A long-awaited lease sale for oil production in the Gulf of Mexico was held last Tuesday, despite a last minute-lawsuit to block it, and interest in the sale was quite strong. The Interior Department says that some 20 companies submitted 241 bids.
The news is encouraging to a region that has for more than a year suffered reduced economic activity as a result of the drilling restrictions imposed after the Deepwater Horizon tragedy and for the country as a whole which suffers price volatility and overall price hikes when access to our own fuel is limited. The region where leases were put up for sale on Wednesday is expected to yield as much as 423 million barrels of oil and up to 2.65 trillion cubic feet of natural gas. But the significance of this sale goes beyond just the resources it will enable producers to tap. As the first sale to go forward since the oil spill in 2010, it leaves us cautiously optimistic for a return to more normal drilling activity in a region that is so central to our energy independence and economic stability.
In the weeks leading up to the sale, many, including CEA, expressed concern that the terms of the sale, including much higher minimum bids and shorter lease terms than in prior lease sales, were highly restrictive. The fact that so many interested producers turned out to bid despite these challenging terms tells us a couple things, most important that the oil industry continues to value energy development in the Gulf of Mexico and access to new areas.
Also, this week the Bureau of Ocean Energy Management issued a conditional approval for Shell’s 2012 Chukchi Sea Exploration Plan. The area, which is believed to contain billions of barrels of oil, has long been contested and delayed due to environmentalist groups claiming the area is too fragile for drilling. But the approval came after Shell demonstrated it had met a wide range of important and rigorous safety and environmental standards that would allow for Shell to drill up to six oil wells off Alaska’s northwest coast beginning next summer. The step is another important one to allow US consumers and businesses access to our domestic energy.
While we cannot forget the tragedy that occurred in the Gulf in 2010, or the need to commit to the highest safety standards no matter where or how we are pursuing new energy sources, we must ultimately move forward, ideally with terms that are fair and responsible. We hope that Tuesday’s sale will be followed by continued growth in economic activity in the Gulf in 2012.