Posts Tagged ‘CCS’

In addition to the 94 nearshore Texas leases Exxon acquired in Sale 257, the company was the sole Sale 259 bidder for all but one of 69 nearshore Texas blocks. The exception was High Island 177 (in red above). So who gets that lease?

  • the company (Exxon) that was the sole participant in a de facto CCS sale (bid of $182,750)
  • the company (Focus Exploration) that was participating in the announced oil and gas lease sale (bid of $145,177)

If Exxon is just acquiring these leases for evaluation purposes in preparation for a possible CCS sale in the future, their lease acquisitions may be okay. If they are planning on retaining these leases for actual sequestration operations, that is not okay, at least not until a competitive process has been established for awarding or reclassifying such leases. To date, no lease terms or bid evaluation procedures have been proposed for carbon sequestration leases; nor has an environmental review been conducted pursuant to NEPA.

Questions about Gulf of Mexico carbon sequestration

Read Full Post »

Read Full Post »

On September 14, 2022, BOEM announced that 307 high bids from Lease Sale 257 in the Gulf of Mexico were accepted. BOEM also announced that one high bid was rejected for not providing the public with fair market value. BOEM has not identified the rejected bid.

Per BOEM’s Lease Area Block Online Query file, 306 Sale 257 leases were effective on Oct. 1, 2022. A comparison of these data with the sale results identified 2 Sale 257 leases that have not been awarded:

leaseblockhigh bidder(s)bidcomments
G37261GC 70BHP$3.6 millionlone bid; 7th highest
bid in sale
G37294GC 777BP (75%),
Talos (25%)
$1.8 million2 bids; next highest
$1.185 million

So one of these 2 bids was rejected and the other has lease not yet been awarded for some reason (or perhaps there has been a clerical/IT issue).

Which bid was rejected? I would guess it was the BHP bid even though that bid was the 7th highest bid in the entire sale. The fact that this bid was $2.5 to $3 million higher than the other 7 BHP bids (all of which were accepted) tells us that the company valued this tract highly. Perhaps BOEM, which has all of the geologic data, thought the value was even higher, which is why the bid may have been rejected.

There was another bidder (Chevron) for the BP/Talos tract, so the competition makes it less likely that the bid would have been rejected.

Ironically, the 94 carbon sequestration bids, which made something of a mockery of the lease sale, could not be rejected on fair market grounds. The bids exceeded the minimum required, and the tracts have little or no value from an oil and gas production standpoint. A competitive process would be require to repurpose these leases for carbon sequestration.

Read Full Post »

Which bid was rejected? BOEM announced that 307 of the 308 high bids were accepted. One bid was rejected on fair market value grounds. The unsuccessful bid is not specified on the Sale 257 web page.

When can we expect a statement from Exxon on their intentions for the 94 blocks they acquired? Those 94 blocks (31% of the entire sale) are the elephant in the room, yet we have heard nothing from the company. Given Exxon’s apparent interest in using these leases for CCS purposes, and the tax credits and Federal funding associated with CCS projects (as per the Infrastructure Bill and Inflation Reduction Act), clarification regarding Exxon’s intentions would seem to be appropriate.

Read Full Post »

Pursuant to section 50264(b) of the Inflation Reduction Act of 2022 (Pub. L. No. 117-169), Congress has directed BOEM to award leases to the highest valid bidders in Lease Sale 257, which was held on November 17, 2021. Consistent with this direction, BOEM has accepted 307 of the highest valid bids, totaling $189,888,271.

A total of 33 companies participated in the lease sale, generating $191,688,984 in high bids for 308 tracts covering 1.7 million acres in federal waters in the Gulf of Mexico. One bid was rejected for not providing the public with fair market value.


