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Vol. 12, No. 48 Week of December 02, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Alaska Peninsula, Foothills sales set

February areawide bids to be opened at state office building downtown; Alaska Peninsula best interest finding supplemented

Kristen Nelson

Petroleum News

The Alaska Department of Natural Resources Division of Oil and Gas has issued sale notices for its annual Alaska Peninsula and North Slope Foothills areawide lease sales.

Bids will be opened Feb. 27, the division said Nov. 21.

This is only the state’s third Alaska Peninsula areawide sale, and no drilling has yet occurred in that area.

But for the first time in many years companies will be drilling in the other sales area, the Brooks Range Foothills.

With three companies planning to drill in the Foothills this winter — Chevron at White Hills on the east side near the Dalton Highway and Anadarko Petroleum and Renaissance Umiat adjacent to the National Petroleum Reserve-Alaska in the west — companies are now drilling where, in the recent past, they’ve only put money into acreage and field work. (See most recent winter drilling story in Nov. 18 issue of Petroleum News.)

And a note to those who attend bid openings: Don’t go to the Loussac Library.

The state has changed the venue for these lease sales. The division said bids will be opened 9 a.m. in suite 240 of the Atwood Building, 550 W. 7th Ave. in downtown Anchorage.

Peninsula BIF supplemented

In a Nov. 21 decision of substantial new information for the Alaska Peninsula areawide sale, DNR Commissioner Tom Irwin said the U.S. Fish and Wildlife Service submitted “new information or information that builds upon information” the agency submitted previously about the population in the sale area of the northern sea otter, which has been listed as threatened under the Endangered Species Act since the best interest finding for the Alaska Peninsula sale area was issued in July 2005. The Fish and Wildlife Service also provided information on the Steller’s eider, which is listed as threatened, the Kittlitz’s murrelet, which has since been listed as an ESA candidate species, as well as on 32 “birds of conservation concern.” Of the 32 species which Fish and Wildlife listed for both sale areas, DNR said 27 breed in the Alaska Peninsula areawide sale area and three occur in, but do not breed in the area.

DNR said it determined that “substantial new information has become available that justifies a supplement” to the most recent best interest finding for the Alaska Peninsula area. “The supplement will change one mitigation measure by shortening the period when exploration, development and major maintenance is allowed by six days; include the substantial new information that justifies the shortened period; and add the consultation with USFWS” in addition to the consultation with the Office of Habitat Management and Permitting already required for the director of the Division of Oil and Gas to approve an exception to that period.

Three lessee advisories are also changed, two by adding consultation with the Fish and Wildlife Service, the third by adding an additional explanation of the lessee’s responsibility under the Environmental Protection Act and adding the northern sea otter to the existing table of endangered and threatened species in the finding.

Two sales in peninsula

Alaska Peninsula areawide sales began in 2005 with a sale that brought in $1.1 million for 37 tracts. The second sale, held in 2007, brought in only $38,779 for a single tract.

The tracts leased in the first two sales are grouped together in the area east of Nelson Lagoon, surrounding Herendeen Bay and Port Moller near the southern end of the sale area, which stretches from Nushagak Peninsula, around the northeastern end of Bristol Bay, down the edge of the Alaska Peninsula to Moffett Point.

There was no competition between the two bidders in the 2005 sale: Shell Offshore Inc. bid on 33 tracts for a total of $842,415; Hewitt Mineral Corp. took four tracts for $306,838.

Hewitt was the only bidder in the second sale.

Wide range in Foothills’ sales

The state held its first Foothills areawide sale in 2001, selling 170 tracts for $9.8 million. Since then, the annual sales have drawn mixed levels of interest: 46 tracts were sold in 2002 for $2.9 million; one tract in 2003 for $36,576; five tracts in 2004 for $106,305; 12 tracts in 2005 for $320,000; and 45 tracts in 2006 for $1.27 million.

There were no bids in the 2007 Foothills areawide sale.

Big bidders in the first sale were Burlington Resources (which has since dropped its Foothills leases); Anadarko Petroleum; EnCana; Chevron; Petro-Canada (Alaska); and Union Oil Company of California (now owned by Chevron).

Petro-Canada was the big bidder in the 2002 sale, followed by Anadarko and Union. Anadarko was the dominant bidder in the 2006 sale.

Minimum $5 per acre in both sales

There are 1,047 tracts in the Alaska Peninsula Areawide sale, including onshore and offshore acreage from the Nushagak Peninsula in the north down the north side of the Alaska Peninsula to just north of Cold Bay.

There are 1,347 tracts in the North Slope Foothills Areawide sale. The sale area is between the Arctic National Wildlife Refuge and the National Petroleum Reserve-Alaska. The sale’s northern boundary is the Umiat Meridian baseline; the southern boundary is the Gates of the Arctic National Park and Preserve.

Tracts in both sales range from 1,280 to 5,760 acres.

Both sales have a minimum bid of $5 per acre, a fixed royalty rate of 12.5 percent and an initial primary term of 10 years.

The division said the DNR commissioner has issued a decision of no substantial new information for the North Slope Foothills sale and a decision of substantial new information and supplement to the Alaska Peninsula areawide best interest finding. The sale documents are posted on the division’s Web site

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