Gulf lease sale nets $1.7B in winning bids

[June 21, 2012]  NEW ORLEANS (AP) -- 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 Wednesday.

Interior Department Secretary Ken 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 of Mexico and impose sweeping 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. A previous sale happened in December 2011. It 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 for the latest sale. BP had 43 high bids totaling $239.5 million. It was the second-highest number of winning bids after 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 BP's Macondo well explosion in 2010 -- an area known as Mississippi Canyon. The single highest bid came for a lease in the Mississippi Canyon -- from Statoil for $157 million.

Depending on 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 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 a group calling for an end to offshore drilling.

"We have a chronic oil spill problem in Louisiana," said Kristen Evans, an environmental organizer who was not part of the protest.

Wednesday's was the last sale before regulators announce a new five-year leasing plan this month.

[Associated Press; By CAIN BURDEAU]

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