GoM Lease Sale Met With Loud Protests, Low Participation

Even though industry participation plummeted to its lowest point in two decades, the latest U.S. Gulf of Mexico (GoM) lease sale still managed to attract a crowd.

The Mercedes-Benz Superdome in New Orleans was overrun March 23 as environmental protestors demonstrated against the sale of oil and gas leases covering nearly 45 million acres in the GoM.

The federal lease sale generated the fewest number of bids in the GoM in the past 20 years, said Mike Celata, GoM regional director with the Bureau of Ocean Energy Management (BOEM). The sum of high bids also fell significantly.

Celata said it was business as usual despite an estimated 150 to 200 protesters holding signs such as “keep it in the ground” and chanting loudly during the event.

“I was focused on reading the bids and completing the process and I think we successfully did that and met the mission of the agency,” Celata said during a media conference following the sale.

Lease Sale 241 in the Central Planning Area and Lease Sale 226 in the Eastern Planning Area were the ninth and tenth offshore auctions under the current administration’s Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017.

Sale 241 offered 8,349 unleased blocks covering about 44.3 million acres. In the lease sale, 148 bids were submitted on 128 blocks by 30 oil and gas companies.

The total amount of high bids was roughly $156.4 million. The total amount for all bids submitted was about $179.2 million.

“The sum of high bids was the fourth lowest Central sale since the start of area-wide sales in 1983,” Celata said.

The high bid in Sale 241 was for Mississippi Canyon Block 434 for about $13.7 million in a joint bid submitted by affiliates of Venari Resources LLC and Chevron Corp. (NYSE: CVX).

In spite of the drop in participation, particular areas still attracted competitive bidding, Celata said.

“The deepwater trends are still of interest to operators in the Mississippi Canyon, primarily the Norphlet and the Miocene trend. But there were continued bidding in the Lower Tertiary, though those were single bids,” he said.

Sale 226, which received no bids, encompassed 162 whole or partial unleased blocks covering 595,475 acres in the Eastern Planning Area.

The lease sale was the last for the Eastern Gulf in the current five-year program. However, the industry may have opportunities to bid for leases in the future as the area is included in the proposed 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program, said Janice Schneider, assistant secretary for land and minerals management under the Interior Department.

Schneider said the industry appears to be proceeding cautiously.

“I think the price of oil and gas is certainly influencing the decision-making process. We’re seeing a lot of companies slow down on their capital investments across the board. I think that’s a normal reaction to market conditions,” she said during the media conference.

Schneider expects robust interest to return when commodity prices rise again, regardless of continued protests.

President of the National Ocean Industries Association (NOIA) Randall Luthi applauded the unrelenting commitment of companies that participated in the lease sale even though the number was still small.

The GoM is the source of 20% of the country's domestic oil and natural gas supply. Additionally, GoM lease sales have contributed $80 billion to the U.S. Treasury between 2005 and 2014, Luthi added.

"While it is everyone’s right to protest, many of the demonstrators could not have been here in New Orleans today without the oil and natural gas produced as a result of the very sales they oppose. It is difficult to overlook the irony," he said in a statement.

The Times-Picayune has a video of the protestors on its YouTube channel.

Emily Moser can be reached at emoser@hartenergy.com.