Acadiana Business

Interior slates first O&G lease sale since BP disaster

by Leslie Turk

Twenty million acres in the Western Gulf will be offered for lease Dec. 14.

Keeping with its May announcement that it would expand domestic oil and gas production safely and responsibly, on Friday the Obama administration announced that it will hold the first oil and natural gas lease sale in the Gulf of Mexico since last year's BP disaster.

Western Gulf of Mexico Lease Sale 218 is scheduled to be held in New Orleans Dec. 14. The sale will include all available unleased areas in the Western Gulf off the Texas shore.

"BOEMRE has taken aggressive steps to renew our commitment to the responsible stewardship of the U.S. Outer Continental Shelf," said Director Michael Bromwich. "The decision to hold this sale was made after careful analysis of the best scientific information available and consideration of all public comments received."

The proposed lease sale encompasses about 3,900 unleased blocks covering approximately 20.6 million acres. The blocks are located from nine to about 250 miles offshore, in water depths ranging from 16 to more than 10,975 feet (5 to 3,346 meters). BOEMRE estimates the proposed lease sale could result in the production of 222 to 423 million barrels of oil and 1.49 to 2.65 trillion cubic feet of natural gas.

BOEMRE wants to increase the minimum bid amount for blocks in water depths of 1,312 feet (400 meters) and greater to $100 per acre, up from $37.50 per acre, to ensure receipt of fair market value for the lease rights sold. The administration also hopes the increase will encourage diligent development from bidders. It says the change is based on a rigorous historical analysis of the last 15 years of lease sales in the Gulf of Mexico:

The analysis, adjusted for energy prices at time of each sale, demonstrates that leases that received high bids of less than $100 per acre have experienced virtually no exploration and development activities. In light of this analysis, BOEMRE has concluded that the increase will 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.

"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. "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 per acre.

The lease 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.

Lease Sale 218 is the last remaining Western Gulf Planning Area sale scheduled in the 2007 2012 Outer Continental Shelf Oil and Natural Gas Leasing Program. For more info on Western Sale 218, click here.