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First post-spill offshore oil and gas lease auction brings $1.7B

GULF OF MEXICO — The federal government’s first auction of offshore petroleum leases in the same area where the Deepwater Horizon exploded in 2010 brought in $1.7 billion in winning bids yesterday, prompting Interior Department Secretary Ken Salazar to declare great strides are being made to get drilling back on track in the Gulf of Mexico.

Salazar called the sale robust and said it demonstrated that the drilling industry was returning to levels seen before BP PLC’s catastrophic oil spill forced the federal government to scale back production in the Gulf and impose a sweep of new safety measures and requirements.

“We’re back. The rigs are back,” Salazar said. “It’s proof positive that the oil and gas industry is confident that they can meet the heightened safety requirements that we have instituted since the Deepwater Horizon.”

It was the fourth-largest lease sale for the central part of the Gulf since 1983. Companies bid on 454 tracts in the central Gulf, a leasing area off the coasts of Louisiana, Mississippi and Alabama.

This was the second lease sale in the Gulf since the Deepwater Horizon, the other one taking place in December 2011. That sale covered western areas of the Gulf and brought in $337.7 million in high bids.

BP Exploration & Production Inc., Shell Offshore Inc., Statoil Gulf of Mexico LLC, and Chevron U.S.A. Inc. led the pack of companies submitting bids. BP had 43 high bids totaling $239.5 million. It was the second-highest number of winning bids after the Apache Corp.’s 61 bids.

Shell had 24 winning bids totaling $406.6 million, the most paid by any company. Shell also was the company venturing the farthest offshore with bids in an area known as Lund, which lies nearly 200 miles offshore, or about as far as drillers are allowed to go in U.S. waters.

Companies also snapped up leases in the vicinity of where BP’s Macondo well blew out in 2010 — an area known as Mississippi Canyon. In fact, the single highest bid came for a lease in the Mississippi Canyon — Statoil’s $157 million bid for a tract.

Depending upon water depth, the leases run from five to 10 years and revert back to the government if not developed. The federal government will receive an 18.75 percent royalty rate on all production.

Chris John, the president of Louisiana Mid-Continent Oil and Gas Association, said the sale showed the “industry remains committed to doing business in the Gulf of Mexico.”

Environmental groups have filed suits challenging the resumption of lease sales in the Gulf.

On Wednesday, activists briefly interrupted the auction on Wednesday before security guards disbanded the group calling for an end to offshore drilling.

“We have a chronic oil spill problem in Louisiana,” said Kristen Evans, an environmental organizer wearing a pin with the words “Citizen Monitor.”

She said she was part of a new group, the Oil Monitoring Group, formed to serve as monitors of the oil industry. She was with several other self-described monitors wearing identical vests and pins. They did not participate in the protest that interrupted the auction.

This was the last sale before a new five-year leasing plan is announced in June by regulators.

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