The Nickel Report

As previously forecast, the winds of change are heading to the home of America’s offshore energy industry. On February 22, 2023, the US Department of the Interior’s (DOI) Bureau of Energy Management (BOEM) announced the first-ever offshore wind lease sale in the Gulf of Mexico (GOM). The proposed GOM sale comes in the middle of the comment period on the agency’s proposed changes to the offshore wind regulations.

The Proposed Sale Notice (PSN) includes 102,480 acres near Lake Charles, Louisiana, and two areas near Galveston, Texas, one comprising 102,480 acres, and the other comprising 96,786 acres (see the below image). BOEM appears to be interested in comments on regulations that would limit leasing near Galveston to a single area or potentially eliminate the sale of leases in either area.

In Executive Order 14008 President Biden paused oil and gas lease sales on public lands and offshore waters. Thereafter, the Bureau of Ocean Energy Management (BOEM) canceled Lease Sales 258 (in Alaska's Cook Inlet) and 259 (in the Gulf of Mexico). Congress, however, required BOEM to hold both lease sales in the Inflation Reduction Act (IRA).

Below, we briefly summarize recent developments for each lease sale and subsequent opportunities available to upstream oil and gas companies.

The Gulf of Mexico (GOM) has long been home to offshore energy development, but with President Biden’s call to advance offshore wind development, a new change is potentially coming to the horizon—wind farms. At the helm of GOM wind development is the Department of the Interior’s (DOI) Bureau of Ocean Energy Management (BOEM), who has now announced the solicitation of public comments on two potential wind energy areas (WEA) off the coasts of Texas and Louisiana and the related environmental assessment (EA) for the entire GOM Call Area.

On January 11, the Bureau of Ocean Energy Management (BOEM) announced the beginning of a scoping period to prepare a draft environmental assessment (Draft EA) for the Gulf of Mexico (GOM) Call Area to assess potential impacts associated with offshore wind leasing. The area includes approximately 30 million acres of federal lands on the outer continental shelf (OCS) in the GOM, and covers areas in what is commonly known as the Western and Central Planning Areas of the GOM. This is the same area described in the Call for Information and Nominations published in the Federal Register on November 1, 2021. Comments will be received through February 9, 2022. BOEM anticipates completing the Draft EA this summer.

Since the first Gulf of Mexico rig was installed in 1947, over 12,000 offshore oil and gas platforms have been installed globally. A 2016 study forecasts 600 will require decommissioning by 2021 and 2,000 more by 2040 at a cost of US$210 billion. Many newer platforms are sited in deeper waters, facing higher decommissioning costs and complexity.

The 1958 UN Convention on the Continental Shelf and 1972 London Convention broadly prohibited ocean “dumping.” Subsequent frameworks recognize exceptions permitting in situ offshore structure decommissioning consistent with internationally recognized standards. The 1982 UN Convention on the Law of the Sea (UNCLOS), for example, requires member states adopt rules no less stringent than the London Protocol, amending the original Convention to allow deliberate placement of subsea structures in defined circumstances. Thus, in situ offshore platform decommissioning has been recognized as conforming with governing treaties and legal frameworks.