MMS issues proposed notice of Eastern Gulf of Mexico Lease Sale 197

The Minerals Management Service announced in the Federal Register the availability of the Proposed Notice of Sale for Eastern Gulf of Mexico (GoM) Lease Sale 197, an offshore oil and gas lease sale scheduled for March 16, 2005.

The Minerals Management Service announced in the Federal Register the availability of the Proposed Notice of Sale for Eastern Gulf of Mexico (GoM) Lease Sale 197, an offshore oil and gas lease sale scheduled for March 16, 2005. This proposed lease sale is the third Eastern GoM Outer Continental Shelf (OCS) lease offering in the last five years, and the configuration is the same as for lease sales 181 and 189, held in December 2001 and December 2003, respectively.

The proposed lease sale area encompasses 124 unleased blocks in an area of the Eastern GoM OCS Planning Area, and covers about 714,240 acres from 100 to 196 mi offshore in water depths of 1,600 to more than 3,425 m. Estimates of undiscovered economically recoverable hydrocarbons in the proposed sale area range from 65-85 MMbbl and 0.265-0.34 tcf of natural gas.

Recently revised provisions proposed for this lease sale include the following:
• Price thresholds when deepwater royalty suspension would end are set at $39/bbl for oil and $6.50/MMbtu for gas, expressed in 2004 dollars
• MMS is considering whether to change royalty suspension price thresholds for deepwater oil and gas from an annual system to a monthly system for future deepwater leases. MMS requests comments on the desirability and the specific components of the monthly approach. Depending on the comments received and further analysis, MMS may choose to retain the annual system or adopt the monthly system. A decision on this issue will be made for the Final Notice of Sale scheduled for February 2005
• A final rule was published on Nov. 26, 2003, which requires compliance with the Department of the Interior's nonprocurement debarment and suspension requirements. Each lessee must communicate this requirement to comply with these regulations to persons with whom they do business related to their lease by including this term as a condition in their contracts and other transactions. This agreement will be evidenced by language prepared by MMS through an Addendum included in each lease resulting from this lease sale.

As a further incentive toward meeting our Nation's energy needs and increasing domestic natural gas and oil production, MMS will continue a royalty suspension of 12 MMboe of for a lease in water depths of 1,600 m or deeper in this proposed notice of sale.

At this stage in the lease sale process, the proposed notice of terms and conditions will be sent to the Governors of the affected states for a 60-day comment period. The states are Florida, Alabama, Louisiana, and Mississippi.

Statistical Information (Lease Sale 197):
• Size: 124 unleased blocks; 714,240 acres
• Initial period: 10 years
• Minimum bonus bid amount: $37.50 per acre, or fraction thereof
• Rental/minimum royalty rates: $7.50 per acre, or fraction thereof
• Royalty rates: 12 1/2%
• Royalty suspension area: A royalty suspension of 12 MMboe will apply to all leases in this sale.

The Proposed Notice of Lease Sale 197 will be posted on the MMS website at www.gomr.mms.gov. In addition, copies of the document are available from the MMS Gulf of Mexico Regional Office, Public Information Unit, 1201 Elmwood Park Boulevard, New Orleans, Louisiana 70123. Telephone (504) 736-2591, toll free 1-800-200-GULF.

11-08-04

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