Early Assessment of Interior's Area-Wide Program for Leasing Offshore Lands

RCED-85-66: Published: Jul 15, 1985. Publicly Released: Jul 26, 1985.

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Pursuant to a congressional request, GAO discussed the impact of recent areawide sales for leasing offshore lands, including the Department of the Interior's: (1) new bid-acceptance procedures for ensuring that it receives fair market value for leased offshore lands; and (2) streamlined presale planning process for providing states and others affected by offshore activities an opportunity to participate in the process.

GAO found that: (1) more offshore lands have been leased and exploration is progressing at a faster rate under the areawide program; (2) the stepped-up pace of areawide leasing, by itself, significantly decreased competition and government bid revenues for individual tracts; (3) the shift to areawide leasing was responsible for an average reduction in bids of $541 per acre leased; and (4) bid revenues have comprised about 67 percent of the total direct revenues received by the government. GAO noted that the estimated value of each tract was the primary criterion that Interior used to ensure receipt of fair market value; however, because of the large increase in the number of tracts leased, Interior adopted a two-phase bid-acceptance process. During the first phase, Interior awards leases to the higher bidder for tracts receiving adequate competition, and in the second phase estimates the value of the tracts not leased during the first phase. GAO also found that: (1) Interior should use its estimates of tract value for assessing the reasonableness of high bids; (2) Interior's past experience showed that relying solely on the receipt of three or more bids did not ensure that the high bid exceeded its estimates of fair market value; and (3) Interior's streamlined presale planning process has reduced the time needed to prepare a sale from about 40 months to 20 months.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: It is not known if Congress will act on this recommendation.

    Matter: Congress should consider whether a need exists for requiring Interior to annually assess and report on the cumulative effects of the offshore program on the human, marine, and coastal environment.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Minerals Management Service (MMS) has made the recommended comparison, which was reported to Congress in appendix P of the proposed 5-year Outer Continental Shelf Oil and Gas Leasing Program.

    Recommendation: The Secretary of the Interior should consider the effects on competition and bid revenues in relation to the anticipated benefits and report the findings to Congress.

    Agency Affected: Department of the Interior

  2. Status: Closed - Not Implemented

    Comments: MMS has no plans to implement this recommendation. The MMS position is that current procedures ensure that high bids represent fair market value and that changes are not needed.

    Recommendation: In order to become a knowledgeable seller and have increased assurance that the high bids represent fair market value, the Secretary of the Interior should, in those cases where it has good or excellent supporting data to estimate tract values, use its independent estimates of tract value for assessing the adequacy of high bids.

    Agency Affected: Department of the Interior


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