Companies bid $ 192 million in first sale of Biden Gulf oil

Energy companies such as Shell, BP, Chevron and ExxonMobil offered a total of $ 192 million for drilling rights in federal oil and gas reserves in the Gulf of Mexico on Wednesday, when the first government lease auction under President Joe Biden exposed the obstacles you face to achieve. Climate targets depend on deep cuts in fossil fuel emissions.

The Interior Department auction came next Republican state attorneys general The Louisiana-led company successfully challenged a sales suspension that Biden imposed when he took office.

The companies bid for 308 parcels totaling almost 2,700 square miles (6,950 square kilometers). It marked the largest acreage and the second-highest total bid since bidding resumed across the Gulf in 2017.

What is driving the increased interest is a rebound in oil prices and uncertainty about the future of the lease program, industry analysts said. Biden campaigned on promises to end drilling on federally owned land and waters, which includes the Gulf.

“Prices are higher now than they have been since 2018,” said Rene Santos of S&P Global Platts. “The other thing is the fear that the Biden administration will be here for another three years. They are certainly not going to accelerate the number of lease sales and could potentially have fewer sales.”

It will take years to develop the leases before companies start pumping crude. That means they could continue to produce well beyond 2030, when scientists say the world must be on track to reduce greenhouse gas emissions. to avoid catastrophic climate change.

However, even when Biden has tried cajole other world leaders To strengthen efforts against global warming, including at this month’s UN climate talks in Scotland, he has struggled to gain ground on climate issues at home.

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The administration has proposed another round of oil and gas sales early next year in Wyoming, Colorado, Montana and other states. Interior Department officials proceeded despite concluding that burning fuels could generate billions of dollars in possible future climate damage.

Emissions from the burning and extraction of fossil fuels from public lands and waters account for about a quarter of US carbon dioxide emissions, according to the US Geological Survey.

“What is really haunting people right now is this conflict between the short and the long term when it comes to energy policy,” said Jim Krane, an energy studies fellow at Rice University in Houston. “We still need this energy system that is basically causing climate change, even as we fight climate change.”

Wednesday’s live-streamed auction invited energy companies to bid for drilling leases in 136,000 square miles (352,000 square kilometers), about twice the area of ​​Florida. Federal officials estimated before the sale that it could lead to the production of up to 1.1 billion barrels of oil and 4.4 trillion cubic feet of natural gas.

Shell Offshore Inc., the largest lessee in the Gulf, said the 20 areas for which it successfully bid $ 17.9 million could offer development opportunities near existing rigs or new areas.

“The absolute continuing need for continued competitive leasing in the US Gulf of Mexico,” said Shell spokeswoman Cindy Babski.

Chevron USA was the highest bidder, offering nearly $ 49 million for 34 deals. BP Exploration and Production had $ 30 million in high bids in 46 tranches, and Anadarko US Offshore had nearly $ 40 million in high bids, including the highest bid of the day, $ 10 million, in 30 tranches.

ExxonMobil bid nearly $ 15 million in two areas off the Texas coast in the Northwest Gulf.

Those 94 tracts are in shallow water, less than 200 meters (656 feet) deep, where oil has mostly been depleted and there are few active leases.

Not far away on the Houston Ship Channel, Exxon is seeking a government-industry collaboration that would elevate $ 100 billion to capture carbon dioxide From industrial plants, it is piped and injected deep under the floor of the Gulf of Mexico, a process known as carbon capture and sequestration, or CCS.

“Exxon’s offerings have to be a game in their proposed CCS project,” said Justin Rostant of industrial consultancy Wood Mackenzie.

ExxonMobil spokesman Todd Spitler declined to say whether there was a link between their offers and the carbon sequestration proposal. The company is evaluating the geology of the subsurface for “future business potential” and will work with the Department of the Interior on its plans after the leases are awarded, he said.

Shallow waters are often more attractive to smaller oil companies with less to spend on expensive deepwater exploration, said Krane of Rice University. As carbon management becomes more viable, he said, shallow reaches will become attractive for things beyond oil production.

Environmental reviews of the lease auction, conducted under former President Donald Trump and affirmed under Biden, came to an unlikely conclusion: Extracting and burning the fuel would result in fewer climate-changing emissions than leaving it behind.

Similar claims in two other cases, in Alaska, were rejected by federal courts after challenges from environmentalists. Climate scientist Peter Erickson, whose work was cited by justices in one of the cases, said the Interior Department’s analysis had a glaring omission: It excluded increases in greenhouse gases in foreign countries that result from having more oil than Gulf entering the market.

Federal officials recently changed their emissions modeling methods, citing Erickson’s work, but said it was too late to use that approach for Wednesday’s auction.

A lawyer for environmental groups who challenged Wednesday’s sale in federal court said it was based on “incorrect data” that does not reflect its impact on the environment.

“It is basically a gift to the industry of millions of acres of the Gulf of Mexico so that they can maintain production for years, at a time when we must move away from the development of fossil fuels,” said Earthjustice attorney Brettny Hardy.

The Gulf of Mexico represents approximately 15% of the United States’ total crude production and 5% of its natural gas.

Federal officials have 90 days to award or reject bids.

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Brown reported from Billings, Montana.