The $15 Million Mistake

When the Interior Department opened sealed bids on some Louisiana offshore oil land last month, a peculiar fact turned up. On one tract, Kerr-McGee Industries, Inc. submitted the only bid--a whopping $4,000,000; on several other tracts it was also completely unopposed by such offshore bidders as Shell, Gulf and Continental Oil. The worried giants hastily rechecked their geologic studies. Did Kerr-McGee, headed by Oklahoma's Democratic Senator Robert S. Kerr and Oilman Dean McGee, have some special information on the land? Not at all. In Washington last week, Kerr-McGee was desperately trying to withdraw its $15 million in bids and get back the $3,000,000 down payment it had made on the land. It was all a horrible mistake.

As Dean McGee told the story, his company had spent $400,000 in seismographic surveys of the areas to be leased. McGee himself figured out the bids, jotting down identification numbers of the land he wanted. In most federal land auctions the land is divided into tracts, and the only numbers that bidders have to worry about are tract numbers. But this time, as Kerr-McGee and all other bidders had been informed, land was divided into blocks, which were then subdivided into tracts. McGee copied down the block numbers instead of the tract numbers, and these were submitted. In the bidding, it turned out that there were tract numbers on Interior Department maps to match McGee's block numbers, though the land was not even in the area that Kerr-McGee had so carefully surveyed.

When the mistake was discovered, the first of its kind on record, Kerr-McGee tried to get all bids thrown out. Failing in this, it asked to withdraw its own and get back its $3,000,000. Last week Interior turned the case over to the General Accounting Office for a ruling. But there was a good chance that Kerr-McGee would have to pay the $15 million for the leases it did not want.

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