Oil and Gas Lease Sales Go On Even Though There Are Few Takers and Lots of Litigation

Oil drill rig in the Gulf of  Mexico    Photo: Dario Lopez-Mills, AP

Between coronavirus economic meltdown and the excess oil supply thanks to the Russia and Saudi Arabia price war, bidding on the latest oil and gas leases for sale in the Gulf of Mexico yesterday was lower than any sale since 1993 for the highly productive central Gulf, according to the Associated Press.  And a coalition of environmental groups challenged the sale in court yesterday seeking to block the lease sales, saying federal authorities approved the sale without fully analyzing the risks expanded drilling poses to the environment.

Why This Matters:  You gotta wonder why the federal government is essentially giving away our shared oil and gas resources. Cheap sales like this are good for the President’s pals in the oil and gas industry, but they are selling off our national assets for pennies on the dollar and making our climate change crisis worse.  The major oil and gas companies were the big winners — Shell, Chevron, BP and Total accounted for more than 60% of the high bids.  Why are there not more bidders given that the sales are so cheap, you ask?  Because even at these bargain-basement lease prices, with the price of gas at $20/barrel (where it was yesterday) they can’t come close to making money – break-even is $45/barrel.

The Lowest Price Ever

According to industry analysts, if the government accepts these bids, the winning companies will pay a fraction of previous purchases.  Speaking to the AP, the industry analyst went on to say, “If the prices stay low for a long time, the next sale is going to be potentially worse,” noting that market prices plummeted again yesterday from less than $27 a barrel to $20.37 a barrel.  This is reportedly the first time the total high bid amount came in at below $100 million since the region-wide lease sales began in 2017.

Legal Challenges

The environmental groups filed the lawsuit objecting to the sales on procedural and substantive grounds.  Kristen Monsell, oceans legal director with the Center for Biological Diversity said, “This dirty and dangerous drilling takes a heavy toll on marine life, people, and our climate. The Gulf has been treated as a sacrifice zone for too long. We’re hopeful the court will finally force this reckless administration to follow the law.”  Earth Justice explained in a statement that they are challenging the Department of the Interior’s “flawed analyses of the sales’ environmental effects, which rely on incorrect assumptions about safety regulations and royalty rates that would apply to the leases. Interior based several of its conclusions on Obama-era policies, including the Well Control Rule and the Clean Power Plan, which the Trump administration has rolled back.”

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