Interior Department sells $850 million worth of leases to major oil companies

The Interior Department announced Wednesday that it sold $872 million worth of leases in the deep-water Gulf of Mexico to major oil companies.

This was the first sale since 2012 in which BP was able to participate, and the oil giant submitted winning bids for 24 lease blocks for a total of $41.6 million.

Only last week, BP reached an agreement with the Environmental Protection Agency, which lifted a ban on BP’s participation in government contracts including leases. The ban had gone into effect for what the EPA called the London-based company’s “lack of business integrity” after it pleaded guilty to criminal charges related to the massive 2010 oil spill in the Gulf of Mexico from BP’s Macondo well.

The bids were part of Lease Sale 231 on the Outer Continental Shelf. Altogether, 50 companies bid on 329 blocks covering 1.7 million acres, an area bigger than Delaware and nearly half the size of Connecticut.

Although the leases are in federal waters, Gulf Coast states will receive at least $2.16 million from the sale thanks to the Gulf of Mexico Energy Security Act (GOMESA) negotiated by then-Sen. Pete Domenici (R-N.M.) to open up 8.3 million acres in the gulf for exploration. The states, whose own waters extend only three miles, will get 37.5 percent of the royalties but only on certain blocks.

Nine leases auctioned Wednesday fell into that category. It was the second time that Louisiana has received revenue under GOMESA, according to the office of Senate Energy and Natural Resources Committee Chairman Mary Landrieu (D-La.).

Exxon Mobil was the sole bidder on offshore blocks in Lease Sale 233 near the U.S.-Mexico water boundary, paying $21.3 million. The bidding there was made possible by the recent U.S.-Mexico Transboundary Hydrocarbons Agreement on how to tax and share revenue on reservoirs that might stretch across the boundary into Mexican territory.

The highest bid for a single block was $68.8 million by Freeport McMoran.

No companies bid on blocks in the gas-rich areas of the eastern gulf, since large amounts of onshore shale gas has lowered expectations for natural gas prices

The Gulf of Mexico accounts for 23 percent of U.S. domestic oil production and 7 percent of domestic natural gas production.

Steven Mufson covers energy and other financial news.
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