US to auction Gulf of Mexico oil under climate compromise

Companies have offered bids on more than 2,600 square miles of federal oil and gas leases in the Gulf of Mexico in a sale mandated by last year’s climate bill compromise

US to auction Gulf of Mexico oil under climate compromiseBy KEVIN McGILL and MATTHEW BROWNAssociated PressThe Associated PressNEW ORLEANS

NEW ORLEANS (AP) — Companies have offered bids on more than 2,600 square miles (6,700 square kilometers) of federal oil and gas leases in the Gulf of Mexico in a sale mandated by last year’s climate bill compromise.

Wednesday’s auction is the first in more than a year and is expected to draw interest from major oil companies such as ExxonMobil and Chevron. It could further test the loyalty of environmentalists and young voters who backed President Joe Biden in 2020 but were frustrated by this month’s approval of the huge Willow drilling project in northern Alaska.

Developing the leases for sale in public waters in the Gulf of Mexico could produce more than 1 billion barrels of oil and more than 4 trillion cubic feet (113 billion cubic meters) of natural gas over 50 years, according to a government analysis. Burning that oil would increase planet-warming carbon dioxide emissions by tens of millions of tons, the analysis found.

Oil prices fell sharply over the past year and it’s uncertain how much companies will be willing to invest in new leases. There’s one more sale scheduled in September, but it’s unknown how many more the administration could conduct, which could hinder companies’ expansion plans.

Yet analyst Sami Yahya said approval of the ConocoPhillips Willow project in the National Petroleum Reserve-Alaska bodes well for the industry and prospects for future leasing.

“It showed that the Biden administration is likely trying to strike a balance between energy transition and energy security,” said Yahya with S&P Global.

The Department of Interior sale comes two days before a deadline set in last year’s climate bill that Biden signed into law. The measure prohibited leasing public lands for renewable power unless tens of millions of acres are first offered for fossil fuels. That was a concession to get support from West Virginia Democrat Joe Manchin, a fossil fuels industry supporter.

The undersea parcels that were up for auction Wednesday covered 114,000 square miles (295,000 square kilometers) an area larger than Arizona. But similar to past auctions of similar magnitude, only a fraction of the available acreage sold.

Bids from companies were due Tuesday and were being opened Wednesday in New Orleans.

The sale is taking place in a state that is economically dependent on the oil and gas industry but also especially vulnerable to climate change.

Since it takes years to develop offshore parcels before crude is pumped, the leases could produce oil and gas long past 2030, when scientists say the world needs to have drastically cut greenhouse gas emissions to stave off catastrophic climate change.

Sea level rise is a factor in Louisiana’s steady loss of coastal wetlands, which in addition to harboring a variety of fisheries and wildlife, provide a buffer between inland population areas and hurricanes that scientists say are growing stronger as the world warms.

Louisiana’s complicated relationship with the industry also is illustrated by lawsuits filed by coastal parishes over decades of alleged damage to wetlands from dredging canals to service oil and gas drilling.

A lawsuit against Wednesday’s sale is pending before a U.S. District judge in Louisiana. It takes 90 days for the government to evaluate any bids, which means they still could be blocked before being issued.

“There’s been a lot of talk from the administration about taking climate change seriously and moving our economy away from fossil fuels, and yet we continue to see massive oil and gas projects, both onshore with Willow and offshore in the Gulf of Mexico,” said George Torgun, an attorney with Earthjustice representing environmental groups in the case.

Chevron said in a Monday court filing that it could lose millions of dollars from future production if the leases are blocked. The company’s Gulf of Mexico operations produce the equivalent of almost 200,000 barrels a day from hundreds of leases it has bought since 2001, a representative of the Houston-based company said in an affidavit.

“Chevron plans to produce from its Gulf of Mexico leases for decades into the future,” said Trent Webre, a Chevron manager in the region.

At the prior Gulf of Mexico auction in 2021, companies offered a combined $192 million for tracts totaling nearly 2,700 square miles (6,993 square kilometers). That sale was subsequently blocked by a federal judge, then reinstated under last year’s climate bill.

Over several months beginning in May the administration plans to auction more than 500 square miles (1,400 square kilometers) of onshore oil and gas leases in Wyoming, New Mexico, Montana, Nevada and other states.

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Brown reported from Billings, Montana.

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