“Leases awarded through Lease Sale 262 will be for oil and gas exploration and development only.” (News Release)
“Leases issued as a result of GOA Lease Sale 262 are expressly limited to oil and gas exploration and development.” (p. 16 of the Sale Notice)
Comment: Why would BOEM stipulate, for the first time ever, that an Oil and Gas Lease Sale is only for oil and gas exploration and development? Perhaps because, at the last 3 sales, 2 companies wrongfully acquired oil and leases for carbon disposal purposes. Those leases will likely expire at the end of their primary term, and the lessees will have nothing to show for their investment.
Other items of interest:
“Congress may enact legislation through reconciliation efforts sometime after publication of this Proposed NOS“
Comment: The Offshore Oil and Gas Leasing provisions in the “Big Beautiful Bill” make OCS leases more attractive in that they minimize sale uncertainty and return royalty rates to pre-IRA levels.
Proposed Primary Terms
Comment: Time for an update. The drilling requirements for a primary term extension should be the same for leases in 0-400 m as for those in 400-800 m. The requirement for an ultra-deep subsurface well is selectively punitive to shelf operations. These operations, although typically less lucrative, are important to the Gulf’s infrastructure.
Restricted Joint Bidders On April 29, 2025, BOEM published the most recent List of Restricted Joint Bidders in the Federal Register (90 FR 17832). Potential bidders are advised to refer to the Federal Register prior to bidding for the most current list at the time of the lease sale. Please refer to the joint bidding provisions at 30 CFR 556.511-556.515
The differences between the House and Senate versions of the Big Beautiful Bill are summarized in the table below. (See the previous post on the House version.)
The Senate bill includes royalty and lease terms that favor deepwater lessees, but excludes the provisions in the House bill that streamline the leasing process and minimize litigation risks. At least some of those House provisions were rejected by the Senate Parliamentarian.
The House will vote on the version that passes the Senate. So the Senate version is more likely to be enacted.
House
Senate
Comment
royalty: 12.5% to 18.75%
royalty: 12.5% to 16 2/3%
Lowering the royalty cap to 1/6 (16 2/3%) unduly limits the Secretary’s discretion and may reduce revenues without significantly increasing production.
2 GOA sales/yr over next 15 yrs.
same as House
Would have liked the opportunity for consideration of very limited Atlantic leasing or stratigraphic test drilling, but that is not politically feasible at this time.
use Sale 254 form and stips 4-10, may update stips 1-3
sale 254 lease form and stips 4-9, may update stips 1-3 and 10
The minor difference favors the Senate version. Stip 10 pertains to restrictions due to Rights-of-Use and Easement for Floating Production Facilities, and needs to be updated with each sale
mandates 10 year lease term for water depths >800 m
Although a 10 year term for deepwater leases is generally prudent, the Secretary should be able to choose a shorter term if concerns about timely exploration and diligent development arise (more likely given the increase in leases that could be issued as a result of the 2 sales/yr mandate).
requires approval of subsurface commingling unless there is “conclusive evidence” of safety or ultimate recovery issues
Although BSEE’s policy change on downhole commingling was warranted, the legislative change removes essentially all discretion by mandating approval unless there is “conclusive evidence” to the contrary. Conclusive evidence is dependent on production history, at which point it may be too late.
Adherence with the Biological Opinion shall satisfy the Secretary’s obligations under the Endangered Species Act of 1973 and the Marine Mammal Protection Act of 1972
This provision reduces govt/lessee litigation risks
Previous EIS’s for the Gulf of Mexico shall satisfy the Secretary’s NEPA obligation.
Rejected by the Senate Parliamentarian.
Consistency determinations prepared by BOEM for Lease Sale 261 for the States of Texas, Louisiana, Mississippi, Alabama, and Florida will satisfy the Secretary’s CZMA obligations.
The States or Parliamentarian may not have been comfortable with this provision which simplifies plan approval processes.
