August 21, 2003 --- Vol. 9, No. 82August 2003

MMS issues final Beaufort Sea lease sale notice

The Minerals Management Service published its final sale notice Aug. 21 for the Beaufort Sea OCS Lease Sale 186, announcing it would offer the entire sale area for lease, deferring only two areas. The sale, which will be held Sept. 24 at the Loussac Public Library in Anchorage, will offer 1,794 whole or partial blocks from the Canadian border on the east to near Barrow, Alaska on the west, encompassing approximately 9.4 million acres in the outer continental shelf offshore Alaska’s northern coast.

The sale notice confirmed that for the first time in the OCS leasing program’s history, MMS will be providing an attractive list of incentives designed to draw players to offshore Alaska, making the lease terms “more comparable with state and other federal North Slope oil and gas leasing terms,” the agency said in a press release.

MMS is offering the tracts at the reduced bid amounts and sliding scale rentals it announced in July: Minimum bid for Zone A blocks $37.50 a hectare; $25 a hectare minimum bid for Zone B blocks.

The agency is also offering royalty suspension for first oil production, with suspension volumes varying by zone.

Sale 186 will include several drilled prospects, including Kuvlum, Hammerhead and Sandpiper. MMS estimates Kuvlum reserves at 100 to 300 million barrels, Hammerhead at 100 to 200 million barrels, and Sandpiper at 20 to 70 million barrels.

Leases from the McCovey prospect, drilled by EnCana a year ago, might also be included in the sale, MMS spokesperson Robin Cacy told Petroleum News Aug. 21.

At the request of Alaska Gov. Frank Murkowski, MMS will defer 26 blocks off Barrow and 28 blocks offshore Kaktovik used for subsistence whaling by those communities.

“The Beaufort Sea continues to hold the best near-term potential for offshore petroleum reserves on the Alaska OCS,” said MMS Director Johnnie Burton. “We must, however, protect those areas vital to North Slope communities that rely on subsistence whaling.”

In addition to MMS’s existing regulations, which cover safety, drilling and pollution prevention, the final notice of sale included seven lease stipulations “intended to minimize effects to the environment and to the Inupiat people,” the agency said.

“The stipulations call for protection of biological resources, including spectacled and Steller’s eiders, use of pipelines rather than tankers, and methods to minimize interference with subsistence whaling and other subsistence harvesting activities,” MMS said.

“We believe that these stipulations have in the past and will continue to reduce environmental effects and conflicts with the bowhead subsistence hunts and other subsistence activities,” MMS Regional Director John Goll said. “MMS will continue to work closely with North Slope communities, tribes, the Alaska Eskimo Whaling Commission, local, state and federal agencies, and the industry whenever activity occurs.”

Bids for four tracts in the U.S.-Canada disputed part of the Beaufort Sea will be accepted, MMS said, and it will determine on or before Sept. 24 whether it is in the best interest of the United States to open those bids or return the bids unopened.

Editor’s note: See Aug. 24 edition of Petroleum News for full story, including Canada’s reaction to the possibility of the four tracts (totaling 16,000 acres) being included in the sale.

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