The U.S. Interior Department is planning to make nearly 77 million acres available for oil and gas development in its largest lease sale to date.
The 14,375 blocks being offered for the proposed March 2018 sale are located in the Gulf of Mexico (GoM) offshore Texas, Louisiana, Mississippi, Alabama and Florida. The sale essentially includes all available unleased areas on the GoM’s Outer Continental Shelf, excluding blocks that are subject to a Congressional moratorium, adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the Eastern Gap and some blocks where the Flower Garden Banks National Marine Sanctuary is located.
The news was welcomed by the industry, which sees opportunity as it continues to recover from the downturn.
“The historic size of lease offerings in Proposed Lease Sale 250 presents an unprecedented opportunity for the industry to safely produce reliable and affordable oil and natural gas for American consumers, bolster the U.S. economy and increase domestic energy security,” National Ocean Industries Association (NOIA) President Randall Luthi said in a statement.
The Interior Department estimates the proposed region-wide sale could result in the development of up to 1.12 billion barrels of oil and up to 4.42 trillion cubic feet of gas with most activity centered on the GoM’s most active region—the Central Planning Area.
The amount of acreage for the proposed sale is over 1 million acres more than what was offered during the last region-wide sale.
“In today’s low-price energy environment, providing the offshore industry access to the maximum amount of opportunities possible is part of our strategy to spur local and regional economic dynamism and job creation and a pillar of President Trump’s plan to make the United States energy dominant,” Secretary Ryan Zinke said in a news release. “And the economic terms proposed for this sale include a range of incentives to encourage diligent development and ensure a fair return to taxpayers.”
The proposed sale will be the second offshore sale under the new five-year National Outer Continental Shelf Oil and Gas Leasing Program, which was approved during the Obama administration. The first sale, which took place in August, was called a success by U.S. Bureau of Ocean Energy Management (BOEM) officials although it brought in less than half that of the March 22 lease sale that covered less territory.
The August sale—the first under the Trump Administration—generated about $121 million in high bids for blocks. Of the 14,177 blocks offered during the GoM-wide sale, 99 bids were submitted on 90 tracts. In terms of acreage, more than 508,000 of the nearly 76 million acres offered received bids from the 27 companies that participated in the sale, according to statistics from BOEM.
“Offshore lease sales are an integral part of a good national policy to provide energy sustainability, but cannot achieve energy dominance alone,” Luthi added.
NOIA’s more than 250 member companies are involved in various aspects of offshore energy including drilling, production and engineering. “NOIA looks forward to working with the secretary in developing a royalty policy that benefits both the U.S. government and those who actually do the work of exploration and development,” Luthi added.
The Interior Department receives royalty payments on future production from leases as well as high bids and rental payments. Earlier this year, Zinke signed an order to hold more leases and to speed up the permitting process in an effort to encourage competition. The department also moved to lower the royalty rate for leases in less than 200 m of water depth. Companies will pay 12.5% instead of an earlier proposal for 18.75%.
Velda Addison can be reached at email@example.com.