Salazar, Bromwich announce proposed Gulf of Mexico oil and gas lease sale

Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich announced that BOEMRE will hold the first oil and natural gas lease sale in the Gulf of Mexico since the Deepwater Horizon explosion and oil spill.

Offshore staff

WASHINGTON – Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich announced that BOEMRE will hold the first oil and natural gas lease sale in the Gulf of Mexico since the Deepwater Horizon explosion and oil spill. Consistent with steps President Obama announced in May 2011 to expand domestic oil and gas production safely and responsibly, the proposed Western Gulf of Mexico Lease Sale 218 is scheduled to be held in New Orleans on Dec. 14, 2011. The sale will include all available un-leased areas in the Western Gulf Planning Area offshore Texas.

“This sale is an important step toward a secure energy future that includes safe, environmentally-sound development of our domestic energy resources,” Salazar said. “Since Deepwater Horizon, we have strengthened oversight at every stage of the oil and gas development process, including deepwater drilling safety, subsea blowout containment, and spill response capability. Exploration and development of our Western Gulf’s vital energy resources will continue to help power our nation and drive our economy.”

“BOEMRE has taken aggressive steps to renew our commitment to the responsible stewardship of the U.S. Outer Continental Shelf,” Bromwich said. “The decision to hold this sale was made after careful analysis of the best scientific information available and consideration of all public comments received.”

The proposed lease sale encompasses about 3,900 un-leased blocks covering approximately 20.6 million acres. The blocks are located from nine to about 250 mi (14 to 402 km) offshore, in water depths ranging from 16 to more than 10, 975 ft (five to 3,346 m). BOEMRE estimates the proposed lease sale could result in the production of 222 to 423 MMbbl and 1.49 to 2.65 tcf of natural gas.

As part of the Administration’s commitment to provide incentives for diligent development, and to ensure receipt of fair market value for the lease rights sold, BOEMRE proposes to increase the minimum bid amount for blocks in water depths of 1, 312 ft (400 m) and greater to $100 per acre. The minimum bid for those water depths in previous sales was $37.50 per acre.

This change is based on a rigorous historical analysis of the last 15 years of lease sales in the Gulf of Mexico. The analysis, adjusted for energy prices at time of each sale, demonstrates that leases that received high bids of less than $100 per acre have experienced virtually no exploration and development activities. In light of this analysis, BOEMRE has concluded that the increase will have little to no adverse impact on the timing or magnitude of production from tracts offered in this sale. Raising the minimum bid will discourage companies from purchasing leases they are unlikely to explore in the near term.

“BOEMRE is proposing this increase in an effort to ensure that areas with the greatest resource potential are developed, and to decrease the amount of leased acreage that is warehoused and goes unexplored,” Bromwich said. “The change in terms will better ensure that the nation’s resources are being developed in a timely manner.”

The minimum bid amount for leases in the much more heavily explored and produced shallower water depths will remain at $25 per acre.

The lease sale will include environmental stipulations requiring that operators protect biologically sensitive features, as well as marine mammals and sea turtles. These stipulations will require trained observers to ensure compliance and restrict operations when conditions warrant.

Lease Sale 218 is the last remaining Western Gulf Planning Area sale scheduled in the 2007 – 2012 Outer Continental Shelf Oil and Natural Gas Leasing Program. The terms and conditions outlined in the package are not final. Different terms and conditions may be employed in the Final Notice of Sale, which will be published at least 30 days before the sale.

All terms and conditions for Western Sale 218 are detailed in the Proposed Notice of Sale information package.

The Notice of Availability of the Proposed Notice of Sale is available today for inspection in theFederal Register.

08/19/2011

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