Federal Leasing Policy

Comments were presented on the proposed expansion of the competitive onshore oil and gas leasing system and the impacts which access to Federal lands and delays in the permitting process have on the onshore leasing system. Over the years, the Federal leasing system for onshore oil and gas has been criticized. The controversy has generally centered around the merits of a competitive leasing system. A more competitive system has been viewed as a way to increase Federal receipts and also to correct other problems perceived in the present lottery-type system. However, there has been concern that an all-competitive system would be detrimental to independent oil producers who have dominated the development of the small onshore tracts. GAO believes that a systematic approach to leasing Federal resources in a manner which encourages exploration and development is necessary. However, achieving this through an onshore oil and gas leasing system would be difficult because of the vast amount of leases and acreage already under lease with varying expiration dates of up to 10 years, the absence of geophysical and geological data, and scattered ownership patterns. Thus, the impact of proposed changes by the Department of the Interior are difficult to forecast confidently. In fact, the more competitive and all competitive leasing systems proposed could very likely result in considerably less land under lease, delays in making land available for leasing, and less incentive and opportunity for independent oil companies and others to continue their traditional role of searching out and exploring lands for prospective oil and gas. In addition, the offering of larger competitive lease tracts coupled with the use of bonus bidding or other alternatives could significantly alter the dynamics and structure of participation in the system in favor of the major oil companies. Other problems associated with the type of competitive leasing system proposed are: the potential for delays due to the lack of requisite data for track selection or consolidation; the likelihood that many ranked wildcat lands will not be leased competitively and potential production will be lost; the lengthy time it will take to promulgate the rules, regulations, and standards required under the various competitive leasing systems; and the lack of assurance that the Government will receive a fair market value recovery on land competitively leased.