US to auction Gulf of Mexico oil as part of climate deal

NEW ORLEANS (AP) — The Biden administration will on Wednesday auction oil and gas leases covering more than 114,000 square miles (295,000 square kilometers) in the Gulf of Mexico in a sale mandated by last year’s climate law compromise.

The online auction – which is expected to draw interest from big oil companies like ExxonMobil and Chevron – is the first in more than a year and could see the loyalty of environmentalists and young voters who supported President Joe Biden in 2020 but frustrated by this month further challenge approval of the giant Willow drilling project in northern Alaska.

Development of the Gulf of Mexico public water leases for sale 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 this oil would increase planet-warming carbon dioxide emissions by tens of millions of tons, the analysis said.

Oil prices have fallen sharply over the past year, and it’s uncertain how many companies will be willing to invest in new leases. Another sale is slated for September, but it’s unknown how many more management might complete, which could hamper the companies’ expansion plans.

However, analyst Sami Yahya said the 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 S&P Global’s Yahya.

The Home Department’s sale comes two days before a deadline set in last year’s climate law that Biden signed into law. The measure banned the leasing of public land for renewable energy unless tens of millions of acres were first offered for fossil fuels. This was a concession to gain support from West Virginia Democrat Joe Manchin, a supporter of the fossil fuel industry.

The underwater packages being auctioned on Wednesday cover an area larger than Arizona. At previous auctions of a similar size, only a fraction of the available space was sold.

Bids from companies were due Tuesday and were due to open in New Orleans on Wednesday at 9 a.m.

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

Because offshore packages take years to develop before crude oil is pumped, the leases could produce oil and gas well beyond 2030, when scientists say the world must have drastically reduced greenhouse gas emissions to stave off catastrophic climate change.

Sea level rise is a factor in Louisiana’s steady loss of coastal wetlands, which not only support a variety of fisheries and wildlife, but also provide a buffer between inland population areas and hurricanes, which scientists say are associated with warming of the world become stronger.

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

A lawsuit challenging Wednesday’s sale is pending before a U.S. District Judge in Louisiana. It takes the government 90 days to evaluate all bids, which means they can still be blocked before submission.

“The government has talked a lot about taking climate change seriously and moving our economy off fossil fuels, and yet we continue to see massive oil and gas projects, both onshore with Willow and offshore in the Gulf of Mexico,” he said George Torgun, an Earthjustice attorney representing environmental groups in the case.

Chevron said in a court filing Monday 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 nearly 200,000 barrels per day from hundreds of leases it has purchased since 2001, a representative for the Houston-based company said in a affidavit.

“Chevron plans to produce from its leases in the Gulf of Mexico for the next several decades,” said Trent Webre, a Chevron executive in the region.

At the previous Gulf of Mexico auction in 2021, companies bid a total of $192 million for lands totaling nearly 2,700 square miles (6,993 square kilometers). That sale was subsequently blocked by a federal judge and then reinstated under last year’s climate law.

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.


Brown reported from Billings, Montana.

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