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BOEM proposes first GOM oil and gas lease sale for 2021

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The Bureau of Ocean Energy Management (BOEM) proposed to offer approximately 78.2 million acres for a region-wide Gulf of Mexico lease sale scheduled for March 2021. Lease Sale 257, scheduled to be live-streamed from New Orleans, will be the eighth offshore sale under the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program. The sale will include approximately 14,594 unleased blocks – all of the available unleased areas in federal waters of the Gulf of Mexico.

The Notice of Availability (NOA) of the Proposed Notice (PNOS) of Sale for Lease Sale 257 will be published 18 November in the Federal Register. BOEM will also hold Lease Sale 256 on 18 November. Sale 256 was delayed from its planned August 2020 date to allow time for additional analysis of oil and gas markets in light of the COVID-19 pandemic.

“Despite circumstances imposed by the coronavirus, we are confident that industry remains interested in acquiring new leases to support their portfolios,” said Mike Celata, Director of BOEM’s Gulf of Mexico Region. “The Gulf of Mexico is a world-class resource area that serves a key role in our nation’s energy security.”

The Gulf of Mexico Outer Continental Shelf (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. Only blocks in the western, central and a small part of the eastern Gulf will be offered at the sale under current law.

Revenue received from OCS leases, including high bids, rents and royalties, support the treasuries of the Gulf Coast states of Texas, Louisiana, Mississippi, and Alabama.  Portions also go to the US Treasury and two nationwide programs, the Land and Water Conservation Fund and the Historic Preservation Fund. In Fiscal Year 2020, almost $353 million in revenue from oil and gas development in the Gulf was distributed to these states and programs.

Leases resulting from this proposed sale would 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. In addition, the following areas are unavailable and excluded from the lease sale: 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.

BOEM has also included fiscal terms that take into account market conditions and ensure taxpayers receive a fair return for use of the OCS. These 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.

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