The US Bureau of Ocean Energy Management (BOEM) has potentially lost some $567 million in revenue by underestimating the value of offshore oil and gas assets it is responsible for leasing, the Government Accountability Office (GAO) said in a report Thursday
WASHINGTON (Pakistan Point News / Sputnik - 24th October, 2019) The US Bureau of Ocean Energy Management (BOEM) has potentially lost some $567 million in revenue by underestimating the value of offshore oil and gas assets it is responsible for leasing, the Government Accountability Office (GAO) said in a report Thursday."Our analysis of BOEM data as well as BOEM testimony indicate that the Bureau changed its forecasting parameters, thereby lowering many valuations and acceptable bid thresholds... in order to justify accepting bids," the report said. "Tracts for rejected bids are, on average, subsequently sold for more than twice the initial rejected amount, suggesting that BOEM could be forgoing hundreds of millions of Dollars in bid revenue by accepting bids that are too low."
The GAO said it did not know exactly how many bids would have been rejected by BOEM based on initial valuations that did not meet the agency's requirements.
"However, if BOEM had rejected 26 percent of the bids that were up to double its valuations - which appears reasonable to interpolate based on the distribution of the other bid-to-valuation relationships - the Bureau potentially could have subsequently collected approximately $567 million additional dollars in bid revenue for tracts it determined to be viable," the report said.
GAO said BOEM's ability to assure receipt of fair market value was further hindered by the lack of a systematic assessment of performance and ways to improve it.
As a result, GAO said it made four recommendations for BOEM to correct its valuations process.
First, BOEM should develop a documented plan for determining whether and how to develop a progressive royalty structure, the report said.
Second, BOEM should enlist an independent third party to examine the extent to which the Bureau's use of delayed valuations assures the receipt of fair market value "and make changes as appropriate, the report said.
Third, the BOEM director should take steps to ensure that its bid valuation process is not biased toward adjusting valuations downward based on their proximity to bids, the report said.
Fourth, BOEM should implement a systematic process for comprehensively evaluating its tract valuations, such as by expanding the scope of the Bureau's "lookback studies" effort, and remediating any identified deficiencies, the report added.
