Gulf of Mexico oil & gas lease sale on again as US sets a date for December

The U.S. Bureau of Ocean Energy Management (BOEM) has set a new date for the next offshore oil and gas lease sale for acreage in the Gulf of Mexico (GOM) after postponing it to comply with a court order.

Lease Sale 261 for acreage in the Gulf of Mexico was originally planned to be held on September 27, 2023, with more than 6 million acres removed from the sale. However, the American Petroleum Institute (API), Chevron, Shell, and the State of Louisiana filed a motion for preliminary injunction to oppose the reduction in acreage and restrictions on oil and natural gas vessel traffic, seeking immediate action from the court ahead of the planned lease sale. As a result, the court hit the brakes on the attempts to restrict the acreage available for the lease sale on September 21, 2023.

Afterward, the United States sought an emergency stay of the order to allow time for a more orderly lease sale process. As the court’s decision sparked environmental groups’ ire, they appealed the court order granting a preliminary injunction request to remove protections for the Rice’s whale. Following the United States Court of Appeals for the Fifth Circuit ruling, BOEM put the lease sale on ice for a few days to iron out all the details. A few days later, a new date was set to hold the lease sale on November 8, 2023.

However, the legal challenges for the lease sale did not end there, as another order, issued by the United States Court of Appeals for the Fifth Circuit on October 26, 2023, in Louisiana v. Haaland, led the Bureau of Ocean Energy Management to put off Lease Sale 261 until the court rules since uncertainty surrounded the areas and stipulations that should be included in the sale notice.

Things have now changed once again following the order issued by the United States Court of Appeals for the Fifth Circuit on November 14, 2023, which requires BOEM to hold Lease Sale 261 within 37 days, removes the restrictions on oil and gas vessels, and restores the previously removed acreage. Due to this, BOEM has scheduled Lease Sale 261 for December 20, 2023. Pursuant to direction from the court, lease blocks that were previously excluded due to concerns regarding potential impacts to the Rice’s whale population in the Gulf of Mexico will be included.

In addition, BOEM will remove portions of a related stipulation meant to address those potential impacts from the lease terms for any leases that may result from this lease sale. A final notice of sale is slated to be published in the Federal Register on November 20, 2023, and will be available for public inspection on November 17, 2023. BOEM will livestream the opening of bids at 9 a.m. CDT on December 20, 2023.

In response to this, Ryan Meyers, American Petroleum Institute’s Senior Vice President and General Counsel, remarked: “Energy independence scored an important win tonight with the Fifth Circuit decision lifting unjustified restrictions on oil and natural gas vessels and restoring acreage for offshore energy development. The U.S. Gulf of Mexico plays a critical role in maintaining affordable, reliable American energy production, and today’s decision creates greater certainty for the essential energy workforce and the entire Gulf Coast economy.” 

Furthermore, Lease Sale 261 is the final offshore lease sale mandated by the Inflation Reduction Act and is likely to be the only offshore sale scheduled to take place until 2025, as the proposed final program for 2024-2029 offshore oil and gas leasing in the Gulf of Mexico comes with the lowest number of offshore oil and gas lease sales in U.S. history. This plan encompasses a maximum of three potential oil and gas lease sales in the Gulf of Mexico area slated for 2025, 2027, and 2029, respectively.

Moreover, the three proposed lease sales are said to be the minimum number that would enable the Interior Department to continue to expand its offshore wind leasing program through 2030 in compliance with the terms of the IRA. The plan entails zero oil and gas lease sales in the Atlantic, Pacific, and Alaskan waters.

According to the U.S. Energy Information Administration (EIA), the Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude oil production, and federal offshore natural gas production in the Gulf accounts for 5% of total U.S. dry production.

API highlights that the U.S. Gulf of Mexico produces some of the lowest carbon-intensity barrels in the world, thus, constrained production in the basin could be replaced by higher carbon-intensity barrels from elsewhere in the world.