Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Oil Reserve Sale Biggest Ever in U.S.

LOS ANGELES -- In the largest sale of U.S. government property ever, Occidental Petroleum of Los Angeles won the bidding for the historic Elk Hills Naval Petroleum Reserve near Bakersfield, California, by agreeing to pay $3.65 billion, the Energy Department said Monday.

Occidental outbid 22 others, including Chevron and Atlantic Richfield Co. by paying more than 50 percent above the government's own estimate of what the oil field was worth a year ago.

Occidental is acquiring the government-owned 78 percent interest in the oil field and the rest is owned by Chevron.

The high purchase price reflects the growing premium paid for domestic oil reserves at a time when some energy economists are predicting oil prices will rise in coming years.

U.S. Energy Secretary Federico Pena said most of the proceeds from the sale will go to reduce the federal budget deficit.

"This is a good deal for the taxpayer and delivers on President Clinton's promise to make the government work better and cost less," Pena said in an interview.

But the federal government won't get all $3.65 billion.

Nine percent of the sale price, or more than $300 million, will go to the California State Teachers Employees' Retirement System as part of a settlement last year of an ownership tiff between the federal and state governments.

For Occidental, the purchase will add the equivalent of about 1 billion barrels of crude oil to its reserves, tripling its U.S. crude holdings and doubling its domestic natural gas inventory.

Elk Hills, one of the 11 largest oil fields in the lower 48 states, encompasses about 47,000 acres, 1,000 producing oil wells, a power plant and a gas processing plant.

Occidental said it would sell its MidCon natural gas pipeline and marketing system to help pay for the Elk Hills purchase.

The company said the MidCon sale should raise $3 billion.