Friday, June 9, 2023 | Back issues
Courthouse News Service Courthouse News Service

1.6 million acres of Gulf of Mexico auctioned for new oil and gas development

The most recent lease sale of offshore tracts by the Bureau of Ocean Energy Management is the result of the Inflation Reduction Act and attracted bids from 32 companies.

(CN) — In accordance with congressional direction provided under last year's Inflation Reduction Act, the Bureau of Ocean Energy Management on Wednesday auctioned some 1.6 million acres of seabed in the Gulf of Mexico to oil and gas companies for offshore energy development.  

The sale of 5- and 10-year leases attracted a total of 32 companies to 313 tracts of the 13,670 tracts offered across more than 73 million acres. The bidding process, which opened Wednesday morning at the BOEM office in New Orleans, resulted in bids totaling $309 million, with high bids equaling about $263 million. 

Of the tracts that were auctioned, 98 are in so-called “shallow” water depths of less than 200 meters, 93 lie between 200 meters and 1,600 meters, and 122 tracts are in deep water of 1,600 meters or more. 

During the sale, BOEM Director Elizabeth Klein noted key provisions in this round of bids include increased rental rates in all depths, while royalty rates in all waters increased from 12.5% to 18.75%. Separately, the agency pointed out that leases resulting from the sale “will include stipulations to mitigate potential adverse effects on protected species and to avoid potential conflicts with other ocean uses in the region.” 

“BOEM takes its mission of safe and responsible development on the Outer Continental Shelf seriously,” Klein said. “We are committed to good stewardship of the environment and also working to facilitate renewable development on the OCS and we undertake all of these efforts within close engagement of communities all across the country.”

Soon after taking office in January 2021, President Joe Biden signed an executive order establishing a moratorium on drilling on federal lands and offshore waters, but the effort was later blocked by a federal judge. BOEM’s last offshore oil and gas sale occurred in November 2021, but another federal judge later revoked it, siding with an environment nonprofit organization which argued the agency failed to properly consider emissions in its environmental impact statement. 

Then, in what was considered a concession for Republicans and the fossil fuel industry, the Inflation Reduction Act reinstated the 2021 sale and also ordered BOEM to conduct two additional offshore sales in the Gulf of Mexico 2023, along with a third in Alaska’s Cook Inlet. Wednesday’s sale was the first. 

“Oil serves as the feedstock for liquid hydrocarbon products, including gasoline, aviation and diesel fuel, and various petrochemicals,” BOEM explained in its environmental impact statement accompanying the sale. “Oil from the Gulf of Mexico OCS contributes to meeting domestic demand and enhances national economic security. Since the U.S. is expected to continue to rely on oil and natural gas to meet its energy needs, this proposed action would contribute to meeting domestic demand and to reducing the need for imports of these resources.”

Ultimately, the agency concluded any new oil and gas development in the Gulf related to the sale would have negligible to minor effects on existing natural resources, including that of air and water quality, coastal and deep water habitats, protected species and fisheries. Absent the “unlikely” scenario of a catastrophic oil spill, only certain bird species and estuarine habitats will be moderately affected by new development, according to the report

Red blocks indicate areas in the Gulf of Mexico bid on by oil and gas companies during the Bureau of Ocean Energy Management's Lease Sale 259 on March 29, 2023. Blue blocks were leased in 2020 and 2021, while leases in green blocks were awarded prior to 2020. (BOEM via Courthouse News)

On March 6, a coalition of environmental organizations including the Center for Biological Diversity, Natural Resources Defense Council, Sierra Club, Friends of the Earth, Healthy Gulf and Bayou City Waterkeeper filed a lawsuit against BOEM and others, attempting to prevent or revoke the sale. 

“Lease sale 259 would offer up all unleased areas in the western and central Gulf of Mexico, which could lock in a massive drilling operation to extract more than 1 billion barrels of oil and 4.4 trillion cubic feet of natural gas over the next 50 years, directly contradicting the administration’s commitment to reduce greenhouse gas emissions and transition to clean energy,” the groups said in a press release. Their complaint claims BOEM failed to consider the health hazards and climate change in accordance with the National Environmental Policy Act.

Andrew Whitehurst, water program director at Health Gulf, said the lawsuit remains active and Wednesday's auction results were disappointing.

“One of our strategic goals is to transition away from fossil fuels and in furtherance of that goal we have opposed several of these lease sales,” he said by phone Wednesday. “We would hope the extent would be smaller or limited, but I don't think that’s what happened.”

According to law, the governors of affected states — Texas, Mississippi, Florida, Alabama and Louisiana — will have an opportunity to comment on the sale. Afterward, the Department of Interior determines how to proceed. The leases may be extended if wells are drilled and in production prior to their initial expiration dates. 

BOEM has scheduled the second sale in the Gulf of Mexico for September, while the sale in Alaska must be held by December. 

Categories:Business, Energy, Environment, Government

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.