Assuring receipt of Fair Market Value (FMV) on OCS lands is mandated by the OCS Lands Act and is a critical responsibility of the Resource Evaluation program. After each lease sale, BOEM will analyze tract-specific geological and geophysical data and assess the oil and gas potential for each OCS tract that receives a bid. BOEM also develops and maintains discounted cash flow models that provide a stochastic analysis of the net present value (NPV) of lease sale tracts. Decisions to accept or reject a bid on an OCS block are based in part on these analyses.
BOEM uses a two-phase post-sale bid evaluation process to assess the adequacy of bids received for the lease sales. To assure receipt of FMV, BOEM will accept the highest qualified bid in phase 1 for each tract that it determines is nonviable. BOEM will pass to phase 2 for further analysis each tract that it determines is viable or of unknown viability.
In phase 2, all tracts first undergo a detailed geological and geophysical evaluation by BOEM. This evaluation further refines BOEM’s understanding of the oil and gas potential of viable tracts and helps assess viability where it could not be determined in phase 1. Upon completion of this evaluation, the Regional Director may accept the highest qualified bid on any tracts deemed nonviable. BOEM will then subject the remaining tracts to a full-scale resource and economic evaluation using BOEM’s discounted cash flow model to determine if each tract’s highest qualified bid provides fair market value.
The FMV process is typically completed within 90 days of the sale date.
Resources and Publications
- Fair Market Valuation Methodology
- Summary of Procedures for Determining Bid Adequacy at Offshore Oil and Gas Lease Sales: Effective March 2016, with Central Gulf of Mexico Sale 241 and Eastern Gulf of Mexico Sale 226
- Procedures for Determining Bid Adequacy at Outer Continental Shelf Oil and Gas Lease Sales: Effective with the first lease sale held in the 2024 – 2029 National OCS Oil and Gas Leasing Program
- Lease Sales and Fair Market Value