2 Senators Claim U.S. Recklessly Draining Oil Site

Two Senate Democrats accused the Energy Department Wednesday of recklessly draining the Elk Hills Naval Petroleum Reserve in Kern County despite warnings from the agency’s own technicians and consultants that up to 130 million barrels of crude oil could be wasted by deliberate overdrilling.

Citing an internal department audit spotlighting the problem, Sens. Lloyd Bentsen of Texas and Albert Gore Jr. of Tennessee charged that the Reagan Administration had pressed for overproduction at the 700-million barrel reserve to maximize revenues and to help cut the federal budget deficit.

The lawmakers petitioned Comptroller General Charles A. Bowsher to investigate the matter and called on Energy Secretary John S. Herrington to halt production at Elk Hills until the results of such a probe are in.

‘Clear Scientific Advice’

“It’s a major outrage,” said Gore, attacking Energy officials for continuing the practice even while the current oil glut has slashed revenues from the fields. Gore said the audit, released April 25 by the inspector general’s office at the Department of Energy, showed that as far back as 1983 the department “had clear scientific advice that if it did not cut back on production it would severely damage the reserve, losing millions of barrels of oil.”

Spokesmen for both the department and Chevron, the San Francisco-based petroleum conglomerate that owns a 22% minority stake in the reserve, questioned the allegations and said that the inspector general based his conclusions on incomplete and disputed analyses of technical data.

For example, department spokesman John Donnelly said that last year a consulting firm that had earlier warned of potential major losses of crude oil at one of the larger reservoirs at Elk Hills reversed its findings and pronounced the field in better shape than it had been in years. However, the turnaround was ignored by the audit report, Donnelly said.

Elk Hills, established as a federal petroleum reserve in 1912 but not opened to commercial production until 1976 in the wake of the Arab oil embargo, is the fourth largest oil-producing field in the United States. The federal government owns 78% of the reserve and Chevron owns the rest.

Current Revenue Cut

The Energy Department sells its share of Elk Hills oil to commercial refiners. Administration estimates initially pegged federal revenues from Elk Hills oil sales at $1.2 billion in the current 1986 fiscal year, but budget analysts now calculate that the fields will bring in only $870 million because of declining oil prices.

The issue raised by the lawmakers and auditors involves a highly technical calculation of what is the best rate to pump oil out of the ground, both to maximize revenues and to get the most out of the available reserves. Petroleum experts call the figure the maximum efficient rate. Federal law stipulates that production at Elk Hills must adhere to the maximum efficient rates for the various fields that comprise the facility.

Overproduction can suck water and gas through a subterranean oil field, breaking it up into smaller pools and raising drilling costs beyond levels that are economically feasible, according to the audit report. The study charged that actual production rates had topped the maximum efficient rates calculated by some department consultants and engineers for seven years and that Department of Energy officials had been aware of the problem at least since 1983.

“Between 90 and 130 million barrels of otherwise recoverable oil is at risk of being lost through overproduction over the life of the (Elk Hills) reserve,” the audit concluded, estimating the value of the potential loss at $1.6 billion to $2.3 billion.