Fair Market Value
The Outer Continental Shelf Lands Act (OCSLA) grants the Secretary the authority to issue leases on the OCS. Section 18(a)(4) of the OCSLA states that "Leasing activities shall be conducted to assure receipt of fair market value for the lands leased and the rights conveyed by the Federal Government." Lessees pay bonuses, rentals, and royalties reflecting the value of the rights to explore and potentially develop and produce OCS oil and gas resources. The Bureau sets minimum bid levels, rental rates, and royalty rates by individual lease sale based on its assessment of market and resource conditions as the sale approaches.
Since 1983, the Bureau has used a two-phase post-sale bid evaluation process to meet the fair market value requirement. Under its bid adequacy procedures, the Bureau reviews all high bids received and evaluates all blocks using either tract-specific bidding factors or detailed tract-specific analytical factors to ensure that fair market value is received for each OCS lease issued. This bid adequacy process relies on both evidence of market competition and in-house estimates of tract value. In addition to the lease fiscal terms and bid adequacy process, the Bureau establishes terms and conditions to assure diligent development of leases and environmentally clean and safe operations.
The Bureau of Land Management and BOEM jointly commissioned a study, Comparative Assessment of the Federal Oil and Gas Fiscal System, to provide an important analysis and model that will provide both agencies with an additional tool in making future assessments of fair return and decisions regarding fiscal terms for Federal oil and gas leases.
Bid Adequacy Procedures
Lease and Royalty Historical Summaries