On Feb. 11, 2020, BOEM announced it will offer over 78 million acres for a region-wide lease sale scheduled for March 18, 2020. The sale will include all available unleased areas in federal waters of the Gulf of Mexico. BOEM’s press release can be found at https://www.doi.gov/pressreleases/interior-announces-region-wide-oil-and-gas-lease-sale-gulf-mexico-2.
Bidders for the lease sale should be aware that the Office of Investment Security, Department of the Treasury issued a final rule, effective February 13, 2020, establishing regulations to implement the provisions relating to real estate transactions in section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018. The final rule was published at 85 Fed. Reg. 3158 on Jan. 17, 2020, and will be codified at 31 C.F.R. part 802.
The new rule sets forth the process relating to the national security review by the Committee on Foreign Investment in the United States (CFIUS) of certain transactions, referred to in the rule as “covered real estate transactions,” that involve the purchase or lease by, or concession to, a foreign person of certain real estate in the U.S. Covered real estate transactions include some transactions involving real estate located within the territorial sea of the U.S., as identified in the new rule, and may apply to certain lease blocks offered in Lease Sale 254.
In determining whether a lessee is a foreign national, government, person or entity, CFIUS looks not only at the entities that are lessees, but also to any person with the ability to exercise control, as defined by the statute and its implementing regulations, over the lessee. CFIUS is authorized to review covered real estate transactions and to mitigate any risk to the national security of the U.S. that arises as a result of such transactions. This could result in the modification, suspension, or prohibition of a covered real estate transaction.
The CFIUS notification process in the regulation is largely voluntary. A party to a transaction may, pursuant to the regulations, notify CFIUS of the transaction by submitting a declaration or notice and seek a determination.
Accordingly, BOEM recommends that each bidder review the final rule before bidding on blocks located within the U.S. territorial sea. The boundary of the U.S. territorial sea is delineated on the map “Gulf of Mexico, Region-wide Oil and Gas Lease Sale 254, March 18, 2020, Stipulations and Deferred Blocks” included in the Final Notice of Sale package: https://www.boem.gov/Sale-254.
For further information about the Department of Treasury’s final rule, please refer to https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius.