First of 30 oil lease sales planned for Gulf of Mexico draws US$279 million

Oil platforms are visible through the haze near the Flower Garden Banks National Marine Sanctuary in the Gulf of Mexico, off the coast of Galveston, Texas, Saturday, Sept. 16, 2023. (AP Photo/LM Otero)

WASHINGTON — Oil companies offered US$279 million for drilling rights in the Gulf of Mexico on Wednesday in the first of 30 sales planned for the region under Republican efforts to ramp up U.S. fossil fuel production.

The sale came after U.S. President Donald Trump’s administration recently announced plans to allow new drilling off Florida and California for the first time in decades. That’s drawn pushback including from Republicans worried about impacts to tourism.

Wednesday’s sale was mandated by the sweeping tax-and-spending bill approved by Republicans over the summer. Under that legislation, companies will pay a 12.5 per cent royalty on oil produced from the leases. That’s the lowest royalty level for deep-water drilling since 2007.

Thirty companies submitted bids, including industry giants Chevron, Shell and BP, federal officials said. The total amount of high bids was down by more than US$100 million from the previous lease sale in the Gulf of Mexico, under former Democratic U.S. President Joe Biden, in December 2023.

“This sale reflects a significant step in the federal government’s efforts to restore U.S. energy dominance and advance responsible offshore energy development,” said Laura Robbins, acting director of the Gulf region for the U.S. Bureau of Ocean Energy Management, which is part of the U.S. Interior Department.

The administration’s promotion of fossil fuels contrasts sharply with its hostility to renewable energy, particularly offshore wind. A judge on Monday struck down an executive order from Trump blocking wind energy projects, saying it violated U.S. law.

Environmentalists said the fossil fuel sales would put wildlife in the Gulf at an higher risk of dying in oil spills. Spills occur regularly in the region and have included the 2010 Deepwater Horizon tragedy that killed 11 workers in an oil rig explosion and unleashed a massive spill.

“The Gulf is already overwhelmed with thousands of oil rigs and pipelines, and oil companies are doing a terrible job of cleaning up after themselves,” said Rachel Matthews with the Centre for Biological Diversity.

Erik Milito with the U.S. National Ocean Industries Association, an industry group, said the takeaway from Wednesday’s sale was that the Gulf “is open.”

While results of individual lease sales may fluctuate, Milito added, “the real success is the resumption of a regular leasing cadence.”

“Knowing that (another lease sale) is coming in March 2026 allows companies to plan, study, and refine their bids, rather than being forced to respond to the uncertainty of a politically-driven multiyear pause,” he said.

At least two lease sales annually are mandated through 2039 and one in 2040.

The sales support an executive order by Trump that directs federal agencies to accelerate offshore oil and gas development, U.S. Interior Secretary Doug Burgum said in a statement. He said it would unlock investment, strengthen U.S. energy security and create jobs.

But Earthjustice attorney George Torgun said the Trump administration conducted the sale without analyzing how it would expose the entire Gulf region to oil spills, how communities could be harmed by pollution and how it could devastate vulnerable marine life such as the endangered Rice’s whale, which numbers only in the dozens and lives in the Gulf of Mexico.

The environmental group has asked a federal judge to ensure that the lease sale and future oil sales better protect Gulf communities.

Only a small portion of parcels offered for sale typically receive bids, in areas where companies want to expand their existing drilling activities or where they foresee future development potential. It can be years before drilling occurs.

The drilling leases sold in December 2023 and during another sale in March 2023 are held up by litigation, according to Robbins. A federal court ruled this spring that U.S. officials did not adequately account for impacts to planet-warming greenhouse gas emissions and the Rice’s whale.

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Brown reported from Billings, Montana.

Matthew Brown And Matthew Daly, The Associated Press