U.S. oil companies get last chance to secure drilling rights in Gulf of Mexico with upcoming auction
(Bloomberg) – Oil companies will get one last crack at new drilling rights in the Gulf of Mexico on Wednesday, before the Biden administration imposes a two-year hiatus.
The Interior Department auction, mandated by Congress under last year’s Inflation Reduction Act, will be the last sale of its kind until 2025 — when there may be tighter limits and less territory up for grabs. The uncertainty is set to drive up industry interest and bidding this week for the 10-year leases available.
“Companies want to invest in the Gulf of Mexico,” said Erik Milito, head of the National Ocean Industries Association. “This represents their final opportunity to gather more leases for a while.”
The sale comes just days after the U.S. joined nearly 200 other nations at the COP28 UN climate summit in Dubai in a pledge to transition away from fossil fuels. But the auction is mandated by a provision in the sweeping climate law and has since been upheld by federal courts.
Some 73 million acres are available for bidding. Companies including Chevron Corp. and Shell Plc, which had pushed for the larger auction in court, are expected to vie for territory near existing projects and leases. Sealed bids will be opened after the sale starts Wednesday at 10 a.m. in Washington.
The sale has been under a cloud of uncertainty because of a months-long legal battle. Oil companies and their leading trade group went to court to fight an Interior Department plan to rule out selling leases in potential habitat for the critically endangered Rice’s Whale. Interior also had sought to impose vessel traffic limitations on some leases.
Ultimately, the 5th Circuit Court of Appeals sided with the oil industry.
The Interior Department is set to hold just three Gulf auctions over the next five years: in 2025, 2027 and 2029. That’s a marked downshift from past sales, which have happened annually and twice-yearly.
“The administration has thrown up roadblock after roadblock to discourage offshore oil and natural gas production, underscoring the importance of this court-ordered sale as the final opportunity to obtain acreage in federal waters until 2025 at the earliest,” said Holly Hopkins, vice president of upstream policy at the American Petroleum Institute.
The Gulf of Mexico provides about 15% of U.S. crude oil production, according to the Energy Information Administration. Industry advocates say the oil pumped from the basin represents some of the lowest-carbon-intensity crude in the world.
Lead image: Shenzi platform (Woodside Energy)
