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Alternative Bid Variables As Instruments Of Ocs Leasing Policy

Author

Listed:
  • WALTER J. MEAD
  • ASBJORN MOSEIDJORD
  • DENNIS D. MURAOKA

Abstract

Prior to 1979, a cash bonus was used almost exclusively as the bid variable at outer continental shelf (OCS) lease auctions. Criticisms of the cash bonus as a bid variable led to the OCS Lands Act Amendments of 1978 which stipulated that alternative bid variables be employed on a portion of the leases issued over a five‐year trial period. The alternative bid variables include net profit share, royalty rate, and work commitment Each of these bid variables is analyzed to determine the extent to which it (a) promotes economic efficiency, (b) returns fair market value to the government, (c) identifies and selects the most efficient firm to operate the lease, (d) promotes optimal risk sharing between the lessee and the government, and (e) minimizes administrative costs This analysis has led the authors to conclude that while no bid variable is perfect, the traditional cash bonus is preferred

Suggested Citation

  • Walter J. Mead & Asbjorn Moseidjord & Dennis D. Muraoka, 1984. "Alternative Bid Variables As Instruments Of Ocs Leasing Policy," Contemporary Economic Policy, Western Economic Association International, vol. 2(5), pages 30-43, March.
    • Handle: RePEc:bla:coecpo:v:2:y:1984:i:5:p:30-43
    DOI: 10.1111/j.1465-7287.1984.tb00776.x
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    References listed on IDEAS

    as
    1. Walter J. Mead & Asbjorn Moseidjord & Philip E. Sorensen, 1983. "The Rate of Return Earned by Lessees under Cash Bonus Bidding for OCS Oil and Gas Leases," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 37-52.
    2. Hayne E. Leland, 1978. "Optimal Risk Sharing and the Leasing of Natural Resources, with Application to Oil and Gas Leasing on the OCS," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(3), pages 413-437.
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