Optimal risk sharing and the leasing of natural resources, with application to oil and gas leasing on the OCS
Future natural resource discoveries will most likely take place on public lands. Rights to potential oil and gas resources are transferred from the public to private firms through a lease; the lease specifies the nature of the rights granted. Federal offshore leases have specified that firms pay a royalty equivalent to one-sixth of the value of production. This royalty has remained unchanged since offshore leasing began, despite the significant changes in the value of tracts as reflected in winning bids. Leases of other countries specify quite-different payment schedules, with profit rather than production often determining the amount to be paid. Clearly, alternative forms of conditional payments have differing implications on risk sharing and on the exploration, development, and production decisions of firms. This paper develops a general theory of optimal lease payments, paying special attention to royalty and profit-share payments, since they are featured prominently in proposals for new Federal leasing policies.
- OSTI ID:
- 6630968
- Journal Information:
- Q. J. Econ.; (United States), Vol. 92:3
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
POLICY AND ECONOMY
02 PETROLEUM
03 NATURAL GAS
CONTINENTAL SHELF
NATURAL GAS
PETROLEUM
LEASES
RESOURCES
CAPITAL
COMPETITION
DECISION MAKING
ECONOMICS
GOVERNMENT POLICIES
MARKET
PROFITS
PUBLIC LANDS
RISK ASSESSMENT
ENERGY SOURCES
FLUIDS
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GASES
290400* - Energy Planning & Policy- Energy Resources
294002 - Energy Planning & Policy- Petroleum
294003 - Energy Planning & Policy- Natural Gas
021000 - Petroleum- Legislation & Regulations
031000 - Natural Gas- Legislation & Regulations
293000 - Energy Planning & Policy- Policy
Legislation
& Regulation