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Lean Bids Expected at Federal Lease Sale

December 18, 1985

NEW ORLEANS (AP) _ Few bidders were expected at today’s federal oil lease sale for tracts off Florida in the Gulf of Mexico.

A New Orleans drilling company executive said earlier this week that he expected a low bidder turnout because of the government’s decision to eliminate choice tracts from the 36.2 million acre-sale, which includes areas off Florida’s beaches.

The first such sale sparked a furor among environmentalists during the 1970s.

Federal officials said they decreased the amount of 5,000-acre parcels up for sale because of national security and environmental reasons.

Hugh J. Kelly, president of Ocean Drilling and Exploration Co., said the 200 eliminated tracts were potentially good drilling locations.

He said sagging oil and gas prices - combined with the deletion of some of the choice sites - would probably diminish interest in the sale.

The energy companies ″already have pretty good lease inventories now,″ said Susanne Pagano, editor of Offshore Construction Report, a weekly newsletter published in Houston. She predicted bidding would be heavier around the Mobile Bay and Destin Dome areas where past drilling has been concentrated.

Exxon Co. U.S.A. was a major purchaser at last year’s sale in the Eastern Gulf. Exxon currently has 33 tracts in the Mobile Bay area and has announced six discoveries. The company is now operating five rigs in the area.

Money from the federal leases goes directly into the U.S. Treasury and companies have five years to begin drilling.

Length of leases runs from at five to 10 years, depending on the depth of the water at the site.