BOEM contracted with Economic Analysis, Inc. and Marine Policy Center, Woods Hold Oceanographic Institution for the “Areawide Leasing (AWL) Study” to compare 12 alternative leasing and fiscal policies (e.g., lease terms, sale sizes, royalty rates, etc.) on quantitative performance criteria (e.g., oil and gas production, government revenue, social costs, etc.) derived from the OCS Lands Act.
The contract resulted in two sets of reports. Each version evaluates the same policy alternatives under different assumptions about the basic conditions for future development in the Gulf of Mexico. The 2009 version examines policies under the pessimistic view that the ultimate resource size in the Gulf is no bigger than now estimated and operators act as though the average effective Federal tax rate is 35%. The 2010 version examines policies under the optimistic view that estimates of the ultimate resource size continue to grow over the next 50 years at the same pace (2.29% annually) it has grown over the last 40 years and operators act as though the average effective tax rate is only half the nominal marginal rate of 35%. The likely future is between these widely divergent views.
The main value of the studies is in the comparison of the relative rankings of the various policies on the different criteria under substantially different states of nature. The reader is best advised to focus on the results in terms of their direction, relative magnitude, and ranges of relative magnitudes, rather than on their absolute sizes, in evaluating alternative leasing and fiscal policies.