Oil leases in Gulf of Mexico surge despite climate push
WASHINGTON — An oil and gas lease sale for the Gulf of Mexico drew a surge of bidding activity Wednesday, even as the Biden administration tried to hold up the auction to conduct a study of the impact on climate change.
More than 300 drilling blocks spanning 1.7 million acres of federal waters were leased, the most activity in a federal lease sale since 2014, according to federal data. All in all, more than 30 oil and gas companies agreed to pay out a total $191.6 million.
A regular event in past administrations, Biden had tried to delay leasing federal lands and waters for oil and gas development
for 12 months while the climate review was underway. But in June a federal judge in Louisiana ordered the Interior Department to continue holding lease sales while it conducted its review, following a lawsuit by state attorneys general from Texas, Louisiana and 11 other states.
In September, Interior announced it would stage today’s lease sale “in compliance with an order from a U.S. District Court.”
In a press release Wednesday, the Interior Department said it was continuing its review of climate impacts of the leasing program, and future lease sales would use updated emissions models to create, “the most robust projections ever of the climate impacts of offshore lease sales.”
The lease sale was good news for an oil and gas industry that faces an uncertain future under a Biden administration, which has targeted a 50 percent reduction in greenhouse gas emissions from 2005 levels over the next decade.
The question facing the lease sale was whether companies would show the same interest they had in past auctions, as consumers and investors alike press oil companies to shift towards cleaner forms of energy. But with oil prices rising amid renewed demand following the COVID-19 pandemic, oil and gas companies had plenty incentive to drill in the Gulf of Mexico.
“The Gulf of Mexico continues to be an attractive basin when you consider all the
factors companies are looking at,” said Erik Milito, president of the trade group National Ocean Industries Association. “The Gulf has the established infrastructure. That’s a factor that can’t be ignored. When you look along the Gulf Coast at the service companies, ships, pipelines, you have it all right there.”
Less than a week after the close of the COP26 climate summit, the administration’s decision to hold the lease sale drew criticism that Biden was not taking climate change seriously enough. Even some members of the president’s own party were critical that the administration had not yet come up with a plan to reform oil and gas leasing in light of climate change.
“This administration went to Scotland and told the world that America’s climate leadership is back, and now it’s about to hand over 80 million acres of public waters in the Gulf of Mexico to fossil fuel companies,” Rep. Raúl Grijalva, DAriz, chair of the House Natural Resources Committee, said Tuesday. “This is happening under the same lax environmental and safety requirements and inadequate financial assurances that have put Americans in harm’s way for decades.”
But with U.S. gasoline prices up 60 percent from a year ago, Biden is coming under pressure to do something to alleviate the pinch.
He has requested that the expanded oil cartel known as OPEC+ increase production, drawing scorn from the U.S. oil and gas sector, which claims it is being passed over by the administration for crude from nations with lower environmental and labor standards, such as Saudi Arabia and Russia.
The lease sale Wednesday was scheduled by the Trump administration in 2020, the last in the Gulf of Mexico before the nation’s five-year offshore drilling plan expires in July.
Under federal law, the Biden administration will be required to file a new fiveyear drilling plan.
But they have some discretion on the frequency with which they hold lease sales, giving oil and gas companies some concern on when they will next get a shot at bidding on the Gulf of Mexico.
“The way the statute is written (the administration is) required to prepare and maintain a schedule of lease sales,” Milito said. “It’s plural so it would suggest they need to have more than one, but the spirit of the law would suggest more.”