In late August, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) completed its first auction of wind energy development rights in the U.S. portion of the Gulf of Mexico. It was not a resounding success; only one of three available leases received a bid. (These 20 American companies have the worst reputations.)
That single bidder, Germany’s RWE, won the right to develop 102,480 acres offshore of Louisiana for $5.6 million. In February of 2022, a joint venture of Britain’s National Grid and RWE paid $1.1 billion lease rights to 114,277 acres in an area known as the New York Bight. Five other winning bids for the New York auction brought the leasing total to $4.37 billion, still the largest auction of wind energy leases in the United States.
This past March, the BOEM held its first oil and gas auction since November 2021 for Gulf of Mexico leases. The sale drew a total of $310 million in bids, up from $257 million in the 2021 auction. The March sale raised hopes that offshore oil and gas exploration was making a comeback.
As part of last year’s compromise to obtain passage of the Inflation Reduction Act, the Biden administration agreed to hold two Gulf of Mexico oil and gas lease sales by September 30. The second one, Lease Sale 261, is scheduled for September 27.
In late July, the BOEM amended its terms for the Lease Sale 261 by slicing off 6 million acres from the original planned sale of 66 million acres and restricting vehicle activity in the lease area. According to the court ruling handed down on Thursday, BOEM “justified both measures as necessary for the protection of Rice’s whale, a species of baleen whale native to the northeastern Gulf of Mexico that is protected under the Endangered Species Act.”
The State of Louisiana, the American Petroleum Institute (API) and Chevron filed suit in the federal district court for Western Louisiana, claiming that the new lease terms contravened the agreement reached between Congress and the Biden administration by introducing “substantial new conditions and complications, let alone withdraw[ing] millions of acres at the last minute.”
In a 30-page decision, District Court Judge James D. Cain, Jr. prevented the BOEM from removing the contested 6 million acres from Lease Sale 261 and implementing the vessel traffic restriction. Judge Cain further ordered that the sale be held before September 30. (Case # 2:23-cv-01157 in the U.S. District Court for the Western District of Louisiana, Lake Charles Division)
In a statement Thursday morning, API senior vice president and general counsel Ryan Meyers said:
We are pleased that the court has hit the brakes on the Biden Administration’s ill-conceived effort to restrict American development of reliable, lower-carbon energy in the Gulf of Mexico. Today’s decision will allow Lease Sale 261 to move forward as directed by Congress in the Inflation Reduction Act, removing the unjustified restrictions on vessel traffic imposed by the Department of the Interior and restoring the more than 6 million acres to the sale. This decision is an important step toward greater certainty for American energy workers, a more robust Gulf Coast economy and a stronger future for U.S. energy security.
With oil prices already above $90 a barrel and pump prices for regular gasoline averaging nearly $4.00 a gallon nationally, the hunt for more oil makes sense to most people. Whether it makes sense to oil and gas producers is a separate question. In June of 2012, an oil and gas lease sale for some 39 million acres in the Gulf brought in bids totaling $2.6 billion. Those days are long gone.
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