Companies offered $192 million in the first Gulf oil sale deal under Biden

Companies offered $192 million in the first Gulf oil sale deal under Biden

New Orleans Energy companies including Shell, BP, Chevron and ExxonMobil offered a total of $192 million for rights to explore for federal oil and gas reserves in the Gulf of Mexico on Wednesday, as President Joe Biden’s first government lease auction exposed the hurdles he faces. Reaching climate goals that depend on significant reductions in fossil fuel emissions.

The auction came after prosecutors from Republican states successfully sued in federal court to lift a suspension of federal oil and gas sales that Biden had imposed when he took office.

The companies bid for 308 lots totaling about 2,700 square miles (6,950 square kilometers) during a virtual auction hosted by the Department of the Interior’s Office of Ocean Energy Management. It represents the largest total area and the second highest total bid from a government auction since bidding resumed at the Gulf level in 2017.

The increased interest was driven by rebounding oil prices and uncertainty about the future of the government’s leasing program after Biden launched a campaign on pledges to end drilling in federally owned land and water, which includes the Gulf, analysts said.


Renee Santos of S&P Global Platts said: “The prices are higher now than they have been since 2018. The other thing is this fear that the Biden administration will be here for another three years. They certainly are not going to speed up the number of rental sales and they will probably have lower sales.” .

It will take years to develop the lease contracts before companies start pumping crude oil. That means they can continue to produce well beyond 2030, when scientists say the world needs to be on track to reduce greenhouse gas emissions to avoid catastrophic climate change.

But even as Biden has tried to persuade other world leaders to bolster international efforts against global warming, including at climate talks this month in Scotland, he has struggled to gain 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. Home Office officials continued to move forward despite concluding that burning fuel could lead to billions of dollars in potential climate damage in the future.

Emissions from burning and extracting fossil fuels from public land and water account for about a quarter of carbon dioxide emissions in the United States, according to the US Geological Survey.

“The thing that’s really confusing people right now is this struggle between the short term and the long term when it comes to energy policy,” said Jim Crane, a fellow in energy studies at Rice University in Houston. “We still need this energy system that is fundamentally causing climate change, even as we fight climate change.”


The auction, broadcast live on Wednesday, called on energy companies to bid on drilling leases over 136,000 square miles (352,000 square kilometers) — about twice the size of Florida. Federal officials estimated before 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.

Shell, the Gulf’s largest tenant, said the leases the company had successfully negotiated could provide opportunities for development near existing platforms or new areas.

“Regardless of today’s outcome, the need for continued competitive leases continues in the US Gulf of Mexico,” said Shell spokeswoman Cindy Babsky.

Environmental reviews of the sale — conducted under former President Donald Trump and confirmed under Biden — came to an unlikely conclusion: Extracting and burning the fuel would do less greenhouse gases than it left.

Similar claims have been rejected in two other cases, in Alaska, by federal courts after appeals from environmentalists. Citing the work of climate scientist Peter Erickson in one case, the judges said the Home Office analysis contained a stark omission: It excluded increases in greenhouse gases in foreign countries that result from more Gulf oil entering the market.


“The math is very simple in this kind of thing,” said Ericsson, a senior scientist at the Stockholm Environment Institute, a nonprofit research group. “If new leases expand global oil supplies, it will have a relative impact on emissions from burning oil. So, Granting these leases in the Gulf of Mexico will increase global emissions.”

The Office of Ocean Energy recently changed its emissions modeling methods, citing Ericsson’s work. Officials said it was too late to use this method at Wednesday’s auction.

For upcoming sales, company spokeswoman Melissa Schwartz said the interior is conducting a more comprehensive emissions review than any previous administration. It is also appealing a court order that forced the sales appeal.

Eric Milito, president of the National Oceanic Industries Association, said he was not sure using the new approach would have changed the government’s conclusions, because oil drilling in other parts of the world is less efficient and import withdrawals increase carbon costs.


The constant use of old analysis excites drill opponents, who say Biden is not living up to his climate pledges.

“We are talking about moving away from the fossil fuel economy and they are selling a giant carbon bomb for rent,” said Attorney Drew Caputo of Earthjustice, which has filed a pending federal lawsuit against the sale in the Gulf.

Some Democrats also objected to the sale. House Natural Resources Committee Chairman Raul Grijalva of Arizona said Biden “needs to do a better job” after promising leadership on climate issues while continuing a fossil fuel program with a long history of mismanagement.

The Gulf of Mexico accounts for about 15% of all US crude production and 5% of natural gas.


Brown reported from Billings, Montana.


Follow Matthew Brown on Twitter: Tweet embed

Copyright 2021 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.

Leave a Reply

Your email address will not be published. Required fields are marked *