$264M in Gulf oil sales held under climate compromise

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.

Wednesday’s winning bids were 38% higher than last bid And 2017 marked the highest gain since the resumption of auctions across the Gulf. Acreage receiving acreage is comparable to 2021.

Another bay lease sale is planned for September. Not sure how many more 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.

See also  Russia-Ukraine War Latest Updates: Biden in Poland to Meet NATO Secretary

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.

See also  Federal judge adjourns hearing in Trump's DC election meddling case

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 part of the Gulf, where the shallow water — less than 656 feet (200 meters) deep — has mostly played oil and has some operating leases.

Analysts said the acquisition is related 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. Oil and gas companies are banking on carbon capture to extend the life of their fossil fuel facilities, but critics say the technology is unproven and less efficient than switching to renewable wind and solar energy.

All leases sold are for oil and gas exploration and development, federal officials said.

That means Exxon will need the Interior Department’s cooperation to amend its leases before it can pursue 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. “I don’t know how that’s going to play out for Exxon.”

ExxonMobil spokesman Todd Spitler declined to say whether its bid was connected to the ship channel proposal.

“Once the blocks are allotted we will work on the plans with the home department,” he said.

Before the final auction results were announced, representatives of the American Petroleum Institute and the National Oceanic Industries Alliance called for more lease sales to be scheduled so companies can begin exploration work.

See also  Pelosi joins US Democrats' call for Biden to end arms transfer to Israel | Israel's War on Gaza News

Environmentalists renewed calls for Biden to follow through on campaign pledges to end new drilling and leasing 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.

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. The 2021 sale was later blocked It was reinstated under the climate bill last year, by a federal judge.

“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 in the Gulf of Mexico and offshore,” he said. George Dorgan is an attorney with Earth Justice, which is representing environmental groups in the case.

Chevron said in a Monday court filing that it could lose millions of dollars if the leases are blocked. The company has planned to produce oil from the Gulf for decades, said Trent Webre, Chevron manager of the region. .

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.

Leave a Reply

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