Oil producers, together with all sorts of businesses that have long supported the oil industry in the Gulf of Mexico, are hopeful about a scheduled oil lease sale in December, the first sale since the Deepwater Horizon oil spill in 2010. At the same time, many are concerned about the terms for the sale that the Bureau of Ocean Energy Management has set.
Previously, the minimum bid was set at $37.50 an acre in deep water; the new terms set the minimum bid at $100 an acre. Previously, lessees could hold a track for eight to 10 years; this has been decreased to five to seven years. There are also new stipulations that the terms of the leases can be changed after they have been issued. You can see a full list of the changes here.
The proposed Western Gulf of Mexico Lease Sale 218 is scheduled to be held in New Orleans on December 14, 2011 and will include all available unleased areas in the Western Gulf Planning Area offshore Texas. Interior Secretary Ken Salazar has described the sale as “an important step toward a secure energy future that includes safe, environmentally sound development of our domestic energy resources.” And it could be: the Bureau of Ocean Energy Management estimates the sale could lead to the production of up to 423 million barrels of oil and 2.65 trillion cubic feet of natural gas.
But the sale will only be a success if it is executed with reasonable terms. It’s important to keep in mind, after all, that there are different ways to discourage robust drilling activity. You can impose an outright ban, or you can “allow” drilling under terms that are so onerous they are unwelcoming. One of the reasons drilling activity in the Gulf today remains below levels seen prior to the Deepwater Horizon blast is because even after the formal ban on deepwater drilling was lifted, producers have continued to encounter excessive red tape that has created an environment hostile to doing business.
What we need now are policies that support safe and responsible drilling in both letter and spirit.
