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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2007

Vol. 12, No. 32 Week of August 12, 2007

MMS proposes February Chukchi Sea lease sale

The Minerals Management Service has set Feb. 6 as the date for a proposed outer continental shelf oil and gas lease sale in the Chukchi Sea. Sale 193 would be the first Chukchi Sea outer continental shelf lease sale since 1991.

MMS said in the Aug. 3 proposed sale notice that two sales have been held in the Chukchi Sea planning area. In 1988 350 leases were issued following sale 109; 28 leases were issued following sale 126 in 1991. All of the leases have expired.

Alaska Gov. Sarah Palin has 60 days to comment on the size, timing and location of the proposed sale and after those comments are received the Department of the Interior will make a decision on a final notice of sale. If Interior proceeds with the sale, a final notice of sale will be published in the Federal Register at least 30 days prior to the sale date.

The proposed notice and final environmental impact statement for the sale are available on the agency’s Web site at www.mms.gov/alaska.

Bids would be due at 10 a.m. Feb. 5; the public bid opening would be at 9 a.m. Feb. 6 in the Wilda Marston Theatre at the Loussac Public Library in Anchorage.

Royalty suspensions offered

Royalty suspensions will be offered for Chukchi Sea leases ranging from 10 million to 30 million barrels oil equivalent, based on the size of the lease. The royalty suspension will be subject to a price threshold: If the annual price on the New York Mercantile Exchange exceeds $39 per barrel or $6.50 per million Btu, adjusted for inflation, royalties must be paid.

Seven stipulations will be made part of any lease issued as a result of the sale. Stipulation No. 4 — industry site-specific monitoring program for marine mammal subsistence resources — applies to specific blocks during specified timeframes. Stipulation No. 5 — conflict avoidance mechanisms to protect subsistence whaling and other marine mammal subsistence-harvesting activities — applies to specific lease blocks for offshore exploration, development and production activities, but would also apply to all leases for associated activities such as vessel and aircraft traffic that transit the specific blocks or that occur near shore in support of those leases.

The draft EIS for the proposed sale was issued last November.

Although oil and gas development in the Chukchi would present a major challenge, the region has long been known to have the potential to be a world-class oil and gas province (see “MMS issues Chukchi EIS” in the Oct. 22, 2006, issue of Petroleum News). MMS issued a new assessment in February 2006 and said the Chukchi planning area could hold as much as 2.32 billion to 40.08 billion barrels of oil and 10.32 trillion cubic feet to 209.53 tcf of natural gas.

—Kristen Nelson






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