May 16, 2012 --- Vol. 18, No. 37May 2012

$6.9 million in Cook Inlet lease sale

The State of Alaska took in $6,865,835 in apparent high bids at its areawide Cook Inlet oil and gas lease sale this morning in Anchorage, the second-highest dollar volume for a Cook Inlet sale since areawide sales began in 1999.

The largest Cook Inlet areawide sale was an $11 million sale last year, when Apache bid heavily as it established a Cook Inlet acreage position.

In this morning’s sale, Hilcorp Alaska had apparent high bids of $3.1 million on some 83,000 acres, followed by Cook Inlet Energy with $2.7 million in apparent high bids on almost 75,000 acres and Apache Alaska with apparent high bids of $1.03 million on more than 40,000 acres. William Crawford was apparent high bidder on one small tract for $875.

The three major bidders are all large current leaseholders and much of the bidding appeared to be filling in around existing leasehold positions.

Hilcorp Alaska purchased Chevron’s Cook Inlet assets last year and is in the process of acquiring Marathon’s Cook Inlet assets.

Cook Inlet Energy bought assets of a bankrupt Pacific Energy Resources in 2009 and has been bringing production back online since early 2010.

In a statement after the sale, Department of Natural Resources Commissioner Dan Sullivan called the results encouraging and said DNR has worked to get the word out on the world-class resources in the state. He said the Cook Inlet basin “continues to attract explorers on the basis of its hydrocarbon resources” and generous financial incentives.

“Cook Inlet is an excellent example of how a combination of a solid resource base and an attractive financial environment encourages exploration and development,” Division of Oil and Gas Director Bill Barron said.

There is no tax on oil production in Cook Inlet, where production has dropped from a peak of more than 227,000 barrels per day in 1970 to some 10,000 bpd currently. The production tax on Cook Inlet natural gas is 18 cents per thousand cubic feet for new production and producers pay a 5 percent royalty on any new Cook Inlet discovery for the first 10 years of production, in contrast to the usual 12.5 percent royalty.

The state also offers tax credits, and due to 2010 legislation, a special incentive for the first three exploration wells drilled from a jack-up rig.

—Kristen Nelson

See story in May 20 issue, available at 11 a.m., Friday, May 18, at

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