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January 30, 2001 --- Vol. 7, No. 15January 2001

State suspends shallow gas leasing program

The state has suspended its shallow gas leasing program to allow the Division of Oil and Gas to get caught up with issuance of leases for the state's last three competitive areawide oil and gas lease sales.

The director recommended the suspension to the commissioner of the Department of Natural Resources the week of Jan. 22, Natural Resource Manager Pirtle Bates told PNA Jan. 29. The commissioner agreed. The division expects to send a letter on the suspension the week of Jan. 29.

When the division began shallow gas leasing, interest in competitive areawide sales and the price of crude oil were both down, Bates said. The division thought then that it had the resources do handle both the shallow gas and the competitive leasing programs. But, he said, interest in areawide lease sales rebounded, and between applications for shallow gas leases and areawide competitive oil and gas lease sales for Cook Inlet, the North Slope and the Beaufort Sea, the division received as many applications in the last nine months as it received in the previous three years.

The work the division must do to issue competitive oil and gas leases piled up behind the work needed to issue shallow gas leases.

In effect, Bates said, a potential of less than $500,000 in revenues from shallow gas leases was blocking a potential of up to $10 million in revenues due from the balance of bonus bids and rentals for competitive oil and gas lease sales.

Bates stressed that the shallow gas leasing program is only being suspended. All pending applications will be kept, he said. And the division will continue to accept applications for shallow gas leases which are on a first-come, first-served basis to allow applicants to establish priority.

When the division has the resources to do both programs, it will pick the shallow gas leasing program back up. Bates said the division couldn't predict when work would resume on shallow gas applications, but he said the hope is that it won't be more than a year.

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