Dec 10 (Reuters) – The Trump administration is set to conduct the first sale of oil and gas drilling rights in the Gulf of Mexico since 2023 on Wednesday. This event will test the industry’s interest in offshore drilling locations at a time when the U.S. aims to boost domestic fossil fuel production.

This auction is the first of 30 that are required by the tax cut and spending bill signed by President Donald Trump in July. The plans for offshore leasing mark a significant change from those of his predecessor, President Joe Biden, who intended to hold very few oil and gas auctions as part of efforts to reduce reliance on fossil fuels and tackle climate change.

The U.S. Bureau of Ocean Energy Management is offering 81.2 million acres in the Gulf with a royalty rate of 12.5%. This is the lowest rate allowed under Trump's new tax law. Previously, under Biden’s 2022 Inflation Reduction Act, oil companies had to pay a minimum of 16.66% in royalties to the U.S. government, states, and other federal funds.

Trump's law aimed to lower the royalty rate to encourage more industry participation in these lease sales. U.S. crude oil prices have dropped about 20% this year, which could impact investments by drilling companies, although advancements in deep-sea drilling technology are expected to increase production in the Gulf.

Offshore production accounts for around 15% of the U.S. oil output but has not kept pace with the onshore shale fields in recent years due to longer timelines and higher initial costs.

According to pre-sale statistics on the BOEM website, 26 companies placed a total of 219 bids for 1.02 million acres, which is about 1.3% of the land available for auction.

The bids will be announced during an event that will be livestreamed on the BOEM’s website on Wednesday morning.

The last Gulf sale in 2023 received 352 bids from 26 companies for 1.73 million acres and generated $382 million, the highest amount raised in a federal offshore lease sale since 2015.