Taxpayers will lose $77.2 billion in revenue from offshore oil and gas leases if they are let for bids under the Interior Department's current plan, the Sierra Club will charge today.
Carl Pope, the environmental group's assistant conservation director, said in testimony prepared for a congressional hearing that Interior documents show bids are expected to plummet over the next five years for offshore parcels estimated to hold 41 billion barrels of oil and gas.
An industry spokesman confirmed that each parcel might attract a lower bid but said the totals could be higher eventually as more companies participate. Interior Department spokesmen were unwilling to comment without having seen the report.
The reasons for the loss are technical, according to Pope's testimony before the mines and mining subcommittee of the House Interior and Insular Affairs Committee today. "The size and accelerated pace of lease offerings will depress bid levels," he said, "and more will be lost because the Reagan administration has changed the technique for setting minimum bids."
In an interview, Pope said oil companies will feel less competitive because of the vast size of the offerings. At the same time, they will have to spread resources over more territory, and so will offer less for each tract. He said smaller companies would bid even less than now, resulting in a decline in number of participants.
An Interior document, he said, makes the same assumptions and estimates the income reduction at about 32 percent on each barrel of oil.
That means that if 90 percent of the oil is eventually leased in the Gulf of Mexico, off California and in the North Atlantic -- all prime areas -- and if 80 percent is leased in the South Atlantic and off Alaska, "the total loss to the U.S. Treasury . . . would be over $54 billion," Pope's scheduled testimony said.
In addition, it continued, another $23 billion would be lost because of changes in the way each parcel is evaluated. Interior formerly evaluated each tract for oil content and set minimum bid levels but now will evaluate only 35 percent of them and set no minimum.
That means, according to the department's figures, that companies will become more cautious and bid lower, Pope said. Assuming that about 15 percent of the tracts will attract bids, in line with past practice, Interior estimated that oil firms will probably decrease offers by about $900,000 per tract, for a total of $23 billion lost to taxpayers, Pope's testimony said.
He added that the $77.28 billion total could be too high if the 41 billion barrels of oil is not recoverable, or too low if royalty levels drop.
"The department is proposing to liquidate an enormously valuable U.S. asset, and they don't seem willing to calculate the impact of using various schedules," he said in an interview. Spreading the offerings over a longer period and limiting their scope would allow companies some breathing room and raise bids for each parcel, he said.
Stephen Chamberlain, outer continental shelf specialist for the American Petroleum Institute, an industry trade organization, confirmed that bids for each parcel might decrease. "Given limited resources and the decrease in worldwide crude prices, and the current supply excess, it means the incentive for tremendously aggressive offshore leasing is not there," he said. "There will be a tendency for the offering per tract to decline . . . but you may have an overall increase in gross revenues based on more [companies] participating in the process."