Gulf of Mexico oil & gas lease sale put off again until court decision comes

The U.S. Bureau of Ocean Energy Management (BOEM) has delayed the next offshore oil and gas lease sale for acreage in the Gulf of Mexico (GOM) once again, pending further direction from the Fifth Circuit Court of Appeals.

Originally, BOEM planned to hold Lease Sale 261 for acreage in the Gulf of Mexico on September 27, 2023, with more than 6 million acres removed from the sale. In a bid to oppose this, the American Petroleum Institute (API), Chevron, Shell, and the State of Louisiana filed a motion for preliminary injunction, seeking immediate action from the court ahead of the planned lease sale.

This bore fruit on September 21, 2023, as the court hit the brakes on the attempts to restrict the acreage available for the lease sale. In response, the United States sought an emergency stay of the order to allow time for a more orderly lease sale process. The court’s order sparked environmental groups’ ire, so they also 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 this lease sale do not seem to be over.

As a result of the order issued by the United States Court of Appeals for the Fifth Circuit on October 26, 2023, in Louisiana v. Haaland, the Bureau of Ocean Energy Management has decided to postpone Lease Sale 261 until the court rules, as it cannot be certain which areas or stipulations may be included in the sale notice. Therefore, potential bidders in this sale should not submit bids until BOEM provides additional instructions. The lease sale will be held after further directions are received from the Court of Appeals. 

In response to this delay, Holly Hopkins, American Petroleum Institute’s Vice President of Upstream Policy, remarked: “From issuing the weakest 5-year program for offshore leasing in U.S. history to repeatedly delaying congressionally-mandated lease sales, the Department of the Interior continues to demonstrate its willingness to ignore the clear and growing need to expand American energy leadership and reduce reliance on foreign energy sources.

“Beyond the sale that was postponed today, there will be no offshore sales until 2025 – the longest gap in offshore sales since 1966. The U.S. oil and natural gas industry stands ready to support the nation’s energy security through reliable, lower carbon-intensive energy produced here in the U.S. Gulf of Mexico, but the Interior Department’s inconsistent policies undermine the certainty needed to invest in future production.”

Uncertainty surrounds the future lease sales in the U.S. 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 scheduled for 2025, 2027, and 2029, respectively.

These 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. EIA, 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 underlines that the U.S. Gulf of Mexico produces some of the lowest carbon-intensity barrels in the world, but constrained production in this basin could be replaced by higher carbon-intensity barrels from elsewhere in the world.

Moreover, NOAA recently denied the petition for rulemaking to impose speed limits on all vessels operating in the Rice’s whale core habitat area in the Gulf of Mexico, concluding that a series of actions were needed, including conservation tasks, drafting a species recovery plan, and conducting a quantitative vessel risk assessment before it would even consider rulemaking on the vessel restrictions.

The American Petroleum Institute underscores that the Department of the Interior conducted none of these actions in their attempt to target oil and gas vessels through placing vessel restrictions as lease stipulations in Lease Sale 261, as well as issuing a notice to lessees recommending various restrictions on oil and gas vessels.