Mandatory Spending Option

Function 270 - Energy

Impose a Fee on Nonproducing 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.

Leases for oil and gas development on federal lands onshore include a rental fee for nonproducing parcels; the current fee is $1.50 per acre for the first five years and $2 per acre for the next five years. Legislation that established a separate new fee of $6 per acre on nonproducing leases would increase net federal income by $200 million over 10 years, CBO estimates. That effect is the net result of increases in income from fees and decreases in income from bonus bids, because the new fee would slightly reduce the amount private firms would be willing to bid in an auction for leases. CBO anticipates that such a fee would have a negligible effect on production.