A Fiscal Cliff by John Merrifield & Barry Poulson

Author:John Merrifield & Barry Poulson [Merrifield, John & Poulson, Barry]
Language: eng
Format: epub
ISBN: 9781948647892
Publisher: Cato Institute
Published: 2020-10-20T06:00:00+00:00

SOLUTIONS

Simply having a fire sale of the minerals on federal estates is unrealistic and unlikely to produce the desired outcome of generating substantial revenues. Doing so could significantly reduce the price of the minerals or, conversely, might not produce much interest at all. Some areas might generate significant value, for example, any of the federal holdings in the Permian Basin in western Texas and southeastern New Mexico. Others might generate little or no interest, as with the DOI’s offshore lease sale in the Gulf of Mexico. In March 2018, the DOI offered up the largest offshore lease sale in history with discounted royalties to attract bidders. Though the auction produced $124.76 million in winning bids, companies bid on only 1 percent of the acreage, far less than what the DOI had envisioned.56 An outright fire sale of minerals would generate less interest if a minimum bid was set. Removing the minimum bid and allowing companies to buy the minerals outright would do little in terms of generating serious revenues. It would be a one-time, underpriced injection into the Treasury.

Instead, Congress and the executive branch should take a number of actions to maximize the potential value of energy resources on federal lands and waters. Several important steps are involved.

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