Institute for Policy Integrity

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Letter to BOEM regarding options value

February 8, 2012

Currently, the federal government treats lease sales as a now-or-never decision. That’s an approach that leads to too many leases sold too quickly, at too low a price. Instead, BOEM should be waiting to sell these leases until the time is right—when they can get the highest possible price.

Failing to do so means taxpayers are getting less than the leases are worth, a proposition that could mean hundreds of billions of dollars lost.

To call attention to the matter, Policy Integrity sent a letter to the Bureau of Ocean Energy Management (BOEM) requesting that the agency incorporate options value into their assessments of offshore drilling lease sales. Michael Livermore’s working paper, Patience is a(n Economic) Virtue, was attached to the letter.

Since, in its decisionmaking, BOEM must strive to consider all relevant factors, and to quantify all costs and benefits as fully and as accurately as possible—norms that are enshrined in legal precedents and executive orders—it is problematic that the agency does not currently take options into account at all.

Filed under Natural Resources, Letters