Early Assessment of Interior's Area-Wide Program for Leasing Offshore Lands

Pursuant to a congressional request, GAO discussed the impact of recent areawide sales for leasing offshore lands, including the Department of the Interior's: (1) new bid-acceptance procedures for ensuring that it receives fair market value for leased offshore lands; and (2) streamlined presale planning process for providing states and others affected by offshore activities an opportunity to participate in the process.

GAO found that: (1) more offshore lands have been leased and exploration is progressing at a faster rate under the areawide program; (2) the stepped-up pace of areawide leasing, by itself, significantly decreased competition and government bid revenues for individual tracts; (3) the shift to areawide leasing was responsible for an average reduction in bids of $541 per acre leased; and (4) bid revenues have comprised about 67 percent of the total direct revenues received by the government. GAO noted that the estimated value of each tract was the primary criterion that Interior used to ensure receipt of fair market value; however, because of the large increase in the number of tracts leased, Interior adopted a two-phase bid-acceptance process. During the first phase, Interior awards leases to the higher bidder for tracts receiving adequate competition, and in the second phase estimates the value of the tracts not leased during the first phase. GAO also found that: (1) Interior should use its estimates of tract value for assessing the reasonableness of high bids; (2) Interior's past experience showed that relying solely on the receipt of three or more bids did not ensure that the high bid exceeded its estimates of fair market value; and (3) Interior's streamlined presale planning process has reduced the time needed to prepare a sale from about 40 months to 20 months.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: James Duffus Iii Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 512-7756