NEW ORLEANS (AP) — Oil companies paid a combined $264 million for drilling rights in the Gulf of Mexico on Wednesday in sales forced by last year’s climate bill compromise..
The auction, the first in the Gulf in more than a year, attracted interest from industrial companies including ExxonMobil, Shell and Chevron. This could further test the loyalty of environmentalists and young voters who supported President Joe Biden in 2020 But they were frustrated by the approval this month of the massive Willow drilling project In northern Alaska.
Developing leases for sale in public waters in the Gulf of Mexico could produce more than 1 billion barrels of oil and 4 trillion cubic feet (113 billion cubic meters) of natural gas over 50 years. Government analysis. The analysis found that burning that oil would increase planet-warming carbon dioxide emissions by millions of tons.
Oil prices have fallen sharply in the past year and it is uncertain how much companies will be willing to invest in new leases. The total area auctioned is comparable to the acreage sold during the last auction In 2021.
One more sale is planned for September, but how many more is unknown Management may conduct, which may hamper the expansion plans of the companies.
However, approval of ConocoPhillips’ Willow project in the National Petroleum Reserve-Alaska is an opportunity for industry and future leasing, said analyst Sami Yahya.
“It shows that the Biden administration is trying to strike a balance between energy transition and energy security,” said Yahya with S&P Global.
The Department of Interior sales come two days before a deadline set for last year’s climate bill, which Biden signed into law.
The measure prohibited the leasing of public lands for renewable energy unless tens of thousands of acres were first dedicated to fossil fuels. It was an offer to win the support of West Virginia Democrat Joe ManchinA fossil fuel industry supporter.
The Climate Act also raised the royalty rate companies must pay on the oil they produce. The Biden administration on Wednesday raised the selling rate to the maximum allowed — 18.75%, versus 12.5% historically — and yet it does not appear to be curbing interest.
The parcels offered at auction covered an area of 114,000 square miles (295,000 square kilometers), larger than Arizona. As in past auctions of a similar size, only a fraction of the available acreage—about 2,600 square miles (6,700 square kilometers)—was auctioned.
Most of the 313 tracts that received offers were single bidders.
Bids for the companies opened Wednesday in New Orleans, a state economically dependent on the oil and gas industry and particularly vulnerable to climate change.
Because offshore parcels take years to develop before crude oil can be pumped, leases could produce oil and gas by 2030, scientists say, and the world must drastically reduce greenhouse gas emissions to prevent catastrophic climate change.
Sea-level rise is a factor in the steady loss of Louisiana’s coastal wetlands, which shelter a wide variety of fish and wildlife and provide a buffer between inland population areas and hurricanes, which scientists say are getting stronger as the world warms.
Louisiana’s complicated relationship with industry is illustrated by lawsuits filed by coastal parishes over decades of alleged damage to wetlands from canals and oil and gas drilling.
ExxonMobil placed the highest bid for 69 fields in the Northwest Gulf. In 2021, the company bid nearly $15 million for areas in the same area, which include shallow water — less than 656 feet (200 meters) deep — where oil has mostly played and some operating leases.
Analysts say the acquisitions are linked to Exxon’s pursuit of a government-industry collaboration to capture and store carbon dioxide from industrial plants in the Houston Ship Channel. The carbon dioxide will be transported in pipes and injected deep beneath the Gulf of Mexico floor, known as carbon capture and sequestration, or CCS.
ExxonMobil spokesman Todd Spitler declined to say whether there was a connection between its bid and the carbon capture program.
“Once the blocks are allotted we will work on the plans with the home department,” he said. “ExxonMobil takes a long-term business view, and we will evaluate seismic and subsurface geology for future business potential.”
Before the final auction results were announced, representatives of the American Petroleum Institute and the National Oceanic Industries Alliance had already called for more lease sales to be scheduled so the companies could begin exploration and ensure future oil supplies.
Environmentalists again called on Biden to stick to his 2020 campaign pledge to end new drilling and leasing. Diane Hoskins with the Oceana Group said Democrats could “fulfill their promise” by ending the lease in a long-running five-year plan for the Gulf, which Interior Department officials say will be ready by the end of the year. .
A lawsuit against Wednesday’s sale is pending before a U.S. district judge in Louisiana. The government has 90 days to evaluate any bids, meaning they can be blocked before they are awarded.
“There’s been a lot of talk from the administration about taking climate change seriously and moving our economy away from fossil fuels, yet we continue to see massive oil and gas projects offshore in Willow and the Gulf of Mexico,” he said. George Dorgan is an attorney with Earth Justice, which is representing environmental groups in the case.
Chevron said in a court filing Monday that it could lose millions of dollars in future production if the leases are blocked.
“Chevron plans to produce from its Gulf of Mexico leases for several decades,” said Trent Webre, Chevron manager of the region.
In a previous Gulf of Mexico auction in 2021, companies offered $192 million for a total of 2,700 square miles (6,993 square kilometers) of land. The sale was subsequently suspended It was reinstated under the climate bill last year, by a federal judge.
The administration plans to auction 500 square miles (1,400 square kilometers) of offshore oil and gas leases in Wyoming, New Mexico, Montana, Nevada and other states over several months starting in May.
Brown reported from Billings, Montana.