After months of delay, the U.S. Department of the Interior auctioned off 1.7 million acres for offshore oil and gas leases during Lease Sale 261 on Dec. 20, 2023. (See Holland & Knight's previous alert, "Interior Department Announces Five-Year Lease Plan for Offshore Oil and Gas," Sept. 29, 2023.) The sale attracted 26 companies that bid on 311 offshore blocks and garnered the U.S. Treasury $382 million, the largest lease sale in eight years.

Initially, Lease Sale 261 was challenged by environmental groups that claimed the lease sale could harm the endangered Rice's whale. In response, the Interior Department announced the removal of 6 million acres from the sale and applied operational restrictions on oil and gas companies to protect the Rice's whale. This action was challenged by industry groups and the state of Louisiana. Ultimately, the U.S. Court of Appeals for the Fifth Circuit ordered the sale to proceed without the Rice's whale restrictions. (See Holland & Knight's previous alert, "Appeals Court Restores Offshore Oil, Gas Lease Sale Without Rice's Whale Protections," Nov. 15, 2023.)

Lease Sale 261 will be the last offshore oil and gas lease sale until 2025. The Interior Department's five-year offshore drilling plan calls for only three lease sales – the fewest called for in the history of the offshore oil and gas industry. In announcing the five-year plan, the Interior Department stated that the three lease sales were the minimum number that could be offered to allow the department to hold offshore wind lease sales. The Inflation Reduction Act requires that in order for the Interior Department to hold an offshore wind lease sale, the department must have completed an offshore oil and gas sale within a year of the offshore wind lease sale and offer at least 60 million acres.