Effects of Increasing Filing Fees for Noncompetitive Onshore Oil and Gas Leases

In response to a congressional request, GAO examined the Department of the Interior's action which increased from $25 to $75 the fee charged to applicants filing for noncompetitive onshore oil and gas leases. Specifically, GAO considered: (1) Interior's basis for establishing the higher filing fee; (2) the expected number of lease filings at the higher rate and the higher rate's effect on revenues; and (3) the possible impact on leasing participants and related implications for reducing fraud, development delays, and the administrative burden.

Interior concluded that the increased filing fee would: (1) reduce the total filings per year but still generate increased revenue; and (2) deter casual speculators and multiple filers, thereby reducing both fraud and its administrative burden. GAO could not rule out the possibility that the positive results foreseen may not materialize to the degree projected. While it is likely that the increased fee will generate additional revenue over what was attainable under prior rates, Interior's projections of at least a million filings and $150 million in revenues are far from certain. Further, GAO was unable to determine the degree to which the problems that Interior wanted to overcome actually existed, or that they would be resolved through a fee increase. GAO suggested that: (1) a reduction in the number of filings would not necessarily be the total or only solution to reducing the administrative burden; (2) the casual speculator has not had that great an adverse effect on development and, in fact, has certain positive aspects; and (3) the true extent of fraud in the leasing system may not be as great as initially supposed. In addition, there were possible adverse effects that may not have been fully considered. For example, the increased filing fee, when coupled with increased rental, could adversely affect the industry's exploration activities. GAO was not suggesting that Interior's analysis was totally off base; however, since there were very little empirical data on which to base projections, results could not be accurately predicted.