Even though the U.S. Bureau of Ocean Energy Management (BOEM) blamed the lack of interest for the most recent Western Gulf of Mexico (GoM) lease sale on current crude oil market conditions, that doesn’t come close to telling the whole story about the worst lease sale with the fewest participants and lowest bids since 1983.

For 33 blocks out of 4,000 blocks offered—a measly 0.8% of 1%—only $22.7 million in high bids were uncovered. Of the 33 high bids, BHP Billiton Petroleum (Deepwater) Inc. had 26 bids.

According to the Aug. 19 BOEM press release, “Lease Sale 246 builds on the fi rst seven sales held under the Obama Administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012 to 2017.” If it built on the earlier sales, it didn’t build much. The only two places where the federal government is holding lease sales are the western GoM and the central GoM.

It makes one wonder what kind of results there would have been in a down market if the sale had been in the eastern GoM, Baltimore Canyon or off the Carolina coast. The western GoM has never drawn an overwhelming amount of interest, and having yet another western Gulf sale won’t change that.

The federal government puts a lot of spin on Gulf lease sales, but the pickings are getting slimmer as the same blocks get offered over and over again. If the government wants to increase interest and boost revenues, it would behoove BOEM to open new areas.

Given the opposition to offshore drilling in Congress, though, opening new areas is easier said than done. Following the federal government’s approval for Royal Dutch Shell to drill offshore Alaska, 12 U.S. senators—all of whom oppose offshore drilling—in a letter asked the Securities and Exchange Commission (SEC) to “conduct a full review of the disclosures of companies currently drilling or planning to drill for oil offshore in the Gulf of Mexico and the Atlantic, Pacific and Arctic Oceans and take necessary action to protect investors and maintain the integrity of the market.”

The senators include Ben Cardin (D-Md.), Sheldon Whitehouse (D-R.I.), Dick Durbin (D-Ill.), Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Barbara Boxer (D-Calif.), Bob Menendez (D-N.J.), Patrick Leahy (D-Vt.), Richard Blumenthal (D-Conn.), Brian Schatz (D-Hawaii), Bernie Sanders (D-Vt.) and Cory Booker (D-N.J.).

Except for the senators from Illinois and California, not a single other state produces oil, gas or coal to any great degree. But those other states sure do consume oil, gas and coal. “Maintaining the integrity of the market” must mean that those states aren’t willing to contribute to U.S. energy supply.

“America has never been more energy secure with an abundance of domestic oil. There is no need to expand drilling into waters less able to recover from a spill,” according to the senators’ press release.

But that’s a very short-term view. Energy-consuming states also need to be looking at their long-term need.

Comments