Revenues From the Operation of Naval Petroleum Reserve No.3, and the Administration of the Naval Oil Shale Reserves in Colorado and Utah

Published by the Government Accountability Office on 1971-12-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          UNITED STATES GENEI~ALACC~UNTF~G
                                    WASHINGTON,   D.C.   20548



                                                                                     111111114 I
            Dear Mr, Sanders:
                  As paxt of our examination into the conservation and management_
          J of natural resources by the Department of Defense (Code 862C9), we ',
            have reviewed certain matters relating to revenues from the operation
            of Naval Petroleum Reserve No, 3 (Teapot Dome, Wyoming)and the a&in-             _
            istraxion of the Naval. Oil Shale Reserves in Colorado and &xh.
                  We found that errors in the pricing of crude oil sales from
            Naval Petroleum Reserve No. 3 resulted in underpayments to the Navy
            of about $19,000. Purther, some grazing fees collected from lessees
            operating on Naval Oil Shale Reserve+-++,-dsthat should have been
            deposited to the General Fund of the U. S;YTreasury had been cotin-
            gled with funds used by the Dureau of Land Iknagement, Department of         .
            the Interior.   Actions have been or are being taken to correct these
            FROMNAVAL 333TROm RESEm NO. 3

                    During the 24-month period ended December31, 190, revenue from
            the sale of crude oil was understated by about $19,000 because the con-
            tractor    operator of Naval Petroleum Reserve No. 3 had not billed the
            purchaser in accordance with the pricing provisions of the sales con-
            tract.     Contract NOd-9914, dated November1, 1968, provides that the
            purchaser shalL pay the "base price" in effect at the date the oil is
            delivered, less 5 cents per barrel.     The prior sales contract included
            a provision for paying the "base pricew less 10 cents per barrel.      The
            term "base price" is defined as the average price per barrel of all
            prices regularly posted or published by principal purchasers of crude
            oil in Natrona County, Wyoming, for oil of equal gravity and quality,
                   The operator had made erroneous billings      which resukted in the
             following underpayments,

                                  50 TH ANNIVERSARY      1921-   197
             Ty3eoferror                                    underpayments
    Average price regularly posted
    or published not used                                      $16,341
    Billings prepared on basis of
    pricing provisions applicable to
    the prior sales contract ("base
    price" less 10 cents per bsmel)                              2,530
             Total                                             $18,87a

          Webrought this matter to the attention of the Officer in Charge,
    Navs2 Petroleum and Oil Shale Reserves in Colorado, Utah, and Wyoming,     ! ':
    located at Casper, Wyoming, in January lp?'L The errors appeared to
    be due to oversight. The Officerin Charge advised us later that the
    operator of Naval Petroleum Reserve No, 3 had been notified of the
    errors and that this matter was being taken up with the purchaser, As
    of the end of October lg'j'l, efforts by the Office of Naval Petroleum
     snd Oil Shale Resemes to resolve this matter were still underway,
    INcoNSIm~~              OFGRAZINGRECEIPTS
         Four district offices of the Bureau of Land Managementwere not
    he&ling the deposit of grazing receipts in a consistent maxmerin that
    somereceipts were comingled with Bureau fuuds instead of deposited to
    the General Fund of the Treasury.
              AU surface resources on federally ownedlands within Navatl Oil
    Shale Reserves Nos. 1 and 3 in Colorado and Naval Oil Shale Reserve
    No. 2 in Utah are managedby the Bureau under a cooperative agreement
I   between the Secretary of the Navy and the Secretary of the Interior,
    Under this agreemnt, the Btmeaumay issue leases, permits, or licenses
    involving surface resourcess While the costs of administering grazing
    permits OP?I   the Reserve lands are generally financed with Navy funds,
    most of the receipts from grazing fees have been deposit& to a Breau
    WX0l.U3t,    in which they are coimd ed with fmds used to finance range
    improvements on Bureau lands and other expenditures.
          Four district offices of the Bureau are involved in administration
    of these grazing permits. Receipts f'rom grazing fees on lands tithin
    Shale Reserves Nos, 1 and 3 amountedto $5,0~6 for the year ended
    February 28, 1970, and were deposited by the two cognizant district
    offices to a Bureau receipt account. As to graze fees from ShaLe
*   ..^


                       Reserve Ro. 2 &uring fiscal year 1970, a third district office depos-
                       ited about $1,&k to the General li'und of the Treasury and the fourth
                       district office deposited about $186 to the Rureau receipt account.
                            We beLieve, based on our review of 10 U.S.C. @33(b) and 31 U.S.C.
                       484, that all such receipts should be deposited into the Genera3 Rmd
                       of the Treasury.
                            On November23, 197X, the Bureau of Laud Msnagementissued instruc-
                       tions that receipts from grazing fees on Zav lax16be deposited to the
                       General &nd of the Treasury.
                           Copies of this report are being sent to the Director,   Office of
                                 and Budget, and the Secretary of the Interior.
                                                          Sincerely yours,

                                                          Associate Director

                       The Honorable Frank Sanders
                       Assistant Secretary of the Navy
                         (FinancialManagement)    :