September 25, 2003 --- Vol. 9, No. 94September 2003

Alaska Mental Health Trust lease sale brings in $178,000

The Alaska Mental Health Trust sold seven leases at its Cook Inlet oil and gas lease sale in Anchorage today. Two companies, Aurora Gas and Marathon Oil, picked up some 24,000 acres, paying a total of $178,190.46.

Aurora Gas took one lease on the west side of the inlet northwest of Tyonek at $12.80 an acre, paying $40,077.06 for the tract of some 3,100 acres.

All of the tracts which Marathon took were on the Kenai Peninsula side, east and northeast of Soldotna. The company's bids ranged from $5 an acre to $10.47 an acre, averaging $6.64 an acre. Marathon bid $138,113.40 for some 20,808 acres.

This is the third Cook Inlet oil and gas lease sale the trust has held, said Mike Franger, Trust Land Office senior resource manager. With the new tracts on the Kenai Peninsula offered in this sale, all Cook Inlet acreage leasable for oil and gas, some is now available, he said. Franger said the office has already done title work for the tracts and leases should be issued within about 30 days. Duration of the leases is five years.

Including results from this sale, he said, the trust has leased some 100,000 acres over the last three years, out of less than 250,000 leasable acres in the Cook Inlet area.

Three exploration licenses issued

The Alaska Department of Natural Resources said today that it intends to issue three exploration licenses in the Susitna basin north of Anchorage, two to Forest Oil and one to Clearflame Resources.

Forest's license No. 1 is for 386,206.63 acres and its license No. 2 is for 471,474.23 acres. The Clearflame license, No. 3, is for 478,584.25 acres. The department's Division of Oil and Gas said all the license areas are west of the Parks Highway, and include only lands for which the state owns the mineral estate. Communities in the area include Trapper Creek, Talkeetna, Willow and Skwentna.

The companies will pay licensing fees of $1 per acre.

There is no rental fee for exploration licenses and no up-front payment to the state, as is the case with conventional oil and gas leasing. Instead, money goes into exploration and licenses are granted based on the state's approval of work commitments by the licensees.

Forest's work commitments are $2,520,000 for license No. 1 and $3 million for license No. 2, each of which has a primary term of seven years. Forest has the option to extend the primary term for up to three years, the state said, with the submittal of an additional $5 million work commitment.

Clearflame's work commitment for its license is $2.5 million. That license also has a primary term of seven years. The state said that some of the acreage included in the Clearflame application lies in existing shallow natural gas leases, and if a shallow natural gas lease expires during the term of the license, that acreage may be included in the license.

Once the required work commitment has been completed, the licensees may convert all or a portion of each license area into oil and gas leases, with a rental of $3 per acre per year. Conversion leases from the Forest licenses will have a primary term of five years; those from the Clearflame license will have a primary term of seven years.

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