Feds to hold biggest-ever, oil lease sale in the Gulf

13th November 2017   ·   0 Comments

By Susan Buchanan
Contributing Writer

With the 2010 BP spill still fresh in many minds, the U.S. Interior Department plans to hold the nation’s biggest oil and gas lease sale in the Gulf of Mexico in March. Some 76.97 million acres in federal waters, mainly in offshore Louisiana, Mississippi and Alabama, will be offered.

“Gulf production was 1.6 million barrels per day last year and could be a record 1.7 million to 1.8 million this year and maybe two million in the near future,” Gulf of Mexico regional director Mike Celata with the Bureau of Ocean Energy Management said last week. He spoke at a November 7 energy forum at the Port of New Orleans. The event was sponsored by the Houston-based Consumer Energy Alliance and the port. BOEM is part of the Interior Department.

“The Gulf of Mexico is and will remain a crown jewel” in the nation’s energy production, Celata said. He and other panelists said Lease Sale 250, scheduled for March 21, will spur job creation in an ongoing period of low oil prices, and will help make the country energy dominant, strengthen national security and address the needs of a growing population.

The March sale, offering an area the size of New Mexico, will include all available, unleased acres on the Gulf’s Outer Continental Shelf. BOEM will auction 14,375 blocks, located three to 230 miles offshore, in the Gulf’s central, western and eastern planning areas in water from nine feet to 11,115 feet deep. The sale will be live-streamed from BOEM’s office on Elmwood Park Boulevard in suburban Metairie in Jefferson Parish. That’s well away from downtown New Orleans, where environmentalists have protested against past auctions. The sale’s opening will be shown on the agency’s website that morning. Visitors won’t be allowed.

The auction will be the second, offshore sale under the agency’s National Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022, Celata said. At Lease Sale 249, held in August, high bids totaled $121 million. That sale was the first to be live-streamed from Metairie, where several protesters were arrested the day before the event.

Last week’s panelists discussed energy’s role in Louisiana’s economy. “Our folks have had to pivot with the changing oil and gas industry in recent decades,” said state Senator Norby Chabert, who grew up in Terrebonne Parish. “Twenty years ago, if you said we’d be drilling in the ultra-deep someday, everyone would have called you crazy.”

Ultra-deep drilling projects have accelerated in the last ten years. BP PLC, Chevron, Statoil, Shell and Conoco-Phillips are developing very deep fields in the Gulf, with federal permission.

Chabert disagrees with those doubting the potential for oil and gas demand, and he said that by year 2050 the world will have nine billion people, versus more than seven billion today. Population growth will boost the need for energy resources, including oil, renewables and alternatives, he said.

Louisiana has some scar tissue from the hit that offshore drilling took when oil prices dropped in the 1980s, panelist Stephen Waguespack, president of the Louisiana Association of Business and Industry, said. The state’s economy is service based and when oil and gas boom, small businesses flourish. “You can’t service air,” he said, and called the upcoming lease sale in the Gulf a no-brainer.

In Louisiana, where recreational fishing is an almost $2 billion industry, “we’ve had no better commercial partner than oil and gas,” Coastal Conservation Association of Louisiana executive director David Cresson said. The oil industry developed the state’s rigs-to-reefs program, re-purposing old structures for fish habitat. Artificial reefs in the GOM have been found to provide more habitat for species than rain forests do elsewhere, he said.

Cresson said Shell, Chevron and Conoco-Phillips are building football fields of land along the coast.

The projects that Cresson alluded to include Shell’s support for recycling oyster shells from New Orleans restaurants to restore reefs and shoreline. Conoco-Phillips, a big Louisiana wetlands owner, has restored parts of its own acreage. Conoco-Phillips, Chevron and CITGO Petroleum have partnered with America’s Wetlands Foundation in a project to mitigate erosion along the Gulf Intracoastal Waterway. And oil companies have purchased mitigation bank credits for developing wetlands.

Nonetheless, hundreds of legacy lawsuits, including several by coastal parishes, have been filed in Louisiana against oil and gas companies for destroying wetlands.

On last week’s panel, South Louisiana Economic Council president and CEO Vic Lafont said fishing, shrimping and oil and gas activities coexist along the Gulf. Builders of fishing boats started producing supply boats for offshore oil years ago and are now building increasingly bigger vessels for foreign companies and governments. Edison Chouest Offshore and Bollinger Shipyards are two of the many local builders that have expanded to meet U.S. and overseas needs, he said.

Greater Lafourche Port Commission executive director Chett Chiasson said lower oil prices over the last three years have given the port, which services over 90 percent of the Gulf’s deepwater output, a chance to catch its breath after rapid expansion. Also on the positive side, the port signed three new leases with tenants recently. The port supports “holistic resiliency,” seeing that its development is environmentally sustainable as it addresses subsidence and land loss, he said.
West Texas Intermediate crude oil prices reached a more than two-year high of $57.35 a barrel last week, but remain below values of over $105 in mid-2014.

Under the federal Gulf of Mexico Energy Security Act or GOMESA, Louisiana, Mississippi, Alabama and Texas share 37.5 percent of Gulf offshore oil and gas revenues, including bonus bids, rentals and production royalties. In effect since fiscal 2007, the law has applied to two small sections of the Gulf so far. Louisiana has pocketed a few million dollars yearly under GOMESA. Another phase of the law, beginning as fiscal 2018 ends, will include a larger Gulf area and some wells that have been activated since 2007. The four states also receive a share of revenue from oil and gas output under another law, the Outer Continental Shelf Lands Act.

Louisiana, for its coastal restoration, has begun spending some of an expected billions of dollars in payments from BP and partners over 15 years, following the 2010 rig explosion.

Meanwhile, environmentalists worry that the Gulf region is still coping with the ecological and public health impacts of the 2010 spill, and they believe that with climate change and rising seas the coast must be protected from industries that extract resources.

This article originally published in the November 13, 2017 print edition of The Louisiana Weekly newspaper.