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Highlights

In 2007, the Department of the Interior (Interior) collected about $10.5 billion in revenues from companies that hold federal oil and gas leases. Interior's Minerals Management Service manages offshore leases, while its Bureau of Land Management manages onshore leases and leases in the National Petroleum Reserve in Alaska. Acquiring a federal lease gives the lessee the rights to explore for and develop the oil and gas resources under the lease. Development entails many tasks, including drilling wells and building pipelines that may lead to oil and gas production. GAO agreed to (1)describe Interior's efforts to encourage development of federal oil and gas leases and compare them to states' and private landowners' efforts, (2)examine trends in leasing and factors that may affect development, and (3) describe development on a sample of leases. GAO reviewed data on about 55,000 leases and spoke to officials at Interior and in eight states with leasing experience, among others.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Interior To better ensure that federal land leased for oil and gas exploration and development provides financial and energy benefits as soon as possible, the Secretary of the Interior should develop a strategy to encourage faster development of oil and gas leases on federal lands, including determining whether methods to differentiate between leases according to the likelihood of finding economic quantities of oil or gas and whether some of the other methods states use could effectively be employed, either across all federal leases or in a targeted fashion. In so doing, Interior should identify any statutory or other obstacles to using such methods and report the findings to Congress.
Closed - Implemented
In May 2011, Interior notified GAO that in response to the recommendation, it had evaluated its options and implemented a strategy to encourage faster development of its offshore leases. Beginning with its federal offshore Lease Sale 208 held in March 2009, and for two subsequent lease sales, Lease Sale 210 held in August 2009 and Lease Sale 213 held March 2010, Interior increased rental rates for lessees. For example, compared to rental rates for Lease Sale 207 held in August 2008, Interior increased rental rates in its subsequent lease sales for leases in water depths less than 200 meters by $0.75 per acre for the first five years of the lease in order to increase the operator's incentive to develop the lease. Rental rates for lease years 6, 7, and 8 were also increased when compared to the prior rates. Rental rates for leases in other categories of water depths were also increased. Interior estimated that the increased rental rates for these three lease sales would generate additional revenues for the government over the first 5 for these lease sales.

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