The Secretary may waive any requirement under the Outer Continental Shelf Lands Act that the Secretary determines would delay issuance of a lease.
Rejected by the Senate Parliamentarian?
A lease must be issued to the highest responsible qualified bidder not later than 90 days after the sale date.
Rejected by the Senate Parliamentarian.
A Governor may nominate for leasing under a lease sale held under this section an area of the OCS that is adjacent to the waters of the State
Never understood the need for this provision.
G&G surveys must be approved within 30 days after a complete application is received.
Not feasible in some cases given endangered species concerns.
A lease awarded under Lease Sale 259 or Lease Sale 261 shall not be set aside, vacated, enjoined, suspended, or cancelled except in accordance with section 5 the Outer Continental Shelf Lands Act (43 U.S.C. 1334). Also, new terms or conditions may not be added to these leases.
Reduces litigation risks.
Any action to approve, require modification of, or disapprove any exploration plan, development and production plan, bidding procedure, lease sale, lease issuance, or permit or authorization related to oil and gas exploration, development, or production, or any inaction resulting in the failure to hold a lease sale shall be subject to judicial review only in a United States court of appeals for a circuit in which an affected State is located.
This provision significantly reduces litigation risks. Rejected by Parliamentarian?
6+ Cook Inlet sales over next 10 yrs.
6+ Cook Inlet sales over the next 7 years
90% of Cook Inlet revenues to the State of Alaska.
70% of Cook Inlet revenues to the State of Alaska.
The percentages are high, but the revenues are likely to be low.
Sharing pictures from John Smith’s excellent decommissioning presentation at the Western States Petroleum Assoc. luncheon in Santa Barbara in May. You can view or download the presentation here.
Today’s Supreme Court decision limits the power of federal district judges to issue universal injunctions. I wonder if this decision restricts courts in DC and Maryland from ruling on oil and gas operations in the Gulf of America? Perhaps not, because those decisions are linked to Federal agencies in the DC area even though the activity is in the Gulf.
Minimizing flaring and venting is important from both environmental and resource conservation standpoints.Flaring and venting volumes are also good indicators of how well production systems are designed, managed, and maintained.
The best performance indicators are the percentages of produced gas that are flared and vented both for oil-well gas (OWG, also known as associated or casinghead gas) and gas-well gas (GWG or non-associated gas).
Updated flaring and venting volumes for the Gulf of America have been compiled using monthly data submitted to the Office of Natural Resources Revenue (ONRR). This is the best data source because reporting is mandatory and strictly enforced, and flaring and venting are accounted for separately.
In assessing performance trends, it’s important to segment venting and flaring volumes for both OWG and GWG production. Venting produced gas (mostly methane) is a more significant environmental concern from both air quality and greenhouse gas (GHG) perspectives.
Flaring and venting data for 2019-2024 are summarized in the table below. All volumes are in millions of cubic feet (MMCF).
Notes and comments:
The more disappointing 2024 numbers are entered in red. The blue numbers, all related to OWG venting, are encouraging.
The % of all produced gas that was flared or vented in 2024 (1.3%) was the highest in the past 10 years (see the chart below the table). Until 2018, annual flaring/venting rates of <1% of production were commonly achieved. This should be the target going forward.
OWG flared increased significantly from 2023 levels, both in terms of the volume (7.26 billion cu ft) and the % of OWG produced (1.22%).
Production curtailments and restarts related to Tropical Storms Francine and Helene may have contributed significantly to the 2024 flaring increase. ONRR’s monthly reports show a near doubling of the average monthly flaring volume in Sept., when Francine and Helene shut-in 42% and 29% of oil production respectively. However, even if the Sept. flaring surge is normalized to the monthly average for the other 11 months, the total 2024 flaring still exceeds the 2023 volume by 361 MMCF.
The % of GWG vented in 2024 was the highest in the 6 year period and double the 2019, 2020, 2021 rates. Inefficiencies associated with the dramatic decline in GWG production, down 41.5% from 2023, may be a contributing factor.
