Shorter lease terms proposed for central gulf sale

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Nov. 13 -- The US Minerals Management Service’s next Central Gulf of Mexico lease sale on Mar. 17, 2010, will include a shorter initial lease term for blocks in 400-1,600 m of water, US Interior Secretary Ken Salazar said on Nov. 13.

Tracts lying in 400-800 m of water will change from an 8-year term to a 5-year initial term, which would extend to 8 years once drilling of an exploratory well begins, Salazar said. Blocks in 800-1,600 m of water will change from a 10-year to a 7-year initial lease term, which would extend to 10 years once an exploratory well is drilled, he continued.

“This new approach to lease terms will better ensure that taxpayer resources are being developed in a timely manner,” Salazar said. Several Democrats in Congress have pushed for diligent development requirements in federal oil and gas leases, commonly called “use-it-or-lose-it” provisions.

American Petroleum Institute Pres. Jack N. Gerard immediately criticized the move, calling it “one more impediment to the development of the oil and natural gas industry necessary for the American economy to prosper.”

Gerard said API wrote to Salazar on Nov. 10 to remind him that the administration of President Barack Obama has set up a series of roadblocks to discourage the investment necessary to increase domestic energy supplies, create well-paying US jobs, and provide additional government revenues at a time when they are desperately needed.

“The shortening of lease terms does nothing to guarantee more discoveries but rather takes away from companies the flexibility necessary to operate in an extremely challenging and risky environment,” Gerard said.

Salazar said the lease sale would offer nearly 36 million acres which potentially could produce up to 1.3 billion bbl of crude oil and 5.4 tcf of gas off Louisiana, Mississippi, and Alabama. The acreage is in water 3-230 miles offshore in 10-11,200 ft of water. It includes acreage in the 181 South area, he added.

Terms and conditions for the lease sale are contained in the proposed notice of sale information at the MMS’s web site at www.gomr.mms.gov/homepg/lsesale/213/cgom213.htm.

Contact Nick Snow at [email protected].