Whales and Lawyers and Oil, Oh My!

People are starting to realize what we’ve known all year — that we’re barreling toward a tighter oil market. 

But hey, at least we’re going to save some whales in the process. 

Back when President Biden’s Inflation Reduction Act was passed in 2022, the legislation carved out a chunk of acreage in the Gulf of Mexico for oil and gas development. 

Earlier this year, the Bureau of Ocean Energy Management (BOEM) announced the final notice of sale of about 13,600 blocks consisting of 73.3 million acres in the Gulf of Mexico. 

Again, this sale was congressionally mandated. 

Then, much to the chagrin of the U.S. oil and gas industry, the BOEM pulled off a classic rug pull… 

One that just made a few select oil stocks in your portfolio become incredibly more valuable. 

It turns out the BOEM decided to strip out more than 6 million acres from the lease sale. 

Why, you ask?

Good question. 

Under a recent settlement agreement, the BOEM would have to exclude the acreage from the lease sale in order to protect the Rice’s whale, an endangered species found in the Gulf of Mexico. 

If you’re really looking for someone to blame, it all rests squarely on BP's shoulders. 

Thanks to the criminally negligent shenanigans from BP during the Deepwater Horizon catastrophe, roughly 20% of the Rice’s whale population was wiped out. 

But there’s a peculiar little bit of information left out in this story. 

You see, the BOEM released its "Final Supplemental Environmental Impact Statement" back on January 9, 2023, more than a month before its final notice of sale was announced. 

In that report, it had this to say about the impact on the Rice’s whale:

Although a smaller leased area resulting in less projected OCS oil- and gas-related activity could decrease the likelihood of OCS oil- and gas-related activities impacting marine mammal populations, such as the Rice’s whale and coastal bottlenose dolphin, there are not enough conclusive data on the density, general distributions, and possible migratory behaviors of marine mammal populations in the GOM throughout the year to support a reasonable conclusive analysis.

It even went on to say that the cumulative impacts to marine mammal populations — even when taking into consideration potential impacts such as the Deepwater Horizon explosion, oil spill, and response — would be negligible. 

The lease sale isn’t expected to take place until late September, so your guess is as good as any as to how this will ultimately play out.

Further restrictions have been laid out too, such as sharply limiting both the times and speeds at which vessels can travel in the Gulf’s waters, which ends up straining companies' operations. Someone is even going to train employees on how to better spot Rice’s whales so there are no accidental collisions. 

But here’s a little secret — it doesn’t matter which side prevails because you’ll be the winner in the end.

Right now, the Gulf of Mexico accounts for about 15% of our domestic production. 

That’s a hefty chunk of our output. 

Going forward, these kinds of environmental challenges will pop up more and more as the climate change debate reaches a fever pitch in the mainstream media. 

And like it or not, environmental groups such as the Sierra Club will become much more successful in getting more operational burdens in place. 

Exacerbating this situation even more is the widening gap between supply and demand fundamentals. 

Not only is demand strong and healthy right now, but there isn’t much room for production growth ahead, especially with fewer rigs out in the field. 

So where do you look? 

Well, perhaps you should start with these must-buy oil stocks that have a foothold in what is arguably the biggest oil region in the world.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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