Impact of an All Competitive Onshore Oil and Gas Leasing System

GAO was asked to evaluate an amendment to S. 1637, 96th Congress. The key issue surrounding the amendment is that it abolishes the current competitive and noncompetitive leasing systems of the Department of the Interior and establishes a new all-competitive leasing system in their place. However, the amendment does not change Interior's authority and responsibility regarding mineral management.

In evaluating the amendment to S. 1647, GAO found that: (1) the amendment would have a negative impact on the timely development and production of oil and gas through delays in the leasing process and the adverse impact on some incentives to development; (2) the amendment would not necessarily ensure a competitive situation or fair market value recovery; (3) the amendment did not specify whether presale or postsale evaluations would be needed under the new leasing system; (4) if evaluations are used to measure fair market value, the workload would be substantial; (5) the amendment would increase competitive bid lease offerings receipts with or without a system of fair market value appraisal; (6) the amendment would reduce the amount of land subject to a rental; (7) the amendment would eliminate filing fee receipts and could reduce royalties through its possible reduction in oil production; and (8) some slippage in land rental receipts could occur because of the quarterly offerings. Thus, GAO concluded that its previously recommended changes to the existing system are the preferred course of action.