drained from the NPR-1.  DOE spent $3.55 million on
this project, in which Chevron originally declined to participate,
saying that it did not have the money at the time.  However, after
these wells proved to be commercially productive, Chevron agreed to
pay its share of the drilling costs at no penalty.  In another case,
in the mid-1980s, DOE drilled an exploratory well at a cost of over
$30 million, but Chevron declined to participate.  DOE later spent
another $6.5 million to redrill the well, but oil has still not been
found.  Chevron believes that this drilling project was not a risk
worth taking.  However, a Chevron official also pointed out that if
the well had proved to be productive and profitable, Chevron would
have agreed to participate and pay its share of the project's costs. 
In any event, Chevron officials told us that because there is no
nonconsent clause in the UPC, they have no incentive to take such
joint risks with DOE.  Both DOE and Chevron officials indicated that
they would be in favor of amending the UPC to include a nonconsent
clause because including such a clause is a typical industry
practice. 


--------------------
\9 The absence of a nonconsent clause also means that Chevron could
bear all the risks or costs of drilling potentially profitable wells,
only to have DOE share in any resulting profits without penalty. 


   CONCLUSIONS
------------------------------------------------------------ Letter :4

According to several experts in the oil and gas industry, including
an independent industry panel, a primary goal of the NPR-1 should be
to maximize profits and, thus, the capacity of the reserve to produce
revenues for the U.S.  Treasury.  The NPR Production Act of 1976, as
amended, and the unit plan contract currently inhibit a management
approach that would enhance the NPR-1's profitability.  Eliminating
the MER requirement could enable DOE to focus on the overall
profitability of the reserve rather than on maximizing the recovery
of its oil.  Eliminating the MER requirement would also give DOE
greater flexibility to adjust operations in response to changes in
oil and gas prices and forecasts so as to earn greater profits and
provide more revenues to the U.S.  Treasury. 

In addition, wrangling over the equity shares has led DOE and Chevron
to focus on issues that take away from more effective management of
the reserve.  As a result, the reserve is not as profitable as it
could be.  Furthermore, as a result of the absence of a nonconsent
clause in the contract, DOE has, at times, taken all of the risks
while Chevron has shared in the profits with no penalty.  The lack of
such a clause also diminishes the incentive for DOE and Chevron to
cooperate in drilling projects, which can affect the overall
profitability of the reserve. 

DOE is considering alternatives to managing the reserve--including
establishing a government corporation to operate it, selling it, or
leasing it--as a means of enhancing its value to the taxpayer.  We
believe that the actions discussed here--eliminating the MER
requirement; finalizing the equity shares, including eliminating the
requirement that adjustments be retroactive; and adding a nonconsent
clause to the contract--could enhance profitability.  Such actions
would complement any future management changes--first proposed by
Chevron to lower operating costs--and move the field towards a more
commercial type of operation.  The value of the NPR-1 would thus be
enhanced and, its return to the taxpayer increased. 


   RECOMMENDATION TO THE CONGRESS
------------------------------------------------------------ Letter :5

In the context of reconsidering the purpose of the NPR-1, we
recommend the following actions to enhance its profitability:  amend
the Naval Petroleum Reserve Production Act of 1976 by (1) eliminating
the MER requirement, (2) requiring that the equity shares be
finalized, and (3) eliminating the requirement that adjustments in
the equity shares be retroactive. 


   RECOMMENDATION TO THE SECRETARY
   OF ENERGY
------------------------------------------------------------ Letter :6

To help enhance the profitability of the NPR-1, we recommend that, in
consultation with the Senate and House Committees on Armed Services,
DOE amend the unit plan contract to require the addition of a
nonconsent clause. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We discussed the factual information in this report with DOE's Deputy
Assistant Secretary for Naval Petroleum and Oil Shale Reserves and
his staff, the Director of the NPR-1 at Elk Hills, and Chevron
officials in Washington, D.C.  These officials generally agreed with
the facts presented.  While DOE and Chevron officials agreed that the
actions discussed in this report will enhance the profitability of
the NPR-1, they believe that other steps also need to be taken to
enhance profits.  They believe that management changes, such as
establishing a corporation or its equivalent to operate the reserve,
are needed to provide DOE with the flexibility to operate the NPR-1
more cost-effectively, as a commercial oil and gas operation is
operated.  These officials also provided technical comments, which
are reflected in the report where appropriate.  As requested, we did
not obtain written agency comments on the report. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To develop this report, we interviewed knowledgeable officials from
DOE and Chevron U.S.A., Inc., as well as various industry experts. 
We reviewed documents provided by these officials on enhancing the
NPR-1's profitability and on the issues discussed in the report. 


---------------------------------------------------------- Letter :8.1

As arranged with your offices, unless you publicly release its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies to the Secretary of Energy, Chevron U.S.A., and other
interested parties.  We will also make copies available to others on
request.  Please call me at (202) 512-3841 if you have any questions. 
Major contributors to this report are listed in appendix I. 

Victor S.  Rezendes
Director, Energy and
 Science Issues


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I


   RESOURCES, COMMUNITY, AND
   ECONOMIC DEVELOPMENT DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix I:1

Charles W.  Bausell, Jr., Assistant Director
Patricia Gleason, Evaluator-in-Charge
Godwin Agbara, Staff Evaluator
Jonathan N.  Kusmik, Staff Evaluator


   OFFICE OF THE GENERAL COUNSEL
--------------------------------------------------------- Appendix I:2

Jackie A.  Goff, Senior Attorney
