Congress Should Extend Mandate To Experiment With Alternative Bidding Systems in Leasing Offshore Lands

RCED-83-139: Published: May 27, 1983. Publicly Released: Jul 5, 1983.

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In response to a congressional request, GAO reviewed the Department of the Interior's use of alternative bidding systems to lease offshore lands for oil and gas development as mandated in the Outer Continental Shelf (OCS) Lands Act Amendments of 1978. Specifically, the report discusses Interior's record in implementing the alternative systems and their impact on company participation and competition in lease sales, government revenues, diligent lease exploration and production, and administrative costs to the government.

GAO found that the initial effects of the alternative bidding systems on company participation and competition generally parallels or betters the results of the traditional system, although upfront money required to obtain leases is not always reduced. GAO compared the alternative bidding systems and found that two of the six sliding-scale systems and the cash bonus bid with the 33.3 percent royalty alternative produced especially encouraging results. However, GAO concluded that additional time and testing are needed to determine the full impact of the systems on Government revenues, lease exploration and production, and administrative costs.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: At this time, there is no interest in Congress to provide for continued use of alternative bidding systems.

    Matter: Congress should amend section 8(a) 5(B) of the Outer Continental Shelf Lands Act, as amended, to provide for continued use of alternatives to the cash bonus bid, fixed-royalty bidding system in leasing offshore lands for another 5-year period.

  2. Status: Closed - Not Implemented

    Comments: This amendment was overshadowed by other, more pressing legislation, and no future action is anticipated. There is no current interest in Congress to delete the Secretary of Energy's annual reporting requirements on the use of alternative bidding systems.

    Matter: Congress should delete the requirement that the Secretary of Energy submit an annual report to Congress on the use of alternative bidding systems and transfer the requirement to the Secretary of the Interior.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The legislative requirement for Interior's report has expired.

    Recommendation: The Secretary of the Interior should comply with the existing reporting requirements of section 15(2) of the Outer Continental Shelf Lands Act, as amended, to provide Congress adequate and timely information on the impacts of using the alternative bidding systems.

    Agency Affected: Department of the Interior

 

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