Vol. 27, No.34 Week of August 21, 2022
Providing coverage of Alaska and northern Canada's oil and gas industry

Congress mandates sales

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Inflation Reduction Act addresses O&G lease sales, including Cook Inlet sale

Kristen Nelson

Petroleum News

The 700-plus page Inflation Reduction Act, signed into law by President Joe Biden on Aug. 16, focuses on big ticket items - reduction of health care costs, growth of renewable energy and increased corporate taxes - but also includes a few pages addressing federal oil and gas lease sales.

It reinstates Outer Continental Shelf Lease Sale 257 in the Gulf of Mexico, for which bids were received in November 2021, and requires three other OCS lease sales, including Lease Sale 258 in Cook Inlet, to be held, with the Cook Inlet sale to be held by Dec. 31, 2022.

The Cook Inlet sale was included in the the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program, but the Bureau of Ocean Energy Management said in May that it would not move forward with the Cook Inlet sale because of the lack of industry interest.

Following the May 2004 Cook Inlet Lease Sale 191, in which BOEM received no bids, the Department of the Interior said the secretary “decided to include the Cook Inlet Planning Area on the schedule as a ‘special interest sale.’ If industry interest reflected in comments on a call for information did not support consideration of a sale, the sale would be postponed,” the agency said, with a request for nominations and comments issued the next year.

A record of decision for the sale was issued in January 2017, and the act says Lease Sale 258 will be held in accordance with that ROD.

Sale 257 reinstated

The act also requires acceptance of bids received for Lease Sale 257 in the Gulf of Mexico, which was held but the leases never issued. The act requires that not later than 30 days after enactment of the act, the Secretary of the Interior is to “accept the highest valid bid for each tract or bidding unit of Lease Sale 257 for which a valid bid was received on November 17, 2021.”

Once executed lease forms, required payments and any required bonds or sureties are received, the secretary “shall promptly issue to the high bidder a fully executive lease,” in accordance with regulations in effect at the time of the same and terms and conditions in the final notice of sale.

Other Gulf of Mexico sales

In addition to the Cook Inlet sale, two other sales required in the act to be held are previously cancelled sales 259 and 261, both Gulf of Mexico sales.

“Notwithstanding the expiration of the 2017-2022 leasing program,” the act says, “not later than March 31, 2023, the Secretary shall conduct Lease Sale 259 in accordance with the Record of Decision approved by the Secretary on January 17, 2017, described in the notice of availability entitled ‘Record of Decision for the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program Final Programmatic Environmental Impact Statement.’”

The other sale, Lease Sale 261, is required to be held no later than Sept. 30, 2023.

Cook Inlet sales history

The most recent federal OCS Cook Inlet sale to draw bids was Sale 244, held in 2017. That sale saw 14 leases awarded to Hilcorp: two offshore Hilcorp’s Ninilchik unit; one offshore BlueCrest’s Cosmopolitan unit; and two groups of leases, three and eight respectively, in mid Cook Inlet between Iniskin Bay and Kachemak Bay. The leases expire Sept. 30, 2027.

Following the 2004 Cook Inlet Sale 191, in which BOEM received no bids, Sale 211 was deferred a year in 2008 and subsequently cancelled with a new sale scheduled. That sale, Sale 219, was cancelled in 2011 due to lack of industry interest, the same fate which befell Sale 258, originally scheduled to be held in 2011.

Recent Cook Inlet work

Last summer, BOEM approved an application from Hilcorp to conduct geohazard surveying over the company’s federal leases in Cook Inlet, encompassing four lease blocks. The agency’s records show a 3D marine geohazard permit was issued to Hilcorp for Cook Inlet work on Aug. 11, 2021, with valid permit dates through Oct. 31, 2021. That work is shown as completed, as is another 3D marine geohazard survey in the summer of 2019. The company received a permit for work in the summer of 2020, but BOEM records show no activity on that permit, presumably due to the pandemic.

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