Mandatory Spending Option

Function 270 - Energy

Increase the Minimum Bid on 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.

Auctions for onshore federal lands to be leased for oil and gas development currently require a minimum bid of $2 per acre; that amount was set by the Bureau of Land Management and could be increased through future rulemaking or legislation. Parcels that receive no auction bids may be leased noncompetitively, with no initial per-acre payment; that provision also could be changed through rulemaking or legislation.

Raising the minimum bid in an auction to $10 per acre and requiring that same amount to be paid for parcels leased noncompetitively would boost net federal income by an estimated $50 million over 10 years, CBO estimates. That effect is the net result of increases in federal income from higher bids or initial payments for some parcels, including all parcels leased noncompetitively, and decreases in rental and royalty income for parcels that go unleased because of the higher initial cost (though such parcels would have generated relatively little production and royalty income).