The Interior Department on Wednesday raised $124.8 million in bids on what it billed as the largest offshore drilling sale in U.S. history.
The sale offered 77 million acres in the Gulf of Mexico and covered all unleased oil and natural gas drilling areas in federal water.
The Bureau of Ocean and Energy Management received 159 bids from 33 companies, the Interior Department agency announced Wednesday morning.
Bidders included major oil companies such as Chevron, Shell, Total and BP.
Wednesday’s sale raised $3 million more than the Trump administration’s first offshore lease sale in August, also in the Gulf, which raised $121 million among 99 bidders. That sale was considered disappointing, as it raised 40 percent less than what Bureau of Ocean Energy Management had estimated.
Before Wednesday’s sale, Interior Secretary Ryan Zinke had called it a “bellwether” for industry interest in the Gulf, as offshore is overshadowed by onshore opportunities from the shale revolution. Brazil and Mexico are also competing for business in their offshore areas.
Michael Celata, Gulf of Mexico regional director at the Bureau of Ocean Energy Management, told reporters that he considers Wednesday’s sale more successful than August’s.
“You’re definitely seeing an increase in interest,” Celata said. “What you see is continued consistent investment in the Gulf. If you look at production, we are at record highs. We expect continued growth in production for about the next six years.”
Other industry officials also were buoyed by the sale and said it reflects well for the Trump administration’s efforts to expand offshore drilling in areas where it’s not currently permitted.
“Today’s lease sale drew more interest than many expected, reflecting the trend of forecasted tighter global oil supply and corresponding higher prices compared to the outlook during last summer’s sale,” Christopher Guith, senior vice president of the Global Energy Institute at the U.S. Chamber of Commerce, told the Washington Examiner.
But critics called the new lease sale an “embarrassing flop.”
The left-leaning Center for American Progress noted companies bid on just 1 percent of available acreage, or 815,403 total acres, which is 46 percent less than the agency expected.
Bids averaged $153 an acre, 35 percent below the August auction.
“Offering a nearly unrestricted supply in a low demand market with a cut rate royalty and almost no competition is bad policy and an inexcusable waste of taxpayer resources,” the group said.
Oil and gas production in the Western and Central Gulf of Mexico, which accounts for almost all U.S. offshore production, is expected to hit a record high in 2018, after suffering three years of losses.
The Bureau of Ocean Energy Management estimates that offshore resources in the Gulf contain more than 48 billion barrels of oil and 141 trillion cubic feet of natural gas.
The Wednesday sale is part of the National Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022, a five-year program established by the Obama administration.
In January, the Trump administration released its own draft offshore leasing plan, proposing to allow oil and gas drilling in nearly all federal waters.
Under the Interior Department’s draft proposal, spanning 2019 to 2024, more than 90 percent of the total acres on the Outer Continental Shelf would be made available for leasing. It proposes 47 offshore lease sales, the most ever over a five-year period, including 19 sales off the Alaska coast, 12 in the Gulf of Mexico, nine in the Atlantic Ocean and seven in the Pacific.
The Trump plan has received bipartisan criticism, with almost all coastal governors expressing opposition to allowing drilling off their shores, for fear of spills and harm to tourism.
The Trump administration is seeking to encourage offshore oil and natural gas drilling in other ways.
The Interior Department has lowered royalty rates for shallow water drilling, from 18.75 percent to 12.5 percent, and is considering doing the same for deep-water projects.
An Interior Department advisory committee voted last month to cut the royalty rate that oil and gas companies pay for deep-water projects. The proposed amount would also fall from 18.75 percent to 12.5 percent, the lowest rate the government can charge for offshore leases.
Zinke will make the final call on whether to approve the lower rate.
Top congressional Democrats have warned Zinke not to reduce the royalty rate, arguing the proposal would prevent the government from claiming billions of dollars in revenue.
