NEW ORLEANS – (AP) – Oil companies combined to pay $264 million in sales last year for rights to drill in federal waters in the Gulf of Mexico. Climate Bill Compromise.
Development of Gulf leases could produce 1.1 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.
A legal challenge to the sale from environmental groups is pending in federal court.
Bids were up 38% from the last auction, marking the highest offering since 2017. Chevron USA paid $108 million for 75 pieces. BP Exploration and Production was the highest bidder at $47 million and Shell Offshore was the highest bidder at $20 million.
The next Gulf lease sale is scheduled for September. Its Not sure how many more The administration may hold because of continued pressure to approve the ConocoPhillips Willow project in Alaska.
The uncertainty means that “companies may try to lease blocks now if future auctions are barred,” said Sami Yahya, an analyst at S&P Global.
“From a global perspective, we continue to move towards an environment with a strong anti-fossil fuel sentiment as operators continue to face public scrutiny regarding emissions,” Yahya said.
The sale came two days before the deadline set in last year’s climate bill. The bill also prohibits the leasing of public lands for renewable electricity unless tens of thousands of acres are first earmarked for fossil fuels. It was a privilege West Virginia Democratic Sen. Joe ManchinAn industry sponsor.
Manchin issued a statement saying sales results show the climate bill “holds this administration’s feet to the fire” to continue fossil fuel production.
The Climate Act also raised the royalty rate companies must pay on the oil they produce. The Biden administration set the rate for Wednesday to the highest allowed — 18.75%, historically 12.5%.
The parcels granted 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.
In a state economically dependent on the oil and gas industry and particularly vulnerable to climate change, company bids opened in New Orleans on Wednesday, leaving only one bidder for most areas.
Because offshore parcels take years to develop before crude oil can be pumped, the leases could produce oil and gas by 2030. That’s when scientists say 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.
ExxonMobil paid nearly $10 million on 69 tracts in the Northwest Gulf. The company bid nearly $15 million for tracts in the same area in 2021. It covers shallow water — less than 656 feet (200 meters) deep — where oil mostly played.
The acquisitions could be linked to Exxon’s pursuit of government-industry cooperation. Capture and store carbon dioxide from industrial plants in the Houston Ship Channel, experts said.
“They deliberately went to lease property that was perfect for geologic storage, and they knew commercial-scale oil and gas production wasn’t possible,” said Eric Smith, associate director of the Tulane Energy Institute.
The carbon dioxide will be transported in pipes and injected deep under the Gulf floor, known as carbon capture and sequestration, or CCS. Oil and gas companies bank on carbon capture to extend the life of fossil fuel facilities. Critics say the technology is unproven and less efficient than switching to renewable energy.
All leases sold Wednesday were for oil and gas, federal officials said.
That means Exxon needs the Interior Department’s cooperation to revise its leases before it can use them for carbon capture, said Justin Rostand, principal analyst at industry consultancy Wood Mackenzie.
“There’s probably some risk that they can actually use it for carbon capture,” Rostand said. “It’s a big question mark.”
ExxonMobil spokesman Todd Spitler declined to say whether its bid was connected to the ship channel proposal.
Environmentalists called on Biden to stick to campaign promises to end new drilling on federal lands and waters. Diane Hoskins with the group Oceana said Democrats “can keep their promise” by ending the lease in a long-delayed five-year plan for the Gulf.
Oil industry groups have called for more offshore lease sales so companies can continue exploration work to ensure future domestic supplies.
The government has 90 days to evaluate any bid, meaning Wednesday’s sale could still be blocked. 2021 sale Then blocked By a federal judge, then reinstated under the climate bill.
“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 Earth Justice attorney representing environmental groups in the pending federal lawsuit.
Many of the leases sold Wednesday were in deep water, Dorgan said, raising the possibility of another major oil spill like BP’s. The Deepwater Horizon disaster In 2010.
Chevron said in a Monday court filing that it could lose millions of dollars if the leases are blocked.
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 in the coming months.
Brown reported from Billings, Montana.
Follow along Matthew Brown And Kevin McGill on Twitter.
“Lifelong social media lover. Falls down a lot. Creator. Devoted food aficionado. Explorer. Typical troublemaker.”