Improving the Government’s Valuation of Natural Resources
Policy Integrity’s multi-year effort to improve federal natural resource leasing programs has made a significant impact. We have long advocated that government leasing decisions account for “option value,” a common financial concept that places value on delaying irreversible decisions in order to gain more information. We have suggested policy changes through an academic article, a lawsuit, and numerous public comments, and the Department of the Interior has paid attention. For example, the offshore oil and gas leasing program proposed in early 2015 devotes 12 pages to option value and related resource valuation concepts, using language that closely resembles the arguments Policy Integrity has repeatedly made to the agency. Likely effects of this change include higher minimum bids for lease sales and delayed leasing of sensitive areas. We continue to push for improvements in government natural resource valuation at multiple federal agencies, and through litigation, in order to promote more rational natural resource policies.