GAO Report Says Offshore Leasing Switch Costs U.S.

The Interior Department’s switch to area-wide offshore leasing in 1983 has caused diminished competition and a $7-billion loss to the U.S. Treasury, congressional auditors reported Thursday.

The General Accounting Office told the House Energy oversight and investigations subcommittee in a report that more leases on the Outer Continental Shelf have been sold under the “area-wide” system than by the former tract method.

The GAO estimated that the government took in $8.9 billion for the first 10 area-wide sales from April, 1983, to September, 1984, but should have gotten $7 billion more.

Sales comprised 2,466 tracts covering 13 million acres, including 10 million acres in the Gulf of Mexico off Texas and Louisiana, 2 million acres off Alaska and the rest divided between the Pacific and Atlantic. The GAO said the number of bids dropped from an average of 2.44 under the tract-selection process--leasing one 5,760-acre tract at a time--to 1.65 under the area-wide system, which allows bids on any of 5,000 tracts within a 50-million-acre planning area.

“The increased pace of offshore leasing through the area-wide program has decreased competition--the number of bids for each tract--and reduced government revenues,” the GAO said.

Bids declined from an average of $2,624 an acre under the tract-selection process to $686 an acre under the area-wide program.

Changing to area-wide leasing caused a $541 per-acre, $3.1-million-per-tract reduction in the bonuses paid to the government, the report said.

William Bettenberg, director of the Interior Department’s Minerals Management Service, disagreed with the report, saying that the same criteria used to estimate a $7-billion loss showed a $15.7-billion gain on leases in the Gulf of Mexico alone.