Mineral Revenues:

Potential Cost to Repurchase Offshore Oil and Gas Leases

RCED-91-93, Feb 22, 1991

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Pursuant to a congressional request, GAO reviewed the range of potential costs to the federal government for the cancellation of 123 oil and gas leases offshore Alaska, Florida, and North Carolina.

GAO found that the: (1) bonuses, rents, and associated interest ranged from $889.4 million to $970.7 million for the 123 leases, as of December 31, 1990; (2) federal government was only obligated to pay the lessee the fair value of the lease or sunk costs plus interest which accrues from lease suspension to lease cancellation; (3) lessees spent $1.5 million for the Alaska leases, up to $21 million for the Florida leases, and $20 million for the North Carolina leases; and (4) federal government, as of December 31, 1990, would be required to reimburse the lessees for about $1 billion under the sunk cost approach if it cancelled the 123 leases.