Mental Health Trust negotiates 1,200 acre Jonesville oil and gas lease

Petroleum News

The Alaska Mental Health Trust Land Office said Oct. 25 that it is proposing to issue a negotiated lease for some 1,200 acres of trust mineral estate near Sutton, Alaska, to Knoll Acres Associates LLC.

The Trust lands to be offered include the subsurface estate of parcels within sections 17, 18, 19 and 20 of township 19 north, range 3 east, Seward Meridian.

The Trust’s best interest decision notes that the lands are about 40 miles northeast of Anchorage, “in an historic coal mining area known as Jonesville … in the foothills of the Talkeetna Mountains.”

Mike Franger, the Trust’s senior resource manager for minerals and oil and gas, told Petroleum News the proposed lease is for land encompassed by an existing coal lease held by Knoll Acres, and “gives them the opportunity to explore for oil and gas in the course of their exploration and development of the coal resource.”

The Trust’s decision says the area has been mined for coal in the past, “and is considered to have reasonably good prospects for gas development primarily associated with the methane component of the coal.” Both this acreage and surrounding state and Native lands are leased for coal. The lease is for five years with a bonus bid of $5 an acre and a royalty of 10.5 percent on production in the first term and 12.5 percent on production thereafter with rents of $1 an acre for the first year, increasing by 50 cents a year to $3 an acre for year five and beyond, if held by production.