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Vol. 12, No. 52 Week of December 30, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

State requesting bids

Competing exploration license proposals wanted; Copper River leases issued

Kristen Nelson

For Petroleum News

The Alaska Division of Oil and Gas said Dec. 17 it has received two exploration license proposals which it intends to evaluate and is requesting competing proposals. Because the state is soliciting for competing proposals it is not releasing the names of the applicants or provisions of the proposals.

One of the proposals is for a gas-only exploration license for some 21,080 gross acres in the Houston area in Southcentral Alaska. The Houston area application is for state-owned land within township 18 north, range 3 west, sections 1-18 and 20-24; T18N-R4W, sections 1, 2, 11-13; T9N-R3W, sections 31-36; and T19N-R4W, sections, 35-36, all in the Seward Meridian.

The area is west-northwest of Anchorage. Houston is just within the southern boundary of the exploration area; the southern border skirts the Susitna River, which is south of the area in the east and just within the southern border on the west.

The other proposal is an oil and gas exploration license in the Crooked Creek basin northeast of Fairbanks, between the towns of Central and Circle Hot Springs, and the Yukon-Charley Rivers National Preserve. This area consists of some 161,280 gross acres of state-owned land within township 7 north, ranges 16-19 east; T8N, R16-19E; and T19N, R15-17E, Fairbanks Meridian.

Crooked Creek runs through the northwest corner of the application area, as does the Steese Highway.


Applications received in Apri

Both applications were received April 30. Applications are one way the licensing process can be initiated: The state accepts applications each April. The commissioner of the Department of Natural Resources may also issue a notice requesting submittal of proposals to explore a designated area; those notices may be issued at any time.

Prospective licensees have until 5 p.m. Jan. 17 to notify the Division of Oil and Gas of intent to submit a competing proposal; competing proposals are due by 5 p.m. Feb. 18.

The division does not have a standard proposal form, but requires specific information — along with a map — including the proposed work commitment. Maps and a copy of the proposal notices are posted on the division’s Web site:

Program more than 10 years old

The exploration licensing program was initiated in the early 1990s as a way to encourage exploration in Alaska’s under-explored frontier basins and to complement the state’s areawide leasing program. Acreage included in the state’s areawide leasing program is off limits for exploration licensing.

Exploration licensing areas must be between 10,000 and 500,000 acres.

Proposals for licensing must describe the area; state the specific minimum work commitment in dollars; describe the amount and form of a security to be posted based on the projected cost of the planned exploration work; propose the term of the license — unless specified by the commissioner; and verify that the prospective licensee meets minimum qualifications.

Once the commissioner has determined that a license should be awarded, the successful licensee will be determined by a sealed bid process with the license awarded to the applicant committing the most dollars to an exploration program.

The license recipient must post a bond in the amount of the work commitment and pay a $1 per acre license fee.

The term of the license can be up to 10 years and during the lease, subject to satisfaction of required work commitments, any portion of the licensed area can be converted to oil and gas leases, the term of which can extend beyond the original term of the license. Annual rental for acreage converted to leases is $3 per acre.

If less than 25 percent of the work commitment has been completed by the fourth anniversary of the lease, the license will be terminated with the remainder of the security forfeited to the state.

If the licensee has completed less than 50 percent of the total work by the fourth anniversary, 25 percent of the licensed area will be relinquished, with an additional 10 percent relinquished each successive year until half of the original acreage has been relinquished.

Four licenses issued

The state has issued four exploration licenses: one each in the Copper River and Nenana basins and two in the Susitna basin.

The Copper River basin license, issued in 2000, was a five-year license issued to Forest Oil and Anschutz Exploration covering 318,736 acres with an exploration commitment of $1.42 million.

Regular oil and gas leases were issued Oct. 1 converting 44,761 acres from this license to leases with five-year terms. The leases were issued 50 percent to Forest Oil which is exiting Alaska and 50 percent to Anschutz Corp. Forest has sold its Southcentral acreage to Pacific Energy Resources, whose Alaska subsidiary is Pacific Energy Alaska Operating LLC.

Andex Resources has a seven-year Nenana basin exploration license for 482,942 acres issued Oct. 1, 2002, with a $2.525 million work commitment. The division said in its 2007 annual report that the work commitment in the Nenana basin has been met. Andex, however, lost interest in Alaska when the Alaska Legislature increased the state’s oil and gas production tax in 2006 and Doyon Ltd. is looking for a new partner for Nenana basin work (see story in Jan. 16 issue of Petroleum News at

Forest had two Susitna basin leases, both issued in 2003 with seven-year terms, one covering 386,204 acres with a $2.52 million exploration commitment and one covering 471,474 acres with a $3 million exploration commitment. All of Forest’s Southcentral acreage is now held by Pacific Energy Alaska Operating.

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