Today's Paper News Sports Features Business Opinion LEARNS Guide Newsletters Obits Games Archive Notices Core Values

$264M bid for oil leases in Gulf

1 billion barrels is expected yield by COMPILED BY DEMOCRAT-GAZETTE STAFF FROM WIRE REPORTS | March 30, 2023 at 1:46 a.m.
FILE - The Centenario deep-water drilling platform off the coast of Veracruz, Mexico, in the Gulf of Mexico, is pictured on Nov. 22, 2013. The Biden administration will auction oil and gas leases across more than 114,000 square miles of public waters in the Gulf of Mexico on Wednesday, March 29, 2023, in a sale mandated by last year's climate bill compromise. (AP Photo/Dario Lopez-Mills, File)

NEW ORLEANS -- Oil companies offered a combined $264 million Wednesday for drilling leases in public waters of the Gulf of Mexico in a sale mandated by last year's U.S. climate bill compromise.

The auction was the first in the Gulf in more than a year and drew interest from industry giants including Exxon Mobil, Shell and Chevron. Development of the auctioned leases is estimated to produce more than 1 billion barrels of oil and more than 4 trillion cubic feet of natural gas over 50 years, according to a federal analysis.

But burning the oil is forecast to increase planet-warming carbon dioxide emissions by tens of millions of tons, the analysis found, drawing renewed ire from environmentalists. On the same day of the auction, the Biden administration announced plans to expand offshore wind resources powering millions of homes.

The Department of Interior's oil and gas lease auction comes two days before a deadline set last year by climate legislation within the Inflation Reduction Act, which President Joe Biden signed into law after clinching support from West Virginia Democratic Sen. Joe Manchin, a fossil fuels industry supporter.

To help get Manchin's approval, the act prohibited leasing public lands for renewable power unless tens of millions of acres are first offered for fossil fuels. The climate law also raised the royalty rate companies must pay on oil they produce. The Biden administration set the rate for Wednesday's sale at the maximum allowed -- 18.75%, versus 12.5% historically -- yet that did not appear to curb interest.

The parcels auctioned Wednesday cover 114,000 square miles, an area larger than Arizona. Like past auctions of similar magnitude, only a fraction of the available acreage -- about 2,600 square miles -- received bids.

The vast majority of the 313 tracts fetching offers had only one bidder.

Exxon Mobil offered the highest bids on 69 tracts in the northwest Gulf. The company in 2021 bid nearly $15 million for tracts in the same region, which includes shallow waters -- less than 656 feet deep -- where oil production has mostly played out and where few active leases exist.

Before the bidding results were announced Wednesday, representatives from the American Petroleum Institute and National Ocean Industries Alliance already were calling for more lease sales to be scheduled so companies can start exploration work and ensure future oil supplies.

The bids were opened in New Orleans, in a state that is economically dependent on the oil and gas industry yet especially vulnerable to climate change, namely to rising sea levels and worsening storm events.

Since it takes years to develop offshore parcels before crude is pumped, the leases are expected to produce oil and gas long past 2030, when scientists say the world needs to have drastically cut greenhouse gas emissions to stave off catastrophic climate change.


Environmentalists have again called on Biden to abide by a 2020 campaign pledge to end new drilling and leasing. Diane Hoskins with the group Oceana said the Democratic president can "make good on his promise" by including an end to leasing in a long-overdue five-year plan for the Gulf.

Interior Department officials say the plan will be ready by the end of the year.

A lawsuit against Wednesday's sale is pending before a U.S. District judge in Louisiana. It takes 90 days for the government to evaluate any bids, which means they still could be blocked before being issued.

"There's been a lot of talk from the administration about taking climate change seriously and moving our economy away from fossil fuels, and yet we continue to see massive oil and gas projects, both onshore with Willow and offshore in the Gulf of Mexico," said George Torgun, an attorney with Earthjustice representing environmental groups in the case.

Chevron said in a Monday court filing that it expects to lose millions of dollars from future production if the leases are blocked. "Chevron plans to produce from its Gulf of Mexico leases for decades into the future," Trent Webre, a Chevron manager in the region, said.

At the prior Gulf of Mexico auction in 2021, companies offered a combined $192 million for tracts totaling nearly 2,700 square miles. That sale was subsequently blocked by a federal judge, then reinstated under the Inflation Reduction Act.

Over several months beginning in May the Biden administration plans to auction more than 500 square miles of onshore oil and gas leases in Wyoming, New Mexico, Montana, Nevada and other states.


The same day of the Gulf auction, the Energy Department announced a new strategy to meet the Biden administration's goal of vastly expanding offshore wind energy.

The administration wants to build enough offshore wind turbines by 2030 to power more than 10 million homes, requiring about 30 gigawatts of power. Those turbines would be anchored to the seafloor. The administration also wants to deploy enough floating wind turbines by 2035 to power another 5 million homes, requiring about 15 gigawatts. The first commercial scale offshore wind project in the United States is currently under construction off the coast of Massachusetts.

With its Offshore Wind Energy Strategy released Wednesday, the Energy Department laid out a plan for supporting offshore wind development to meet the 2030 and 2035 targets. The strategy was released during an offshore wind energy conference in Baltimore held by the Business Network for Offshore Wind.

Energy Secretary Jennifer Granholm promised in a statement that offshore wind "will create tens of thousands of good-paying, union jobs and revitalize coastal communities."

The administration is attempting to lower the cost of fixed offshore wind by 30% to $51 per megawatt hour by 2030 and to support a domestic supply chain for the industry. Officials also want to establish the U.S. as a leader in floating offshore wind and lower its cost by nearly 70% to $45 per megawatt hour by 2035.

Other goals are to determine how to deliver large amounts of wind energy to the U.S. power grid and to advance technologies using offshore wind to produce hydrogen and clean fuels. Among other uses, the latter two fuels can be used to generate power even when the wind is not blowing, making an intermittent clean source into one that is closer to being available 24/7.

To achieve all this, Jocelyn Brown-Saracino, the department's offshore wind energy lead, said the Energy Department is bringing experts together to solve offshore wind issues, working with the industry on technology demonstrations and offshore wind research, and financing clean energy projects.

"Our hope is that this outlines a really powerful contribution to advancing offshore wind in the United States," she said.

Information for this article was contributed by Kevin McGill, Matthew Brown and Jennifer McDermott of The Associated Press.

Print Headline: $264M bid for oil leases in Gulf


Sponsor Content