Coming off climate talks, US to hold huge crude sale in Gulf of Mexico

The US Interior Department on Wednesday will auction vast oil and gas reserves in the Gulf of Mexico estimated to hold up to 1.1 billion barrels of crude, the first such sale under President Joe Biden and a harbinger of the challenges he faces to reach climate goals that depend on deep cuts in fossil fuel emissions.

The livestreamed sale invited energy companies to bid on drilling leases across some 136,000 square miles (352,000 square kilometers) — about twice the area of Florida.

It will take years to develop the leases before companies start pumping crude. That means they could keep producing long past 2030, when scientists say the world needs to be well on the way to cutting greenhouse gas emissions to avoid catastrophic climate change.

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The auction comes after a federal judge in a lawsuit brought by Republican states rejected a suspension of fossil fuel sales that Biden imposed when he took office.

The Democrat campaigned on promises to curb fossil fuels from public lands and waters, which including coal account for about a quarter of US carbon emissions, according to the US Geological Survey.

Yet even as he's tried to cajole other world leaders into strengthening international efforts against global warming, Wednesday's sale illustrates Biden's difficulties gaining ground on climate issues at home.

The administration last week proposed another round of oil and gas lease sales in 2022, in Montana, Wyoming, Colorado and other western states.

Interior Department officials proceeded despite concluding that burning the fuels could lead to billions of dollars in potential future climate damages.

“We had Trump's unconstrained approach to oil and gas on federal lands and Biden's early attempt to pause drilling.

Now it looks like the Biden administration is trying to find a new policy,” said researcher Robert Johnston with Columbia University's Center on Global Energy Policy.

“They're being very cautious about undermining their fragile momentum” on climate issues, he added.

The energy bureau said in pre-sale documents released Tuesday that it received bids on 307 tracts totaling nearly 2,700 square miles (6,950 square kilometers).

That's the largest total for a single sale since Gulf-wide bidding resumed in 2017. The seven prior sales generated almost USD 1 billion in total revenue.

Environmental reviews of the latest sale — conducted under former President Donald Trump and affirmed under Biden — reached an unlikely conclusion: Extracting and burning the fuel would result in fewer greenhouse gases than leaving it.

Similar claims in two other cases, in Alaska, were rejected by federal courts after challenges from environmentalists.

Climate scientist Peter Erickson's work was cited by judges in one of the cases, and he said the Interior Department's analysis had a glaring omission: It excluded greenhouse gas increases in foreign countries that result from having more Gulf oil enter the market.

“The math is extremely simple on this kind of stuff," said Erickson, a senior scientist with the Stockholm Environment Institute, a nonprofit research group.

“If new leases expand the global oil supply, that has a proportional effect on emissions from burning oil. Therefore, giving out these leases in the Gulf of Mexico would be increasing global emissions.”

The Interior Department's Bureau of Ocean Energy Management recently changed its emissions modeling methods, citing Erickson's work. Officials said it was too late to use that approach for Wednesday's auction.

For upcoming sales, spokesperson Melissa Schwartz said Interior is conducting a more comprehensive emission review than any prior administration.

It's also appealing the court order that forced their resumption.

Erik Milito, president of the National Ocean Industries Association said he was uncertain that using the new approach would have changed the government's conclusions, since drilling for oil in other parts of the world is less efficient and hauling imports also adds to carbon costs.

The continued use of the old analysis rankles drilling opponents who say Biden isn't following through on his climate pledges.

“We're talking about transitioning away from a fossil fuel economy and they are selling a giant carbon bomb of a lease sale,” said attorney Drew Caputo with Earthjustice, which has a pending federal lawsuit against the Gulf sale.

Some Democrats also objected to the sale. House Natural Resources Committee Chairman Raúl Grijalva of Arizona said Biden “needs to do better” after promising to lead on climate issues but continuing a fossil fuel program with a long history of mismanagement.

The Gulf of Mexico accounts for about 15 per cent of total US crude production and 5 per cent of its natural gas.

Industry analysts had predicted some heightened interest in Wednesday's sale since oil prices rose sharply over the past year.

It's also a chance for companies to secure drilling rights before the administration or Congress can increase drilling fees and royalty rates, said analyst Justin Rostant with industry consulting firm Wood Mackenzie.

“Different companies have different approaches and different strategies,” Rostant said. “Some could think this might be the year to go big.”

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