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Environment

U.S. to offer 37 million offshore acres for oil drilling

WASHINGTON (Reuters) - The U.S. Interior Department on Thursday issued the final terms for leasing almost 37 million acres in the central Gulf of Mexico to energy companies so they can drill for oil and natural gas.

A gull flies at a coastal area in Bayou La Batre, Alabama November 10, 2009. REUTERS/Carlos Barria

The area to be leased may hold up to 1.3 billion barrels of crude oil and 5.4 trillion cubic feet of gas, according to the department, which is also shortening the time that companies would have to develop the tracts.

Lease Sale 213 involves about 6,958 tracts spread over 36.9 million acres located 3 to 230 miles off the coasts of Louisiana, Mississippi and Alabama. The blocks are in water depths from 10 feet to more than 11,200 feet.

The lease sale will include about 4.1 million acres in an area known as 181 South, off the Alabama-Florida border. Drilling off Florida in the Gulf is only allowed far from the state’s shoreline.

The lease sale, which will be held on March 17, will cut the time energy companies have to develop oil and gas resources on certain tracts.

The leasing period for blocks in waters 400 to 800 meters (1,312 to 2,625 feet) deep would change from eight to five years, but when an exploratory well is drilled the lease could be extended by three years.

Blocks 800 to 1600 meters (2,625 to 5,249 feet) deep would have lease terms of seven years instead of 10 years. There would also be an extension of three years with an exploratory well.

The current 10-year leasing period would continue for blocks in 1,600 meters (5,249 feet) of water.

Liz Birnbaum, director of the department’s Minerals Management Service, said the shorter leasing periods will “provide a fair return to the public for (offshore) resources and a fair opportunity for lessees to explore, develop and profit from their leases while encouraging diligent development.”

Oil and gas companies have opposed the cut in the leasing periods.

“MMS recognizes that advances in technology have decreased the time necessary for exploration and development in some water depths, while frontier conditions still exist in the deepest waters of the Gulf,” said Birnbaum. “The reduction of some initial lease periods with possible extensions is a way to expedite development.”

Companies will have to pay the government a royalty fee based on 18.75 percent of the value of the oil and gas they drill in the offshore tracts.

Reporting by Tom Doggett

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