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BOEM announces region-wide oil and gas lease sale for Gulf of Mexico

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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 18 November 2020. The sale will include all available unleased areas in federal waters off the Gulf of Mexico.

“Domestic offshore oil and gas production plays a vital role in strengthening our nation’s energy security,” Mr Cruickshank said. “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 m or deeper. The change means that leases in water depths of 800 m to 1600 m 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 seven-year primary term (which could be “extended” for an additional three years if the lessee spudded a well within the first seven 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 m 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, 10 region-wide lease sales are scheduled for the Gulf of Mexico, where there is substantial resource potential, and oil and gas infrastructure is well established. Two Gulf of Mexico 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 Western, Central and Eastern planning areas in water depths ranging from nine to more than 11,115 ft. 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 US 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 bbl of undiscovered technically recoverable oil and 141 trillion cu ft of undiscovered technically recoverable gas. The US is now the number one producer of oil on the planet thanks in great part to the OCS, specifically in the Gulf of Mexico. The Gulf of Mexico is one of the most important regions for energy resources and infrastructure. Oil and natural gas production in the Gulf is crucial for the US’ national security, economy, and 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, as well as to the US 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,” Mr 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 m 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 and safety and environmental laws.

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