Oil companies offer $382 million for Gulf of Mexico drilling rights in last offshore sale before 2025
WASHINGTON — Oil companies on Wednesday offered $382 million for drilling rights in the Gulf of Mexico after courts rejected the Biden administration's plans to scale back sales to protect an endangered whale species.
The auction was the latest of a number of offshore oil and gas lease sales mandated under the 2022 climate law. It comes as President Joe Biden's Democratic administration tries to navigate energy companies seeking increased oil and gas production and environmentalists who want to stop new drilling to help combat climate change.
According to the U.S. Department of the Interior's Bureau of Ocean Energy Management, companies including Chevron, Hess and BP offered bids on more than 300 parcels covering 7,000 square miles.
The dollar amount of the successful bids marked a sharp increase from the previous sale in March 2023, when the Interior Department awarded leases for about 2,500 square miles (6,500 square kilometers) for $250 million.
The next sale will take place in 2025, frustrating energy companies and Republicans who say the administration is hampering U.S. oil production.
Wednesday's online auction was originally scheduled for September but was postponed by a lawsuit after the government reduced the area available for lease from 30 million hectares to 27 million hectares as part of a plan to protect the region. endangered rice whale.
Chevron, Shell Offshore, the American Petroleum Institute and the state of Louisiana have filed a lawsuit seeking to reverse the acreage cuts and block the inclusion of whale protection measures in the lease sale provisions.
A federal judge in southwestern Louisiana ordered that the sale proceed without whale protections, including rules on vessel speed and personnel. Environmental groups appealed, but the New Orleans-based 5th Circuit Court of Appeals last month rejected their arguments against the sale and rejected plans to scale back the sale.
The lease sale was necessitated by a compromise with Democratic Sen. Joe Manchin of West Virginia, an oil and gas industry supporter who cast the deciding vote in favor of the landmark climate bill. The measure was approved with only Democratic votes in Congress. Under the terms negotiated by Manchin, the government must offer at least 60 million hectares of offshore oil and gas leases over a one-year period before it can offer offshore wind energy leases that are part of its strategy to combat climate change.
Only a small portion of the parcels for sale typically receive bids, in areas where companies are looking to expand their existing drilling operations or where they foresee future development potential.
The administration in September proposed up to three oil and gas lease sales in the Gulf of Mexico over the next five years, and none in Alaskan waters. That was the minimum amount the government could legally offer if it wants to continue expanding offshore wind development.
Environmental groups criticized the five-year plan as a “missed opportunity” to halt the expansion of oil and gas drilling in the Gulf of Mexico and tackle climate change.
“New oil and gas operations (in the Gulf) will only pose more health risks to Gulf Coast communities and slow our transition to a clean energy economy,” said Earthjustice attorney Brettny Hardy.
The industry, meanwhile, said more sales are needed – and sooner.
“In our progressive industry, securing new lease blocks is critical to exploring and developing resources critical to the U.S. economy,” said Erik Milito, president of the National Ocean Industries Association. “The Gulf of Mexico is a major economic driver and investment area, and this (lease sale) was the last opportunity for companies to secure short-term leases.”
Holly Hopkins, API vice president of upstream policy, called Wednesday's sale “a positive step after multiple delays” and noted that it generated the highest dollar value for bids in nearly a decade.
The results show that the oil and gas industry is “working to meet growing demand and investing in the country's long-term energy security,” Hopkins said. “Just as today's record U.S. production was supported by investment and policy decisions made years ago, new leasing opportunities are critical to maintaining U.S. energy leadership for decades to come.”
The administration's clean energy ambitions have been hampered by recent project cancellations, including two major wind energy projects suspended off the New Jersey coast last month and the earlier cancellation of three projects that would have sent power to New England.