Gulf oil lease sale bids $134 million

The federal government took in nearly $134 million in high bids Wednesday during a Gulf of Mexico oil-and-gas lease sale that did not include any bids from BP.

BP was suspended temporarily from entering into any new government contracts.

The lease sale and BP news came the same day U.S. Sen. Mary Landrieu, D-La., spoke on domestic oil-and-gas production increases during a “Natural Gas and Energy Issues in the New Congress” event with fellow U.S. Sen. Lisa Murkowski, R-Alaska.

Thanks to deepwater drilling exploration, evolving technologies for hydraulic fracturing, or fracking, production and “almost unprecedented” progress, Landrieu said, the nation is on the verge of becoming a “net exporter” of natural gas. Such a possibility was virtually inconceivable in recent decades, she said.

“What’s happening now is nothing less than extraordinary,” Landrieu said.

Prior to the western Gulf lease sale, the U.S. Environmental Protection Agency announced Wednesday that it “temporarily suspended” BP from receiving any new government contracts, but that current leases and permits would not be affected.

The EPA announcement stated that the decision was “due to BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response, as reflected by the filing of a criminal information.”

Earlier this month, BP agreed to plead guilty to 11 counts of misconduct or neglect of ship officers, one count of obstruction of Congress, one misdemeanor count of a violation of the Clean Water Act, and one misdemeanor count of a violation of the Migratory Bird Treaty Act, all arising from its conduct leading to the 2010 Deepwater Horizon disaster that killed 11 people and “caused the largest environmental disaster in U.S. history,” according to the EPA.

U.S. Rep. Ed Markey, of Massachusetts and the ranking Democrat on the House Natural Resources Committee, said the suspension was earned.

“When someone recklessly crashes a car, their license and keys are taken away,” Markey said. “The wreckage of BP’s recklessness is still sitting at the bottom of the ocean and this kind of timeout is an appropriate element of the suite of criminal, civil and economic punishments that BP should pay for their disaster.”

But Tommy Beaudreau, director of the U.S. Interior Department’s Bureau of Ocean Energy Management, was much less critical of BP after the lease sale. He said BP has been “sincere” in its reform efforts.

“Our experience with BP following the spill is that BP has gone through significant internal reforms,” Beaudreau said.

Wednesday’s lease sale offered over 20 million acres and attracted $133.7 million in high bids for 116 tracts covering 652,522 acres on the U.S. Outer Continental Shelf offshore of Texas. A total of 13 offshore energy companies submitted 131 bids.

Chevron had the highest single-tract bid of $17.2 million, Beaudreau said.

“The Gulf of Mexico is and will continue to be one of the bedrocks of the United States’ all-of-the-above energy portfolio,” Beaudreau said.

But critics have attacked President Barack Obama for not having enough lease sales and for Wednesday’s sale paling in comparison to the two previous Gulf sales in the past 12 months.

“There is no disputing the fact that our nation’s domestic energy production on federal lands is far lower than what was projected before this administration took office, and is trending in the exact opposite direction of the rapid growth we’re seeing on private and state lands,” U.S. Sen. David Vitter, R-La., said in a prepared statement.

“Oil-and-gas production on federal property is a process that requires leasing, permitting, exploring, more permitting, and then hopefully production,” Vitter added. “At the leasing and production stages, large sums of monies come into the federal Treasury. But, instead of encouraging production and this revenue, the administration has made it a standard to stymie the process and focus attention on unproven expenditures like offshore wind.”

A much-larger eastern Gulf lease sale in June generated $1.74 billion in high bids and a 21 million acre sale held in December brought in nearly $340 million.

U.S. Rep. Bill Cassidy, R-Baton Rouge, said the Obama administration has proven it does not support the oil-and-gas industry through decisions like the Gulf drilling moratorium after the BP oil leak and the delays for moving forward with the proposed Keystone XL pipeline that would extend from Canada to Texas.

“It is self-evident that domestic oil and gas is good for the United States,” Cassidy said, citing economic growth and energy independence.

Landrieu said the country needs to move forward with more Gulf lease sales. However, she said, the federal government is not fully to blame for the more recent slowdown of energy exploration in the Gulf.

Increased global competition has led to more corporations seeking drilling opportunities elsewhere, she said, and there are only so many resources.

“We need to work harder as a Gulf Coast to continue to entice,” Landrieu said, arguing that effort extends to growing other related industries, such as ship fabrication.