Companies bid $192M in Gulf oil sale
NEW ORLEANS – Energy companies including Shell, BP, Chevron and Exxonmobil offered a combined $192 million for drilling rights on federal oil and gas reserves in the Gulf of Mexico on Wednesday, as the first government lease auction under President Joe Biden laid bare the hurdles he faces to reach climate goals dependent on deep cuts in fossil fuel emissions.
The auction came after attorneys general from Republican states successfully sued in federal court to lift a suspension on federal oil and gas sales that Biden imposed when he took office.
Companies offered bids on 308 tracts totaling nearly 2,700 square miles during a virtual auction hosted by the Interior Department’s Bureau of Ocean Energy Management.
It marked the largest total acreage and second-highest bid total from a government auction since Gulf-wide bidding resumed in 2017.
Driving the heightened interest are a rebound in oil prices and uncertainty about the future of the government leasing program, industry analysts said. Biden campaigned on pledges to end drilling on federally owned lands and waters, which include the Gulf.
“Prices are higher now than they’ve
been since 2018,” said Rene Santos with S&P Global Platts. “The other thing is this fear that the Biden administration is here for another three years. They’re certainly not going to accelerate the number of lease sales and they could potentially have fewer sales.”
It will take years to develop the leases before companies start pumping crude. That means they could keep producing long past 2030, when scientists say the world needs to be well on the way to cutting greenhouse gas emissions to avoid catastrophic climate change.
Yet even as Biden has tried to cajole other world leaders into strengthening international efforts against global warming, including at this month’s climate talks in Scotland, he’s had difficulty gaining ground on climate issues at home.
The administration last week proposed another round of oil and gas lease sales in 2022, in Montana, Wyoming, Colorado and other western states.
Interior Department officials proceeded despite concluding that burning the fuels could lead to billions of dollars in potential future climate damages.
Emissions from burning and extracting fossil fuels from public lands and waters account for about a quarter of U.S. carbon dioxide emissions, according to the U.S. Geological Survey.
“The thing that is really bedeviling people right now is this conflict between the short term and long term when it comes to energy policy,” said Jim Krane, an energy studies fellow at Rice University in Houston. “We still need this energy system that is basically causing climate change, even as we’re fighting climate change.”
Wednesday’s livestreamed auction invited energy companies to bid on drilling leases across 136,000 square miles – about twice the area of Florida. Federal officials estimated prior to the sale that it could lead to the production of up to 1.1 billion barrels of oil and 4.4 trillion cubic feet of natural gas.