In keeping with the Trump Administration’s goal of strengthening America’s energy independence, the Bureau of Ocean Energy Management (BOEM) Acting Director Walter Cruickshank and Gulf of Mexico Regional Director Mike Celata announced that BOEM will offer approximately 78 million acres for a region-wide lease sale scheduled for November 18, 2020. The sale will include all available unleased areas in federal waters of the Gulf of Mexico.
“Domestic offshore oil and gas production plays a vital role in strengthening our nation’s energy security,” said Cruickshank. “A strong offshore energy program provides affordable and reliable energy and jobs Americans need to fuel our economy."
In addition, BOEM is offering a 10-year primary term in water depths of 800 meters or deeper. The change means that leases in water depths of 800 meters to 1600 meters will start out with a primary term of 10 years, without the need to earn an "extension" of the primary term to achieve the full 10 years. Before 2010 BOEM’s predecessor agency offered Gulf of Mexico lease sales with these terms, however in 2010 that was changed to a 7-year primary term (which could be "extended" for an additional 3 years if the lessee spudded a well within the first 7 years). After a careful analysis of the past 10 years’ data, for Sale 256, BOEM is reverting to offering the 10-year primary term in these specific water depths. Leases in 1600 meters of water or deeper will continue to have the full 10-year term as in prior sales.
Lease Sale 256, scheduled to be livestreamed from New Orleans, will be the seventh offshore sale under the 2017-2022 Outer Continental Shelf (OCS) Oil and Gas Leasing Program. Under this program, ten region-wide lease sales are scheduled for the Gulf, where there is substantial resource potential, and oil and gas infrastructure is well established. Two Gulf lease sales will be held each year and include all available blocks in the combined Western, Central, and Eastern Gulf of Mexico Planning Areas.
Lease Sale 256 will include approximately 14,755, unleased blocks, located from three to 231 miles offshore, in the Gulf’s Western, Central and Eastern planning areas in water depths ranging from nine to more than 11,115 feet (three to 3,400 meters). Excluded from the lease sale are: blocks subject to the congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006; blocks adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap; and whole blocks and partial blocks within the current boundaries of the Flower Garden Banks National Marine Sanctuary.
The Gulf of Mexico OCS, covering about 160 million acres, is estimated to contain about 48 billion barrels of undiscovered technically recoverable oil and 141 trillion cubic feet of undiscovered technically recoverable gas. Under the Trump Administration, America is now the #1 producer of oil on the planet, the first time in 40 years, thanks in great part to the OCS, specifically in the Gulf of Mexico. The Gulf is one of the most important regions for energy resources and infrastructure. Oil and natural gas production in the Gulf is crucial for our Nation’s national security, economy, and American jobs.
Revenues received from OCS leases (including high bids, rental payments and royalty payments) are directed to the newly created National Parks and Public Land Legacy Restoration Fund (includes funds for the Bureau of Indian Education), as well as to the U.S. Treasury, the Land and Water Conservation Fund, the Historic Preservation Fund, and certain Gulf Coast states (Texas, Louisiana, Mississippi, Alabama). “BOEM’s staff works hard to protect marine life and the environment in which they live. I continue to be proud of the workers who make these sales happen," BOEM’s Celata said.
Leases resulting from this sale will include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species, and avoid potential conflicts associated with oil and gas development in the region. BOEM has included fiscal terms that take into account market conditions and ensure taxpayers receive a fair return for use of the OCS. Terms include a 12.5% royalty rate for leases in less than 200 meters of water depth, and a royalty rate of 18.75% for all other leases issued pursuant to the sale, in recognition of current hydrocarbon price conditions and the marginal nature of remaining Gulf of Mexico shallow water resources.
An additional stipulation has been added specifying the time frame for decisions on an Application for Permit to Drill (APD) and an Application for Permit to Modify (APM). Under the current practice, the Bureau of Safety and Environmental Enforcement (BSEE) issues greater than 90% of APMs and APDs in under 70 days. Under this stipulation BSEE has 75 days to approve an APD or APM after the application has been received, with some exceptions. This change is being made to facilitate efficient exploration and development of a lease area, consistent with all current practices pertaining to safety and environmental laws.
All terms and conditions are detailed in the Final Notice of Sale (FNOS) information package, which is available at: www.boem.gov/sale-256. Of note, BOEM will be accepting bids by mail only for Region-wide Sale 256. Walk-in bidding will not be permitted for this sale. The Notice of Availability of the FNOS will be available for inspection in the Federal Register at: http://www.archives.gov/federal-register/public-inspection/index.html on Oct. 16, 2020 and will publish in the Federal Register on Oct. 19, 2020.