The Leasing of Federal Lands for Fossil Fuels Production

Having outlined the law and regulations and developed the relevant economic principles, we will turn now to consideration of major practical matters in land leasing. In this chapter we will consider three general questions. First, on what basis should leases be granted? Should they be granted solely on the basis of competitive bidding, or should the practice continue of granting some leases to the first qualified applicant? Second, how should competitive bidding be conducted? Should it be by sealed bids or by oral auction? Third, at what rate should land be offered for lease? Should lease sales be accelerated sharply as a means of quickly increasing self-sufficiency?

Except where noted by specific subheadings, the discussion pertains to the mineral fuels in general. The assumed objective is the full capture of economic rent.

As we explained in chapter 3, the law requires that oil and gas leases on the outer continental shelf, and onshore oil and gas leases on a known geological structure of a producing field, be granted only on the basis of competitive bidding. The only sale of oil-shale leases was by competitive bidding. Since the passage, in August 1976, of the Federal Coal Leasing Amendments Act of 1975,¹ the leasing of coal lands must be by competitive bidding only; preference-right leases growing out of prospecting permits are no longer allowed. That leaves only oil and gas

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