Photo: Illustration; Source: BOEM

BOEM proposes 78.8 million-acre Gulf of Mexico lease sale

The U.S. Bureau of Ocean Energy Management (BOEM) will offer over 78 million acres for a region-wide lease sale scheduled for November 2020.

BOEM said on Friday that it would offer approximately 78.8 million acres for a region-wide lease sale.

Lease Sale 256 will be the seventh offshore sale under the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program and it would include approximately 14,755 unleased blocks – all of the available unleased areas in federal waters of the Gulf of Mexico.

Lease sale 256 map; Source: BOEM
Lease sale 256 map; Source: BOEM

Mike Celata, director of BOEM’s Gulf of Mexico region, said: “The Gulf of Mexico provides a fundamental role for our nation’s energy portfolio. As one of the most productive basins in the world, the development of its resources is essential to our nation’s energy security”.

The Gulf of Mexico Outer Continental Shelf (OCS), covering about 160 million acres, is estimated to contain about 48 billion barrels of undiscovered technically recoverable oil and 141 trillion cubic feet of undiscovered technically recoverable gas.

Revenues received from OCS leases, including high bids, rental payments, and royalty payments, are directed to the U.S. Treasury, certain Gulf Coast states – Texas, Louisiana, Mississippi, and Alabama – the Land and Water Conservation Fund, and the Historic Preservation Fund.

According to BOEM, leases resulting from this proposed sale would include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species, and avoid potential conflicts associated with oil and gas development in the region.

In addition, blocks subject to the congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006, blocks adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap, and whole blocks and partial blocks within the current boundaries of the Flower Garden Banks National Marine Sanctuary are unavailable and excluded from the lease sale.

BOEM has also included fiscal terms that take into account market conditions and ensure taxpayers receive a fair return for use of the OCS.

These terms include a 12.5 per cent royalty rate for leases in less than 200 meters of water depth, and a royalty rate of 18.75 per cent for all other leases issued pursuant to the sale, in recognition of current hydrocarbon price conditions and the marginal nature of remaining Gulf of Mexico shallow water resources.

It is worth noting that Lease Sale 256 was originally scheduled for August, but due to the need to conduct additional analysis to consider recent changes in the oil and gas markets, which were due in part to the COVID-19 pandemic, the sale was moved to November.

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