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MHT planning to extend lease terms Cook Inlet Energy promises two-well program on two leases on the west side of Cook Inlet in return for an extra two years on terms; one well required by end of 2011, 2nd by end of 2012 Eric Lidji For Petroleum News
The Alaska Mental Health Trust Authority plans to give Cook Inlet Energy another two years to explore a pair of onshore leases on the west side of Alaska’s Cook Inlet basin.
Under the deal, Cook Inlet Energy is committing to drill an exploration well on one of the leases by the end of 2011 and a second exploration well on the other lease by the end of 2012. If Cook Inlet Energy misses the first deadline, it would lose one of the leases and if it misses the second deadline it would owe the Trust $250,000 as a penalty.
Cook Inlet Energy, the local subsidiary of Tennessee-based Miller Petroleum, picked up the leases late last year when it acquired the liquidated assets of Pacific Energy. Pacific Energy, in turn, picked up the leases in 2007 when it acquired the assets of Forest Oil.
North of Tyonek The leases sit on undeveloped land about 10 miles north of Tyonek. They are adjacent to the former Three Mile Creek unit, where natural gas production is ongoing, and south of an underground coal gasification pilot project owned in part by Cook Inlet Region Inc.
The two leases comprise some 9,389 acres, but Cook Inlet Energy also wants the Trust to add 626 acres of adjacent Trust land to one of the acres. That additional acreage was only recently conveyed to the Trust, which is why it wasn’t included in previous sales.
The Trust called the lands “highly prospective” for oil and natural gas, but said the possibility exists for exploration of deep coal, possibly through underground gasification.
Under the terms of the deal, Cook Inlet Energy would pay $3 per acre per year on the lease extensions and a $15,525 bonus payment for the 626 additional acres to be added.
The royalty rate on any resources produced would be 12.5 percent.
The Trust will take comments on the proposed extension and expansion through Oct. 25.
MHT and CIE busy this year The Trust Land Office has been busy this summer. In June it began taking offers for underground coal gasification exploration licenses over 190,000 acres in three boroughs. In September, it proposed to lease Kenai Peninsula acreage north of the Cannery Loop unit to Buccaneer Alaska, which in turn promised to drill in 2011.
Since arriving in Alaska, Cook Inlet Energy has been one of the busier companies in the Cook Inlet region, ramping up production at the West McArthur River unit and drawing up an investment wish list that currently depends on raising $75 million to $100 million.
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