Pitfalls in Interior's New Accelerated Offshore Leasing Program Require Attention

EMD-82-26: Published: Dec 18, 1981. Publicly Released: Dec 28, 1981.

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GAO was requested to review the Department of Interior's proposed 5-year offshore oil and gas leasing and development program. In addition to accelerating leasing, the new proposal calls for changes reducing the time for environment analyses and allowing for larger acreage offerings in lease sales. The evaluation focused on the following: (1) differences between the proposed and current programs; (2) processes by which Interior developed the new program and the influence of non-Interior agencies and other affected groups in the process; (3) Interior's capabilities to handle the accelerated program; (4) capability of industry to lease and diligently explore additional offshore land in a timely manner; (5) potential impacts of the program in terms of the amount of land to be leased, the economy and the environment, receipt of fair market value for leased lands, small company participation, and competition in lease sales; (6) legal implications of the program; and (7) soundness and workability of the program.

GAO found that Interior's 5-year estimates of appropriations and staffing show the proposed program costing $40 million less and being accomplished with about 948 fewer staff years than the June 1980 program. Redesign of the program was done within Interior with little or no input from other Federal agencies and only minor consideration input from the public sector. GAO believes that it is important for Interior to have the ability to administer the new program in an efficient and timely manner and be able to deliver leases free of litigation for which permits for exploration and development can be obtained without problems. Industry appears fully capable of increasing its offshore activities and is currently making plans to do so. Interior's recent action in extending lease terms from 5 to 10 years in difficult areas could also increase the amount of land leased. GAO concluded that Interior's program represents a new initiative to determine the hydrocarbon potential of the offshore. Such an assessment is sorely needed inasmuch as the oil and gas potential of the offshore is an unknown in the equation for solving the Nation's future energy needs. However, Interior's planning for the program in terms of: (1) detailing how the program is to be implemented in practice; (2) assessing the potential impacts of the program; and (3) evaluating its capabilities to accommodate the program, needs constant attention. Congress also needs to be satisfied that Interior has thought through and taken appropriate steps to successfully accomplish the program as planned.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Interior should also consider adopting a modified streamlining approach by reducing the size of the areas offered for lease. Trimming the lease sales down to smaller offerings will allow for a more detailed analysis of the environmental features in an area and also reduce the acreage Interior must consider for tract valuations.

    Agency Affected: Department of the Interior

  2. Status: Closed - Not Implemented

    Comments: The new accelerated leasing program was submitted to Congress in May 1982 and approved by the Interior Secretary in July 1982. Some information in response to the recommendation was provided to Congress but not in the detail GAO recommended. Because of time and events, the recommendation is no longer applicable.

    Recommendation: The Secretary of the Interior should provide detailed information and analyses of the Department's capabilities to implement the proposed program. The relationship between reduced funding and staffing and an accelerated program should be carefully documented.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Interior should provide detailed information and analyses of the estimated potential impacts of the program in terms of: (1) increased amounts of land to be leased on energy supply and environmental degradation, (2) competition and small company participation in lease sales, (3) the ability of State and local governments to participate in decisionmaking, (4) revenue projections, and (5) the economy. The implications of using alternative bidding systems should also be included in this analysis.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Interior should provide detailed information and analyses of the practices and procedures by which the streamlining concepts are to be implemented. This effort should focus on such key areas as environmental impact statement preparation and fair market value determinations, these being areas of considerable controversy and litigation in the past.

    Agency Affected: Department of the Interior

  5. Status: Closed - Not Implemented

    Comments: This recommendation is directed toward longer range practices in the Department of the Interior. Interior maintains that it is using 10-year lease terms in accordance with the recommendation and will continue to do so over the next several years. In later years, GAO may want to review the followon use of the 10-year term, but not at this time.

    Recommendation: The Secretary of the Interior should: (1) exercise caution in awarding 10-year leases, limiting the issuance of such leases to only those areas where the situation clearly warrants this option, and (2) closely monitor the impact on diligent development of changes in lease terms and conditions, including possible extensions of timeframes for submitting exploration plans.

    Agency Affected: Department of the Interior

 

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