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The
Outer Continental Shelf Lands Act
(OCSLA)
(286.05 KB PDF) 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 MMS 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 MMS has used a two-phase post-sale bid
evaluation process to meet the fair market value requirement. Under its
bid adequacy procedures, MMS 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 MMS establishes terms and conditions to assure diligent
development of leases and environmentally clean and safe operations.
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