The continued decline in OWG venting to only 0.16% in 2024 is encouraging. The decline should be sustainable given that most OWG is now produced at modern deepwater platforms equipped with efficient flare stacks.
Given the significance of these data, from safety, conservation, and environmental perspectives, a more comprehensive analysis by the offshore industry and regulators should be a priority.
As the chart indicates, the % of flared or vented Gulf of America gas production increased over the past 10 years. This trend is presumably due, at least in part, to the sharp increase in the % of gas production from oil wells (associated gas), which have a higher flaring rate. In 2024, 87% of Gulf gas production was from oil wells.
Flaring/venting summary tables and comments, updated through 2024, will be posted later in the week.
The Safety Alert is attached. Per BSEE, the fires resulted from an accumulation of gas caused by improperly installed or disconnected exhaust vent piping on gas starters.
Incident 1: Two workers sustained burns to the hands, arms, and face. BSEE investigators discovered that the engine’s air intake hose was disconnected, which may have allowed gas-enriched air to be drawn into the carburetor causing the backfire.
Incident 2: While attempting to start the gas engine of a pipeline pump, the lead mechanic sprayed ether into the engine’s carburetor. The exhaust vent piping for the starter had not been installed. The combination of the gas-rich atmosphere and ether caused the engine to backfire and ignited the accumulated gas. The lead mechanic, sustained burns to his face, arms, and hands.
The Alert includes important recommendations for proper venting, mechanical integrity awareness training, maintenance, and the use of gas detectors and a temporary fire watch during engine startup.
This week Total announced the acquisition of a 25% working interest in 40 Chevron leases in the Gulf of America. Total already owned interest in Chevron’s producing Ballymore (40%), Anchor (37.14%), Jack (25%), and Tahiti (17%) fields. Ironically, Federal regulations prohibited Total from jointly bidding with Chevron for any of those leases at the time of the sales. How does that make sense?
Total did not submit a single bid in any of the past 4 Gulf of America lease sales. Perhaps they prefer to acquire interest in blocks previously leased to companies like Chevron. That is a reasonable acquisition strategy. However, farm-in acquisitions yield no bonus dollars to the Federal government. Wouldn’t it have been in the government’s best interest if some of those acquisition dollars were spent at lease sales where the bonus bids go to the US Treasury?It’s long past time to remove the joint bidding restrictions!
Two of Israel’s three offshore gas fields are shut-in as a precaution. As a result, exports to Egypt and Jordan has been curtailed. The Tamar field continues to supply Israel’s gas needs.
Summary table:
field (operator)
2024 production (billion cubic meters) (% of Israel’s total)
While Jamaica’s Walton Morant Block has impressive potential, that doesn’t equate to oil and gas reserves, and speculation about the “next Guyana” is highly premature.
The block’s licensee, United Oil & Gas (UOG), lacks the financial resources to fulfill its drilling commitment, and is thus dependent on finding industry partners. The Government of Jamaica has generously granted multiple license extensions to UOG, the latest through 1/31/2028.
Will UOG succeed in their quest for partners? Is the confidence expressed below justified? Stay tuned.
#UOG CEO Brian Larkin: “We’re in the best position yet — interest is real, and it’s backed by evidence provided to our NOMAD.”
🔹Hydrocarbon shows in all 11 historical wells confirm an active petroleum system 🔹Licence secured through to January 2028 pic.twitter.com/dfogPhpCnH
— United Oil & Gas (LON:UOG) (@UOGPLC) June 12, 2025
🔹 7Bn bbl potential — same source rock & economics as Exxon's Stabroek 🔹 $8/bbl dev. cost | $25/bbl break-even 🔹 Comparable to Guyana & Namibia — but Jamaica remains wide open for entry 📈 Scale like this is rare pic.twitter.com/ZfQda5DQ5Q
Bud's Offshore Energy (BOE) 