Mandatory Spending Option

Function 270 - Energy

Require Sealed Bidding for Auctions of Parcels Leased for Oil and Gas Development on Onshore Federal Lands

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Leasing of federal lands onshore for oil and gas production occurs through an open-outcry auction, as mandated by the authorizing legislation. Changing to a sealed-bid design would increase net federal income by $100 million over the subsequent 10 years, CBO estimates, by increasing competition between firms for parcels. That additional competition would probably increase the amount that firms would have to pay to lease more valuable parcels and, as a result, could reduce the funds available in firms’ exploration budgets for bidding on less valuable parcels. But CBO expects that any reduction in the number of parcels leased would have a negligible effect on production.