Mineral Revenues:

Implementation of the Federal Onshore Oil and Gas Leasing Reform Act of 1987

RCED-89-108: Published: May 8, 1989. Publicly Released: May 31, 1989.

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In response to a congressional request, GAO reviewed the Bureau of Land Management's (BLM) implementation of the Federal Onshore Oil and Gas Leasing Reform Act, focusing on: (1) BLM development of implementing regulations; (2) how BLM conducted oil and gas lease test sales, and the sales' results; and (3) the effect of royalty rate changes for competitively issued oil and gas leases.

GAO found that: (1) BLM issued final regulations to implement the act within the required 180 days; (2) the eight test sales showed that the new system increased competitively leased acreage from 3 percent to 46 percent of all acreage, resulting in increased federal and state revenues; (3) although states received 50 percent of bonuses and rents and did not receive a share of the fees BLM charged, they received a larger share of leasing revenues under the act; (4) under the test sales, bonus and rent revenues for leases that would have sold noncompetitively under the prior system comprised 97 percent of revenues; (5) BLM regulations did not require bidder registration, larger deposits by winning bidders, or enforcement of full payment within 10 business days after auctions; (6) BLM changed royalty rates for competitive leases to a flat rate to simplify administration and encourage competitive leasing and exploration; (7) although the act resulted in increased revenues, less than half of the land leased through the test sales was leased competitively; and (8) although some officials believed that sealed bidding would generate higher revenues, there was no evidence to prove that.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The House Subcommittee on Mining's staff director told GAO that test sales will not be sought. The Subcommittee chairman introduced a bill to make all lease terms the same, at 5 years, on October 31, 1989; however, no action was taken on the bill, and the matter is not currently a priority for the subcommittee.

    Matter: Congress may wish to consider authorizing the Secretary of the Interior to conduct additional oil and gas lease test sales specifically to evaluate the effects of making competitive and noncompetitive lease terms the same (for example, either 5 years or 10 years).

  2. Status: Closed - Not Implemented

    Comments: The House Subcommittee on Mining's staff director told GAO that test sales will not be sought.

    Matter: Congress may wish to consider authorizing the Secretary of the Interior to conduct additional oil and gas lease test sales specifically to evaluate the effects of making minimum bonus bids the same for all leases.

  3. Status: Closed - Not Implemented

    Comments: The House Subcommittee on Mining's staff director stated that test sales will not be sought.

    Matter: Congress may wish to consider authorizing the Secretary of the Interior to conduct additional oil and gas lease test sales specifically to evaluate the effects of using sealed bidding to auction all leases.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Individual BLM field offices have discretion to implement this recommendation. Some have and some have not implemented action. There will be no directive from BLM headquarters.

    Recommendation: To improve BLM internal controls over the federal onshore oil and gas leasing system, the Secretary of the Interior should direct the Director, BLM, to require that bidders register before auctions.

    Agency Affected: Department of the Interior

  2. Status: Closed - Not Implemented

    Comments: Interior's formal response states that it disagrees with the recommendation.

    Recommendation: To improve BLM internal controls over the federal onshore oil and gas leasing system, the Secretary of the Interior should direct the Director, BLM, to require that winning bidders deposit 20 percent of their bonus bids or $2 per acre, whichever is greater, at the auctions.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: BLM headquarters directed the field offices to require full payment within 10 days.

    Recommendation: To improve BLM internal controls over the federal onshore oil and gas leasing system, the Secretary of the Interior should direct the Director, BLM, to enforce the regulatory requirement for full payment on competitive leases within 10 days of the auctions.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: Interior constantly revises its leasing requirements. GAO cannot document which changes are directly due to the recommendation.

    Recommendation: To improve BLM internal controls over federal onshore oil and gas leasing system, the Secretary of the Interior should direct the Director, BLM, to formalize procedures for implementing the leasing system, such as when to accept noncompetitive lease applications after auctions.

    Agency Affected: Department of the Interior

  5. Status: Closed - Not Implemented

    Comments: Interior's formal response states that it sees no advantage to implementing the recommendation. The BLM Chief told GAO that although it is not currently using the nomination option, it does not intend to delete it from its procedures.

    Recommendation: The Secretary of the Interior should direct the Director, BLM, to delete the nomination option from its regulations governing federal onshore oil and gas leasing and offer all leases at auctions.

    Agency Affected: Department of the Interior

 

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