Optimum combination of leasing systems on public lands
Bonus bidding for oil and gas leases on public lands has been a reasonably satisfactory system for capturing the average rent available while being neutral with respect to economic decisions such as abandonment. However, it places a heavy burden of risk and uncertainty on the lessee. There is some reason to believe that social gains are to be had from shifting some of the risk and uncertainty to the lessors (governmental units). Profit-share or royalty bidding tends to accomplish such a shift. However, optimality seems to call for a combination of bonus bidding and profit-share (or royalty) bidding, the latter on wildcat tracts and the former on drainage tracts. Profit-share bidding is somewhat superior to royalty bidding, and the best definition of ''profit'' for the purpose is profits in excess of a normal return on investment. The combination suggested above may be especially desirable in a program of accelerated leasing of public lands. 2 figs.
- Research Organization:
- Texas Univ., Austin (USA). Center for Energy Studies
- OSTI ID:
- 5425034
- Report Number(s):
- UT/CES-PS-24; ON: DE85902040
- Country of Publication:
- United States
- Language:
- English
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