Summary

Pursuant to a congressional request, GAO reviewed the recent Outer Continental Shelf lease sale number 82 which was cancelled when no industry bids were received and discussed why: (1) the companies that expressed interest in the offshore sale areas did not bid on the tracts offered; and (2) the Department of the Interior offered to lease certain tracts that Massachusetts believed were environmentally sensitive and had requested be deleted from the sale. There were also concerns regarding the costs incurred in holding the sale and the implications of this experience for Interior's lease program.

GAO found that: (1) the companies did not bid because of the poor geological prospects for gas and oil in the North Atlantic; (2) a number of tracts that the firms had expressed interest in were awarded to Canada in a boundary dispute settlement; and (3) some companies said that Interior's minimum bid price was too high for a risky deepwater area. Massachusetts and other states requested that Interior delete 221 tracts that had potential impacts on fisheries in the Georges Bank and an additional 293 tracts in water depths of 400 meters or less. Although Interior considered the environmental factors, it decided to keep 149 tracts in the sale offering since it concluded that the potential for environmental damage was minimal and that the proposed lease stipulations were adequate to protect the resources. However, because Massachusetts was not willing to compromise on these tracts, it filed suit to stop sale 82, contending that the environmental concerns were not adequately considered and the tracts were retained because of high industry interest. GAO found that, because industry is the ultimate decisionmaker and the nature of its decision processes is to not bid until shortly before a sale in order to keep bid intentions secret, it would be difficult for Interior to predict the number of bidders that may participate in a sale. Even if Interior were to determine low interest before a sale date, cancelling the sale may result in only minor cost savings.