Bottom line:

Read Full Post »

Per legislation signed by the President on Aug. 16, 2022:

(1) ACCEPTANCE OF BIDS.—Not later 30 days after the date of enactment of this Act, the Secretary shall, without modification or delay
(A) accept the highest valid bid for each tract or bidding unit of Lease Sale 257 for which a valid bid was received on November 17, 2021; and
(B) provide the appropriate lease form to the winning bidder to execute and return.

The Department of the Interior has been silent on their implementation of this provision. We are particularly interested in:

  1. how the 94 carbon sequestration bids will be handled
  2. whether any bids will be rejected on fair market value grounds

Read Full Post »

Contrary to some media reports and industry comments, the Inflation Reduction Act does NOT require the Department of the Interior (DOI) to award leases to the high bidder on each Sale 257 tract. The legislation requires DOI to accept the highest valid bid for each tract.

As BOE has previously explained, the 94 carbon sequestration bids were clearly not valid, and leases should not be awarded. These bids accounted for 30.5% of the entire sale in terms of the number of tracts receiving bids. (More on the CCS bids.)

There is also the matter of fair market value. Only 9 of the 214 (non-CCS) tracts received more than one bid and none received more than 2 bids. DOI/BOEM may determine that some of the bids did not pass the fair market value test. Are such bids “valid” under the terms of the IRA legislation? Note that 7 of the 93 high bids submitted at the previous sale (Lease Sale 256, November 2020) were rejected on fair market value grounds. All 7 were single bid tracts.

Lastly, there is the unresolved matter of the decision by Judge Contreras to vacate Sale 257. While the legislation seems to clearly supersede that decision, who knows what might happen next on the litigation front.

Read Full Post »

Read Full Post »

The subject legislation requires the Secretary of the Interior to accept the highest valid bid that was received for each tract offered in OCS Lease Sale 257. Exxon was the sole bidder on 94 tracts on the nearshore Texas shelf. The leases were to be acquired for carbon sequestration purposes.

The CCS bids should not be considered valid given that:

  1. Sale 257 was an oil and gas lease sale. The Notice of Sale said nothing about carbon sequestration and did not offer the opportunity to acquire leases for that purpose. Therefore, the public notice requirements for CCS leasing (30 CFR § 556.308) were not fulfilled.
  2. Because there was no draft or final Notice of Sale, interested parties and the public did not have the opportunity to consider and comment on CCS leasing, tract exclusions, bidding parameters, and other factors.
  3. 30 CFR § 556.308 requires publication of a lease form. No CCS lease form was posted or published for comment.
  4. CCS operations were not considered in the environmental assessments conducted prior to the sale.
  5. No evaluation criteria for CCS bids have been published.

Unexpectedly, the Infrastructure Bill, signed on 11/15/2021 (just 2 days before Sale 257) included a provision for OCS carbon sequestration. However, that legislation did not require CCS leasing or authorize DOI to sell CCS leases as part of an oil and gas lease sale; nor did it exempt DOI from complying with its leasing regulations. Instead, It gave the Secretary a year (until 11/15/2022) to promulgate necessary implementing regulations. If carbon sequestration in the Gulf of Mexico is deemed to be desirable, a separate CCS sale should be held when the regulatory framework has been established.

Read Full Post »

“Our knowledge and expertise in geoscience and petroleum engineering represent advantageous foundation for CCS development, leading us towards our carbon emissions reduction target.” 


Those who closely followed Australia’s Montara Inquiry in 2010 may be less convinced about PTTEP’s expertise. The Montara well suspension program was completely irresponsible. Even though the production casing cement was clearly compromised, PTTEP suspended the well without a single barrier in the well bore. The company was extremely lucky to have avoided a major safety, environmental, and economic disaster. Perhaps they are a very different company now; I certainly hope so.

Montara blowout, Timor Sea

The PTTEP announcement adds to our skepticism about the motives of some CCS proponents. Is CCS prudent public policy? That question is by no means settled and there has been very little opportunity for comment and debate. BOE has raised concerns and there are no doubt many more that have yet to be addressed.

Read Full Post »

Older Posts »