The long-delayed 2023 OCS lease sale brought almost $400 million in winning bids from oil companies eager to invest in domestic energy development in the Gulf of Mexico.
Bids were high because of a drastic slowdown in lease sales under President Biden and the knowledge that the next sale is not scheduled until 2025.
The sale comes on the heels of Biden’s plan to have the fewest sales in history over the next 5 years in pursuit of his climate goals and campaign pledge to “end fossil fuels.”
Biden’s stingy leasing of oil and gas from federal lands is promising a less secure future for Americans and denying them the economic benefits of domestic production, which is responsible for the nation’s transport and keeping the lights on in homes, factories and farms.
The Bureau of Ocean Energy Management’s December 20 auction of oil and gas drilling rights to about 73 million acres in the Gulf of Mexico (GOM) generated $382.2 million in winning bids from 26 offshore oil operators–the highest total since 2015. The sale ordered by Congress was the last offshore oil and gas lease sale until 2025 when there will be tighter limits and less territory for lease due to Biden’s 5-year lease plan that has just 3 oil and gas lease sales in the GOM and no lease sales off Alaska or the East or West coast. Under the Inflation Reduction Act passed last year, the Interior Department can only hold a lease sale for offshore wind if it holds an oil and gas auction in the preceding 12 months. Offshore wind is a preferred, but expensive technology of the Biden administration, which has been having significant problems in the recent past. The 3 sales in Biden’s offshore plan are a marked reduction from past sales, which have occurred annually and twice-yearly. The Gulf of Mexico provides about 15 percent of U.S. oil production and it provides some of the lowest-carbon-intensity oil in the world. Biden’s 3 sales will represent the lowest number in the program’s history.
The lease sale, originally set for 2022, was delayed several times due to Biden administration antics and legal battles. The lease sale was delayed by lawsuits after the U.S. Bureau of Ocean Energy Management attempted to reduce the available acreage to around 67 million acres. Oil companies and their trade group had to fight an Interior Department plan to rule out selling leases in potential habitat for the endangered Rice’s Whale. Interior also had sought to impose vessel traffic limitations on some leases, but the 5th Circuit Court of Appeals ruled against those lease stipulations to limit vessel speed that environmentalists claimed would protect the endangered marine mammal. The Biden administration has shown no such concern for the plight of the Right Whales grounding in the vicinity of offshore wind activities on the east coast.
Twenty-six oil companies, including Chevron, Shell and BP, secured more than 1.7 million acres across the eastern Gulf of Mexico, submitting 352 bids totaling $441,896,332 at the December 20 lease sale. Anadarko Petroleum Corp., Hess Corp., and Shell plc were especially aggressive bidders, followed by Chevron Corp., Woodside Energy Group Ltd., Equinor ASA, BP plc, and Repsol SA. Anadarko’s bids topped $100 million, including $25 million for a block in the Mississippi Canyon area, the highest of any single bid, and $17 million for a Green Canyon block. Hess bids totaled almost $91 million, focusing on the Green Canyon area, where its highest bid, at $21 million, topped a $4.8 million bid by Chevron.
Shell bid on more blocks than any other company, its total aggregate bids reaching $74.6 million. It went after blocks in the Mississippi Canyon and Green Canyon areas, in addition to a large number of tracts in the Alaminos Canyon area off Texas in the far southwest of the Gulf of Mexico. Smaller companies teamed up for joint bids, including Beacon Offshore, Red Willow, Westlawn, Houston Energy, and Kosmos.
Hess Corp. had 20 successful bids ($88.2 million); Anadarko had 49 successful bids ($74.2 million), and Shell Plc’s successful bids amounted to $69 million. Revenues received from offshore oil and gas leases (including high bids, rental payments, and royalty payments) are directed to the U.S. Treasury, certain Gulf Coast states (Texas, Louisiana, Mississippi, and Alabama) and local governments, the Land and Water Conservation Fund, and the Historic Preservation Fund.
While the results of this lease sale were encouraging and needed as President Biden puts forth more of his anti-oil and gas policies, securing new lease blocks is vital for exploring and developing resources crucial to the U.S. economy. Despite the push by the Biden administration and environmentalists for a carbon-free world, that is not going to happen overnight, and for the United States to remain a superpower and to have affordable and reliable energy for its people, it must continue to open new areas for exploration and development of oil and gas. In particular, additional offshore acreage is necessary to sustain and expand energy production in a region known for among the lowest carbon intensity barrels globally. The Gulf of Mexico is a prime economic engine and investment area.
U.S. House Majority Leader Steve Scalise said the auction showed “resoundingly strong demand” for Gulf drilling and indicated more auctions are needed. “While I’m happy to see today’s lease sale move forward with such strong interest, President Biden has failed to schedule any lease sales for 2024, and is putting America’s energy and national security in jeopardy.”