Economic Value of the Oil and Gas Resources on the Outer Continential Shelf

A theoretical framework for estimating the economic value of the federal government's offshore oil and gas resources is developed. This framework is then applied to geological and economic data generated by the Minerals Management Service in support of their five-year leasing plan. With an 8 percent real discount rate and a 1 percent real price growth rate, the remaining economic rent as of 1987 on the reserves plus the undiscovered offshore oil and gas resources is estimated at $118.6 billion (1987 dollars). The present value of the government's receipts from cash bonus and royalty payments on these deposits is estimated at $37.2 billion. Over 80 percent of the remaining economic rent is derived from developed reserve deposits located in the Gulf of Mexico. The private sector has previously paid cash bonuses for the leases located on those deposits and financed the installation of the development platforms. Because of this, the government will collect only a small portion, approximately 22 percent, of the rent remaining on those reserves.Environmental Economics and Policy, Resource /Energy Economics and Policy,