(The Center Square) – About 80 million acres on the Outer Continental Shelf in the Gulf of America are up for lease in each of two upcoming auctions, marking a push by the Trump administration to significantly expand opportunities for offshore oil and gas production.
But even as the industry applauds the move, it’s not certain whether some oil and gas operators will risk the investment. A legal challenge from environmentalists could stall or halt the administration’s plans. And Florida officials are pushing back on a proposal to open federal waters along the panhandle to drilling.
In its first auction, scheduled for Dec. 10, the Interior Department’s Bureau of Ocean Management plans to lease acreage across 100,000 square miles in the central and western portions off the Gulf. A second auction is scheduled for March 11.
These are the first of 30 to be held through 2040 as mandated by the One Big Beautiful Bill Act, signed by President Donald Trump in July. Each auction must include 80 million acres in the Gulf.
The Act also requires six lease sales to occur over the next six years on acreage in Alaska’s Cook Inlet, an area where oil and gas has been produced since the 1950s.
Separately, the Bureau’s five-year oil and gas leasing program will replace an existing Biden administration plan that did not offer as many lease sales.
The Bureau of Energy Management “is now moving forward with a predictable, congressionally mandated leasing schedule that will support offshore oil and gas development for decades to come,” said Matt Giacona, director of the agency.
Oil and gas production on the Outer Continental Shelf generated $7 billion in federal revenue in the 2024 fiscal year, according to the Interior Department. The funds are distributed primarily to the U.S. Treasury and to government programs directed at coastal conservation and restoration, hurricane protection projects and other public services.
The Dec. 10 auction sets the offshore royalty rate paid by producers at 12.5%, the lowest allowable under federal law. It had risen to 16.66% in 2022 under the Inflation Reduction Act, with a maximum rate of 18.75%.
Louisiana industry sees opportunities, risks
In 2024, the Gulf was the source of about 14% of all U.S. oil production and approximately 2% of domestic natural gas, according to Interior Department data. The waters accounted for 97% of all U.S. oil and gas production during the year.
Chett Chiasson, executive director at Port Fourchon in southeast Louisiana, oversees operations at the most active hub for offshore activities in the Gulf. In an average month, about 15,000 people are flown to offshore locations from the airport at the port, and over 400 large ships traverse its channels daily. The port services over 95% of the Gulf’s deepwater energy production activities.
Chiasson said the Trump administration’s five-year plan will help solidify U.S. energy security in the years ahead. “What we are seeing at Port Fourchon is strong, steady delivery of products, goods and services necessary to explore and produce offshore energy in the Gulf of America. With additional and predictable lease sales, we anticipate the strong business climate to continue and make the U.S. more competitive for capital investment on offshore energy projects immediately and into the future,” said Chiasson.
Louisiana Oil and Gas Association President Mike Moncla said its members are “thrilled at President Trump’s reversal of Biden’s plan.”
“Offshore investment is a long-term play and requires an outlook of certainty,” Moncla said.
But while lower royalty rates and more available leases will increase opportunities for offshore oil and gas operators, attracting investments could still be difficult, said Pierre Conner, executive director of the Tulane Energy Institute in New Orleans.
Most oil and gas production in the Gulf’s more easily drilled shallow waters is played out, Conner said, so bigger firms are more likely to bid on deepwater acreage during the first two auctions.
“These are capital investments of hundreds of millions of dollars and sometimes billions of dollars, and they are going to be very cautious when deciding how to deploy capital. When you compare this to the risk onshore in our U.S. shale plays – which have high success rates – the capital might flow to where there’s a lower risk of a dry hole,” said Conner.
Environmental groups file legal challenge
Additionally, a lawsuit filed by environmental groups could halt or delay the Bureau’s push to open up offshore acreage to more drilling.
The groups – Healthy Gulf, Center for Biological Defense Council and the National Resources Defense Council – sued in federal court on Tuesday in an effort to stop the December auction. The groups contend the lease sale violates the National Environmental Protection Act and the Administrative Procedure Act, as reported by The Center Square.
The Bureau also failed to adequately account for the environmental risk of the auctions on Rice’s whale, an endangered species with habitat solely within the Gulf, the lawsuit said.
Industry insiders have taken note of the challenge. Energy attorneys Jana Grauberger and Kathleen Doody wrote in the Energy Law Blog that the Bureau’s final rule contains no specific provisions related to Rice’s whale.
TRUMP PROPOSES ALASKA, CALIFORNIA, AND GULF COAST OFFSHORE OIL AND GAS LEASES IN FIVE-YEAR PLAN
In a blog post on Nov. 10, they advised oil and gas companies bidding in the auction to be aware that approvals for some offshore activities will require an Endangered Species Act review.
Additional actions could also be required of firms engaged in activities involving new and unusual technologies and certain kinds of seismic surveys, they said.