Additional Information Requested Following Hearing on Onshore Oil and Gas Leasing

GAO was asked to provide additional information following a congressional hearing on onshore oil and gas leasing.

One area of concern was what administrative or regulatory changes would be appropriate for the onshore oil and gas leasing system. A recent GAO report recommended certain actions to tighten controls to eliminate the possibility of the lottery drawings being manipulated. If increased revenues are sought, they would likely come from rents, royalties, filing fees, or bids. Changes which would be directed at increasing production would consist of actions to reduce producer cost, increase land availability, eliminate disincentives or provide incentives to the producer, or mandate diligent development by the producer. There was also concern as to the number of noncompetitive leases that are producing, and the number of acres that have not been producing for many years. Some noncompetitive leases might draw significantly higher sums through competitive bidding, but competitive bidding is no guarantee of large receipts. Competitive tracts have known previous production, so they are often leased for enhanced recovery. The higher potential land, while highly speculative, is now probably being leased noncompetitively. The last area of concern was the success of the independent under the alternative bidding systems used in Outer Continental Shelf leasing. The limited analysis by GAO of the systems indicated little success so far in attracting greater participation by the independents. A sliding scale royalty was established to encourage small company participation, but the analysis indicated that the smaller companies favored the fixed royalty.