September 27, 2011 --- Vol. 17, No. 82September 2011

State sets varying lease terms for fall sales

The Alaska Department of Natural Resources, Division of Oil and Gas, has developed new terms for its fall areawide sales scheduled to be held Dec. 7.

As described in sale notices published this morning, the state has different bidding minimums and rental rates depending on where tracts are located for two of the areawide sales; all North Slope Foothills tracts have the same minimum bid and rental rates.

For the Beaufort Sea and North Slope sales, tracts adjacent to federal lands (for the North Slope sale described as a sub-region adjacent to federal lands) are being offered with different terms.

For Beaufort Sea tracts adjacent to federal lands and for the sub-region in the North Slope sale adjacent to federal lands, the minimum bid is $10 an acre; all other tracts will have a minimum bid of $25 an acre. Tracts adjacent to federal lands will have rental rates of $1 an acre in the first year with rents increasing to $3 an acre for the fifth year and thereafter.

All other tracts in the Beaufort sale and the north and south sub-regions in the North Slope sale will have rentals of $10 an acre for years one through seven and $250 an acre thereafter, “except that beginning in the year after the year in which sustained production commences on this lease or the state otherwise determines in its sole discretion, upon request, that the lessee has exercised reasonable diligence in exploring and developing this lease the annual rental will be $10.00 per acre or fraction of an acre.”

Royalty rates also vary by area for the Beaufort Sea and North Slope sales.

For complete sales details, including regional tract maps, see the division’s website

State denies Aurora Gas application for Cohoe unit

The Alaska Division of Oil and Gas has denied an application by Aurora Gas LLC to form the Cohoe unit.

In a Sept. 23 decision, the division said the unit application was denied because it is not in the interests of the state or the public.

The lands proposed for inclusion in the unit, located near the intersection of the Sterling Highway and Kalifonsky Beach Road near Kasilof on the Kenai Peninsula, include two State of Alaska leases which would have expired Sept. 30, 2010, without the unit application, and one Cook Inlet Region Inc. lease which would have expired Aug. 17, 2011, without the unit application.

Unocal drilled the original Cohoe Unit No. 1 well in 1973. Aurora proposed re-entering the well by Dec. 31, 2011, to perforate selected zones, but as of Sept. 9, had yet to obtain a drilling permit from the Alaska Oil and Gas Conservation Commission, the division said. Aurora also proposed to obtain 3-D seismic over the acreage.

The division said that while Aurora would benefit from unitization because the leases would be extended, unitization would not “offer equal benefit or protection to the people of Alaska or the state,” and “could deprive the state of the benefits of oil and gas leasing.”

See stories in Oct. 2 issue of Petroleum News, available to subscribers online at 11 a.m., Friday, Sept. 30 at

Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] ---