The US Bureau of Ocean Energy Management, Regulation, and Enforcement will hold the first Gulf of Mexico federal offshore oil and gas lease sale since the 2010 Macondo well accident and crude oil spill on Dec. 14 in New Orleans. The agency also is proposing a higher minimum acceptable bid for tracts in deeper water with this sale, it announced.
The sale, Lease Sale 218, will include all available unleased areas in the western gulf planning area off Texas, US Sec. of the Interior Ken Salazar and BOEMRE Director Michael R. Bromwich said in an Aug. 19 joint announcement. They said the proposed sale would encompass 3,000 unleased blocks covering 20.6 million acres.
Bromwich added that as part of the Obama administration’s commitment to provide incentives for diligent development, and to ensure fair returns from rights sold, the agency has proposed increasing the minimum bid for blocks in 1,312 ft or more of water to $100/acre from $37.50/acre.
The change was based on a rigorous historical analysis of the last 15 years of gulf lease sales, according to BOEMRE. The analysis, adjusted for energy prices at time of each sale, demonstrates that leases that received high bids of less than $100/acre have experienced virtually no exploration and development activities.
BOEMRE said in light of this, the increase would have little to no adverse impact on the timing or magnitude of production from tracts offered in this sale. Raising the minimum bid will discourage companies from purchasing leases they are unlikely to explore in the near term, it said.
“BOEMRE is proposing this increase in an effort to ensure that areas with the greatest resource potential are developed, and to decrease the amount of leased acreage that is warehoused and goes unexplored,” Bromwich said, adding, “The change in terms will better ensure that the nation’s resources are being developed in a timely manner.”
The minimum bid amount for leases in the much more heavily explored and produced shallower water depths will remain at $25/acre, BOEMRE said. The sale will include environmental stipulations requiring that operators protect biologically sensitive features, as well as marine mammals and sea turtles. These stipulations will require trained observers to ensure compliance and restrict operations when conditions warrant, BOEMRE said.
The sale is the last remaining western gulf planning area sale scheduled in the 2007-12 US Outer Continental Shelf oil and gas leasing program, it noted.
The National Ocean Industries Association applauded the announcement. “Having a firm date now gives a greater assurance that the sale will indeed take place,” NOIA Pres. Randall B. Luthi said on Aug. 19. “This sale marks a key step toward restoring American jobs.”
American Petroleum Institute Upstream Director Erik Milito also said he was encouraged by the news, but noted that the proposed higher minimum acceptable bid is more than double the previous amount, which he hoped would not discourage bids.