Potential Cost of Purchasing or Exchanging Phosphate Mining Lease Rights in Florida's Osceola National Forest

Gao ID: EMD-82-85 May 24, 1982

GAO was requested to study the potential cost of purchasing or exchanging preference right leases for phosphate mining in the Osceola National Forest. The study included an evaluation of the technical and cost information that had already been developed. Further, GAO was requested to comment on procedures that should be followed by the Department of the Interior and the companies involved in assuring that fair market value is properly determined.

GAO found that the existence of conflicts and deficiencies in the cost and technical information provided an insufficient basis for determining the value of the phosphate deposits. Further, insufficient geological information had been collected, and no field verification had been made by the Interior of the drilling data submitted by the companies. The administrative process to issue preference right leases had not yet been completed, which made the determination of compensation premature. At the present, phosphate deposits within the Forest remain the property of the Government. In addition, the GAO evaluation raised questions regarding the mining profitability which, in turn, raised questions as to the companies' entitlement to preference right leases. Finally, the procedures to be followed in proper determination of fair market value should include: (1) additional drilling and field verification of available data, (2) the cost of capital in the calculation of operation and production costs, and (3) a determination of the commercial value of the deposits.

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