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Letter to the Honorable Nick J. Rahall II 1 (September 2008)

handle is hein.congrec/cbo8861 and id is 1 raw text is: CONGRESSIONAL BUDGT OFFICE Peter R. Orszag,I U .S. Congress ashington, DC 20515 September 9, 2008 Honorable Nick J. Rahall II Chairman Committee on Natural Resources U.S. House of Representatives Washington, DC 20515 Dear Mr. Chairman, You asked for information about the budgetary implications of a recent administrative action and potential legislative changes in policies governing the leasing of oil and gas resources on the Outer Continental Shelf (OCS). In particular, now that the President has removed previous restrictions on leasing in areas off the Atlantic and Pacific coasts, you asked how CBO would estimate the budgetary impact of legislative proposals that would authorize the spending of some of the receipts from future leasing or that would impose a permanent restriction on leasing in certain OCS areas. This letter identifies the key factors governing estimates under current law and of potential legislation. Framework for Estimating OCS Receipts The federal government leases areas for the potential development of oil and gas resources in the OCS in exchange for certain payments from the companies that obtain those leases. Such payments generally take three forms: A bonus bid payment when a company acquires a lease, an annual rental payment on the leased acreage prior to production, and annual royalties based on the value of any production. CBO projects the amount of offsetting receipts (a credit against direct spending) from future bonus and rental payments based on information regarding the areas that could be leased under current law over the next 10

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