for sale

Houston oil companies offer $382M for drilling rights in Gulf of Mexico in last offshore sale before 2025

Companies including Houston-based Chevron and Hess and BP, each with a Houston presence, offered bids. Photo via Getty Images

Last month, oil companies offered $382 million for drilling rights in the Gulf of Mexico on Wednesday after courts rejected the Biden administration's plans to scale back the sale to protect an endangered whale species.

The auction was the last of several offshore oil and gas lease sales mandated under the 2022 climate law. It comes as President Joe Biden’s Democratic administration tries to navigate between energy companies seeking greater oil and gas production and environmental activists who want to stop new drilling to help combat climate change.

Companies including Houston-based Chevron and Hess and BP, each with a Houston presence, offered bids on more than 300 parcels covering 2,700 square miles (7,000 square kilometers), according to the U.S. Department of Interior's Bureau of Ocean Energy Management.

The dollar amount of the successful bids marked a sharp increase from the previous sale in March 2023, when the Interior Department awarded leases covering about 2,500 square miles (6,500 square kilometers) for $250 million.

The next sale will be conducted in 2025, to the frustration of energy companies and Republicans who say the administration is hampering U.S. oil production.

Wednesday's online auction was originally scheduled for September but got delayed by a court battle after the administration reduced the area available for leases from 73 million acres (30 million hectares) to 67 million acres (27 million hectares) as part of a plan to protect the endangered Rice’s whale.

Chevron, Shell Offshore, the American Petroleum Institute and the state of Louisiana sued to reverse the cut in acreage and block the inclusion of the whale-protecting measures in the lease sale provisions.

A federal judge in southwest Louisiana ordered the sale to go on without the whale protections, which also included regulations governing vessel speed and personnel. Environmental groups appealed, but the New Orleans-based 5th Circuit Court of Appeals last month rejected their arguments against the sale and threw out the plans to scale it back.

The lease sale was required under a compromise with Democratic Sen. Joe Manchin of West Virginia, a supporter of the oil and gas industry who cast the deciding vote in favor of the landmark climate law. The measure was approved with only Democratic votes in Congress. Under the terms negotiated by Manchin, the government must offer at least 60 million acres of offshore oil and gas leases in any one-year period before it can offer offshore wind leases that are part of its strategy to fight climate change.

Only a small portion of parcels that are offered for sale typically receive bids, in areas where companies want to expand their existing drilling activities or where they foresee future development potential.

The administration in September proposed up to three oil and gas lease sales in the Gulf of Mexico over the next five years and none in Alaska waters. That was the minimum number the administration could legally offer if it wants to continue expanding offshore wind development.

Environmental groups criticized the five-year plan as a “missed opportunity” to stop the expansion of oil and gas drilling in the Gulf of Mexico and address climate change.

“New oil and gas operations (in the Gulf) will only bring more health risks to Gulf Coast communities and slow our transition to a clean-energy economy,'' said Earthjustice attorney Brettny Hardy.

The industry, meanwhile, said more sales are needed — and sooner.

“In our forward-thinking industry, securing new lease blocks is vital for exploring and developing resources crucial to the U.S. economy,'' said National Ocean Industries Association President Erik Milito. “The Gulf of Mexico is a prime economic engine and investment area, and this (lease sale) was the last chance for companies to secure leases in the near term.''

Holly Hopkins, API vice president of upstream policy, called Wednesday's sale "a "positive step after multiple delays,'' and noted that it generated the highest dollar value for bids in nearly a decade.

The results demonstrate that the oil and gas industry “is working to meet growing demand and investing in the nation’s long-term energy security,'' Hopkins said. “Just as today’s record U.S. production was supported by investment and policy decisions made years ago, new leasing opportunities are critical for maintaining American energy leadership for decades to come.''

The administration's clean-energy ambitions have been hampered by recent project cancellations including two large wind projects shelved last month off the New Jersey coast and the earlier cancellation of three projects that would have sent power to New England.

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A View From HETI

The project would nearly eliminate the emissions associated with power and steam generation at the Dow plant in Seadrift, Texas. Getty Images

Dow, a major producer of chemicals and plastics, wants to use next-generation nuclear reactors for clean power and steam at a Texas manufacturing complex instead of natural gas.

Dow's subsidiary, Long Mott Energy, applied Monday to the U.S. Nuclear Regulatory Commission for a construction permit. It said the project with X-energy, an advanced nuclear reactor and fuel company, would nearly eliminate the emissions associated with power and steam generation at its plant in Seadrift, Texas, avoiding roughly 500,000 metric tons of planet-warming greenhouse gas emissions annually.

If built and operated as planned, it would be the first U.S. commercial advanced nuclear power plant for an industrial site, according to the NRC.

For many, nuclear power is emerging as an answer to meet a soaring demand for electricity nationwide, driven by the expansion of data centers and artificial intelligence, manufacturing and electrification, and to stave off the worst effects of a warming planet. However, there are safety and security concerns, the Union of Concerned Scientists cautions. The question of how to store hazardous nuclear waste in the U.S. is unresolved, too.

Dow wants four of X-energy's advanced small modular reactors, the Xe-100. Combined, those could supply up to 320 megawatts of electricity or 800 megawatts of thermal power. X-energy CEO J. Clay Sell said the project would demonstrate how new nuclear technology can meet the massive growth in electricity demand.

The Seadrift manufacturing complex, at about 4,700 acres, has eight production plants owned by Dow and one owned by Braskem. There, Dow makes plastics for a variety of uses including food and beverage packaging and wire and cable insulation, as well as glycols for antifreeze, polyester fabrics and bottles, and oxide derivatives for health and beauty products.

Edward Stones, the business vice president of energy and climate at Dow, said submitting the permit application is an important next step in expanding access to safe, clean, reliable, cost-competitive nuclear energy in the United States. The project is supported by the Department of Energy’s Advanced Reactor Demonstration Program.

The NRC expects the review to take three years or less. If a permit is issued, construction could begin at the end of this decade, so the reactors would be ready early in the 2030s, as the natural gas-fired equipment is retired.

A total of four applicants have asked the NRC for construction permits for advanced nuclear reactors. The NRC issued a permit to Abilene Christian University for a research reactor and to Kairos Power for one reactor and two reactor test versions of that company's design. It's reviewing an application by Bill Gates and his energy company, TerraPower, to build an advanced reactor in Wyoming.

X-energy is also collaborating with Amazon to bring more than 5 gigawatts of new nuclear power projects online across the United States by 2039, beginning in Washington state. Amazon and other tech giants have committed to using renewable energy to meet the surging demand from data centers and artificial intelligence and address climate change.

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